Back to previous post: “No one goes around suggesting that everyone should become their own autonomous cheesemakers and cheering the death of the cheese industry. Why? Because that would result in a lot of shitty cheese.”

Go to Making Light's front page.

Forward to next post: Blake Charlton experiences suffering

Subscribe (via RSS) to this post's comment thread. (What does this mean? Here's a quick introduction.)

February 4, 2010

A music exec’s take on the Macmillan/Amazon throwdown
Posted by Teresa at 08:44 PM * 161 comments

Macmillan author and former record company exec Susan Pivar has a brilliant piece at HuffPo, The Macmillan vs. Amazon Throwdown, about the significance of sales and distribution structures, the perils of letting retailers control prices, and how, starting in the 90s, their mishandling of the issue “led the music business to unwittingly fall on its pony-tailed sword.” Her analysis goes far beyond Amazon’s grab for lebensraum and other issues of the moment. I suspect people will be reading and quoting it for years to come.

Among other things it’s the first explanation I’ve seen that accounts for a big difference between the recorded music industry and trade book publishing. The music industry promotes and releases a relatively small number of albums, which it expects to sell in vast numbers. The trade book industry publishes a vast number of titles, of which a tiny fraction are bestsellers, a small fraction are modestly profitable, and the rest either lose money or come darn close to it. I mostly understand why we do what we do, but I’ve always wondered why the music industry took the other path.

I’ll try not to quote her entire essay:

…How did the American public get hoodwinked into believing that the suppliers are the bullies rather than the retailers?

As an ex-music business exec (1989-2000), I’ve already seen how the story ends when an industry allows retailers (rather than suppliers) to set product pricing. Recording companies waited around for someone else to take the hit by telling Best Buy or Walmart to stuff their “loss-leader” strategies and outrageous price and position fees. But no one did. Kudos to Macmillan’s John Sargent for his bold gesture. And shame on Amazon for calling the move to accept Macmillan’s pricing (for now) a capitulation. That word really gave me the creeps. …

Yeah. Bullies that are into self-pity feel justified no matter how badly they’re behaving. It’s also been creepy watching days pass without Amazon re-listing the books. I’m increasingly wondering whether the whole point of their “capitulation” announcement was to kill the story in the mainstream media.
Here is one woman’s blow-by-blow view of how we got to a place where retailers control basically everything about how a book reaches your hand. (Social media phenoms notwithstanding.)

Shift in purchasing patterns from regional to national. In the 90s, there were things called record stores. They sold recordings. There were things called appliance stores. They sold appliances. There were things called grocery stores. They sold food. Somewhere in the early 90s these things started to get all mixed together. When it became apparent that the CD was for real and not only were people going to buy new releases in this format but also replace every single thing they already owned, the industry kaboomed. In a good way. Suddenly every retailer wanted to stock CDs. (I’ll never forget the time Rounder Records (my employer at the time) got a 3000-piece bluegrass catalog order from Blockbuster video stores.)

Around the same time, we saw the rise of big box stores selling music. The famous phrase “loss leader” came into our lexicon. CDs became those inglorious leaders. They were imagined to be just the thing to lure unsuspecting customers into the big box with the hope, I suppose, that they’d realize they needed a new washing machine while shopping for Nirvana’s Nevermind, or perhaps the other way around. To capture market share, Best Buy, Circuit City, and others priced music below even wholesale costs in some cases. What knucklehead thought of this, I have no idea, but this was the beginning of the end. Suddenly regular record stores had to compete on price in order to survive. But they couldn’t achieve the economies of scale, so instead they ate each other. 20-store chains became 100 store chains. 100-store chains became 800-store chains. Independent stores began to die. First individual stores and then small chains.

That represents a huge loss of expertise in the overall system. Local stores knew their territory and their customers, and had diverse but well-informed tastes. That is: they had superior resolution when it came to answering a basic question: “Are there people out there who (a.) buy records and (b.) will really like this recording? And if so, who are they, and how do I sell it to them?”
So what, you might think, it’s the American way to compete on price and anyway bands were still making music, so what’s the big deal. The big deal is that purchasing became centralized. This had two important consequences:

One, regional bands or labels couldn’t sell records to a buyer in their own hometown, thereby building a local base, and, drum roll please,

Two, Central buying can only succeed with hit-driven product. When one guy in an office in Albany is deciding what’s going to go in 1200 stores throughout the country, he can’t buy this for Miami and that for Ann Arbor. He doesn’t have time to buy 500 copies of a new release this week and then monitor sales patterns and buy another 500 (or 10 or 1000) the next week and then keep 2 copies in the bin just in case someone wants to buy it in a year. Too labor intensive. Plus he has no idea what people care about in Miami or Ann Arbor. He needs quick turns on music that’s going to blow up out of the box and then be gone. For good.

Buh-bye developing artists.

Context matters. Developing new artists requires a long-term commitment to their work and readership, and close attention to their sales patterns. You can’t do that if every new release has to be a blockbuster. It’s like expecting children to pay the entire cost of their education.

As I said on Boing Boing right after the story broke:

…while a fixed $10 price point would undoubtedly be good for Amazon’s ebook business, it would take a shark-sized bite out of the market for hot new bestsellers, which is trade book publishing’s single most profitable area.

That revenue source is what keeps a lot of publishing companies afloat. It provides the liquidity that enables them to buy and publish smaller and less commercially secure titles: odd books, books by unknown writers, books with limited but enthusiastic audiences, et cetera.

My honest estimate is that the result would be fewer and less diverse titles overall, published less well than they are now.

If you strip away the industry’s margins, you lose the things the industry can do.
Nationalization of music distribution. Central purchasing systems do not thrive on having a multitude of vendors, each with different terms, sales cycles, pricing structures, and styles of customer service. They want to buy a bunch of stuff from as few people as possible. Distributors had to figure out a way to do business with retail behemoths. They had to become behemoths themselves. Major labels actually began scouting indie labels and offering distribution deals to the bigger ones. Smaller indie distributors and one-stops began gluing themselves together to form national distribution companies. Though they were once the bastion of new music, indie labels and distributors had less and less time for developing artists themselves.

Buh-bye regional music.

Nationalization of radio.

(Snipped: interesting history of the Telecommunications Act and its effects.)
… Local radio lost its local-ness and all the pride, quirkiness, and opportunity for new artists and creative programming that went with it. Again, a few people making decisions for a huge number of outlets. And, again, only hits serve an infrastructure like this.

Buh-bye new music.

Here’s the paragraph I think should be carved in granite and inlaid in gold:
Shift in creative locus. Hits, hits, hits. Have I made my point? Instead of a record label being able to survive by selling a few copies of a zillion different recordings, they had to sell a zillion copies of a few recordings. Product lines became less and less diverse, less and less risk-taking. What can sell a zillion copies without artist development? Only already-established artists or those lucky few who a label would choose to get behind and push, push, push until they made it to the top (as long as it happened within the first month after the record came out). To do this would literally require millions of dollars. To spend millions of dollars, you have to have a sure thing. To have a sure thing, you look at what has already succeeded and try to copy it by going out and finding an act that fits the bill. When you copy others, you end up with bullshit.
I know this problem from other places. It’s why major entertainment franchises won’t allow character change or worldbuilding in tie-in storylines: you can’t let the creatives mess around with a narrative franchise worth millions and millions of dollars. It’s why you can’t take your artistic guidance solely from polling the fans: all they know is what they liked last time. It’s why it’s perilous to do editorial work on material with which you have no personal sympathy: if you’re making choices based on what thus-and-such market segment “ought to like,” you run the risk of choosing stuff that no one loves at all. Hell, it’s the single biggest reason acquiring editors are hesitant to get too specific about what they want: aspiring authors will write to fit that description, rather than satisfying their own sense of what’s cool/fun/interesting/worth reading.

(And no, self-publishing is not the answer.)

Have you had the experience over the last decade of checking out the paperback wire racks at your local grocery, or a small airport newsstand, or the sundries store at a highway rest area, and found they were full of famous-author bestsellers, none of which you wanted to read? That state of affairs is the result of the same kind of processes Susan Pivar describes in music. Big-box retailers insisted on simplified purchasing deals with a small number of distributors, and while they were at it they gouged themselves out a bigger wholesale discount.

This triggered the collapse of the previous system of distribution, with its hundreds of regional distributors with all their accumulated expertise, to one where the handful of distributors left standing manage an impoverished system of huge territories with which they’re imperfectly acquainted. That’s why you see those wire racks, which used to have a diverse selection of books, stocked entirely with books by a small number of big-name authors, one vertical row per author. It’s called “famous author racking.” Publishers have run sales demos at selected airport newsstands, showing that a more diverse selection will sell significantly more books, but the distributors weren’t interested. Famous author racking is simple, it’s easy, and the distributors already have as much work to do as they can handle and their resources will allow.

Yay, retailers. We love the retailers. Commerce wouldn’t work without them. But if you let a few big retailers dictate your prices, next thing you know you’re going to be bidding to be allowed to supply them with wholesale merchandise at sweatshop rates so they can drive their remaining competition out of business by undercutting them. That’s bad if you’re making t-shirts. It’s disastrous if you’re making books or music.

It’s particularly disastrous if you care about having access to a wide range of well-made new art. Authors may grumble about publishers (and musicians certainly grumble about record companies), but when they’re not being forced into dysfunctional arrangements, publishing houses are companies whose job it is to find, nurture, shape, package, and sell good books to people who want to read them. When we do it well, we make a world where there are more books, and better books. Authors get paid more to write them, and can afford to put more love and effort into them, and more writers can afford to be authors. We co-enable good bookstores and booksellers. We package books so that they speak to you, telling you what kind of reading experience they are, and letting you decide whether that’s what you want.

If you want good art, you have to pay for good art. You also need a delivery system that connects that art with its audience. And you need for the money paid for that art to go to the people who make it. Macmillan’s fight with Amazon isn’t a meaningless corporate squabble over a few percents profit. It damned well matters.

Comments on A music exec's take on the Macmillan/Amazon throwdown:
#1 ::: James Macdonald ::: (view all by) ::: February 04, 2010, 09:50 PM:

Information wants to be free. Entertainment wants to get paid.

------------

Here's what I'm using as a sig line:

Put the 800 pound gorilla on a diet. Don't link to or buy from Amazon.

#2 ::: Tom Whitmore ::: (view all by) ::: February 04, 2010, 10:14 PM:

The open model of how art gets done is quite different from what actually happens -- Howard S. Becker's book on the sociology of (mostly visual) art as a business, Art Worlds, is really relevant to this discussion as he looks at the importance of the middle men in what gets considered art. The same is quite clear in publishing: the editors, the art directors, the designers, the critics all affect profoundly what is considered "readable fiction". The solo artist is much more of a fiction than most of what shows up in fantasy, though there are examples like Simon Rodia.

#3 ::: Jill Smith ::: (view all by) ::: February 04, 2010, 10:29 PM:

...if you’re making choices based on what thus-and-such market segment “ought to like,” you run the risk of choosing stuff that no one loves at all.

Anyone who has perused the suggestions from Netflix or Amazon based on previous rentals or purchases should know this. And yet.

On a related note, I don't really listen to radio where I currently live (other than NPR and one quirky soul/funk station). I was recently visiting my hometown and wondered if a law had been passed in Massachusetts stipulating that at least one Dave Matthews track must be played per hour for any pop station to stay on the air. This included a local indy station - which says to me that even for the indies, widespread homogeneity has a pernicious effect.

#4 ::: Mike Kozlowski ::: (view all by) ::: February 04, 2010, 11:03 PM:

If I'm understanding that article correctly, the chain of causation that will lead to the death of publishing if Amazon is allowed to set their own prices goes like so:

1. Amazon uses their low prices to put the existing regional e-book shops out of business, so there's no more Central Ohio e-book market or Florida Panhandle e-book market, like there is today.

2. Amazon's central buying, unable to deal with small presses like NESFA Press, Subterranean Press, or Nightshade Books, will only carry books by giant corporations.

3. Somehow, Amazon's pricing policies will cause laws to be passed somehow affecting the hypothetical book radio industry in ways that will cause people's reading tastes to shift so that they somehow only like John Grisham.

4. Increasing centralization of buying, the effect of points 1 and 2 above, will cause publishers to quit producing modest-selling books, as well as preventing them from aggressively promoting their backlist, so that they only focus on bestsellers. Much like the rise of B&N and Borders in the '90s led to exactly the big-box model that she's talking about, so that promising imprints like Orb (which depended on distribution outside of specialized bookstores) got killed off, and we saw a huge consolidation of titles.

So I have to say... seriously? Not one step of that march to doom strikes me as plausible or grounded in the reality of the actual e-book (or, really, book) market. It's the same arguments against book superstores that we all got tired of seeing a decade ago, transposed to an area where they make even less sense.

Plus, yeesh, you're approvingly quoting a music industry executive who is arguing for these higher prices alongside Rupert Murdoch. Doesn't it give you the slightest bit of pause that the lowest and most verminous of all businesspeople are arguing strenuously for Macmillan's position?

#5 ::: Andrew ::: (view all by) ::: February 04, 2010, 11:07 PM:

It doesn't look to me like the retailers are beatable. At least as long as paper publishing with its inherent inefficiencies (distributers, discounts off wholesale, Coop, unlimited returns) dominate publishers business, they'll be forced into ever squeezed margins and spiraling down revenues. How many publishers can sustain more than one or two years where they have any megahits? What if one company hits 3 Dan Brown levels in a row and another misses on all of theirs?

The article does not give me any impression that book publishing companies are going to end up any better than the music publishers.

#6 ::: IreneD ::: (view all by) ::: February 04, 2010, 11:21 PM:

I don't know if the retailers are beatable, but the CEO of the Hachette Book Group USA just announced that his company will shift to an agency model too for ebook pricing:

http://www.mediabistro.com/galleycat/agents/breaking_hachette_book_group_to_transition_to_agency_model_151128.asp

First there was Macmillan. Then HarperCollins, or at least their parent company News Corp, already made clear that they wanted to renegotiate ebook pricing with Amazon:
http://www.jlake.com/2010/02/02/publishing-amazon-vs-harpercollins/

So now Amazon is at odd with 3 of the "big six" publishers. Interesting.

#7 ::: Nicole J. LeBoeuf-Little ::: (view all by) ::: February 04, 2010, 11:25 PM:

3. Somehow, Amazon's pricing policies will cause laws to be passed somehow affecting the hypothetical book radio industry in ways that will cause people's reading tastes to shift so that they somehow only like John Grisham.

This sounds more like ridicule via reductio ad absurdum rather than a good faith understanding of what the article says. Which is to say: Do you really believe that's what Teresa or Susan are saying?

To align your step 3 with how I understood the article: Distributors and retailers would only stock John Grisham (and the other blockbusters). Exactly what's already happened with Walmart's selection of music and video, and with every airport and grocery store book shelf.

The general readership's taste doesn't even begin to come into it. No one is arguing that evil overlords would make it illegal to like Kelly Link.

#8 ::: Mike Kozlowski ::: (view all by) ::: February 04, 2010, 11:38 PM:

Nicole: I was trying to apply all of the writer's boldfaced points about the alleged decline of the music industry to the e-book industry to point out how little sense they make to me.

Teresa sensibly elided the radio point, since it has nothing at all to do with e-books. The original author presumably only included it because she got carried away writing about the music industry and forgot that it was supposed to apply back to e-books.

#9 ::: Teresa Nielsen Hayden ::: (view all by) ::: February 04, 2010, 11:41 PM:

Mike Kozlowski, correct me if I'm wrong, but I am under the impression that I know how my industry works.

If Amazon gets its way, in the near to medium future it takes a big bite out of the initial revenue stream of hot bestsellers, which is the single most profitable area of book publishing. That revenue is what keeps most publishers afloat, and enables us to buy small books, odd books, books by new writers, et cetera.

Over the longer term, its intrusive and unjustifiable licensing demands generate big structural problems. Read Charlie Stross's article for an analysis of that one. As I recall Tom Doherty saying a year or two ago, "We're not going to license ourselves out of our own business."

There's a further set of retailer issues best illustrated by the Amazon/Target/Wal-Mart hardcover price war during the Christmas season just past. Wal-Mart was using hardcover bestsellers as loss leaders throughout that shopping season, and the other two followed suit to a lesser degree. That was hard on brick-and-mortar bookstores, especially the small independent ones.

Is that enough, or shall I continue? Are there any specific areas you need explained?

#10 ::: Teresa Nielsen Hayden ::: (view all by) ::: February 04, 2010, 11:45 PM:

It pleases me no end that Hachette and HarperCollins are demanding renegotiation. Amazon pulled the same de-listing stunt on Hachette's bestsellers and big-name authors back in 2008, when they got frustrated during negotiations over a bigger discount. Hachette caved after a few months. They've got no illusions about Amazon's long-term plans or its habitual strategies.

#11 ::: Mike Kozlowski ::: (view all by) ::: February 05, 2010, 12:01 AM:

Teresa, I also assume you know how your industry works. But I really don't see how an article about how big-box superstores wipe out small local stores has any applicability at all to the e-book market. It's maybe relevant to the debate about big box bookstores, but that debate's long over (and the big box stores didn't seem to really hurt publishing from a reader's perspective).

#12 ::: Paula Lieberman ::: (view all by) ::: February 05, 2010, 12:07 AM:

Hmm.
One of my past careers involved doing market research. People tend to go into things with assumptions, and never necessarily question the validity of the assumptions. And they base the questions they ask on the assumptions (or sometimes deliberately write the questions to bias the responses, for surveys done by partisan pollsters. I wasn't doing that sort of work, the people paying for the studies I was doing, wanted five year forecasts for product types, and data they could use to make engineering business decisions on)

But anyway--I remember when department stores sold books. The flagstaff Jordan Marsh store in Boston, when I was a child, has several stories of book department that extended over from one building into part of another--there were something like three or four interconnected building the store occupied, connecte above and below ground for some parts of the buildings.

The first time I ever saw an Analog magazine (and bought it) was in Jordan Marsh, and I bought Warlock of the Witchworld there, and Black Stallion hardcovers, and I forget what else--and this was when I was living 40 miles and an hour west of Boston and only got there when my parents went shoppig with my sister and I in Boston. Boston also had Lauriat's... the small city I lived in did NOT have a bookstore. There was a small newstand in the city center down a street off Main Street, with a few SF paperbacks and magazines--which I found later.

Fitchburg, an adjacent small city, had a bookstore, or a store which included books.
That was long ago when bookstores were a lot rarer and smaller than they are today....Worcester had maybe multiple bookstores, but despite being 20 mile away, took as long to get to as Boston (route 12 literally went by/goes by the statue of Mary's Little Lamb in the center of Sterling, at 20 mph.... the state finally built a limited access high speed road from Leominster to Worcester-it stopped/stops in Leominister, rather than going further north throgh Fitchburg and then up to the border with New Hampshire--around 1980, too late to stimulate the collapsed economy... Fitchburg turned into a pit after WWII, and when GE pulled out, it got worse.... Leominster's economy tanked when the plastics industry moved out in the 1970s and 1980s. Worcester's economy tanked after WWII and stayed tanked. Gardner and Athol and Orange etc. went down when the furniture industry moved out to Canada and North Carolina... by the time the high speed road to Worcester went in, Central Massachusetts was economically collapsed and the industry and commerce all gone.. the area turned into bedroom communities for the high tech belt to the east, because there was more housing than jobs in Central Massachusetts, and the prices were a lot less expensive than further east, where the population density was higher and there were more job from the educational institutions, the computer companies, the electronics companies, the state government, the medical industry, the sea port the air port, etc.)

Anyway, Boston (and to a lesser degree) was where the shopping and especially the books were, and department stores had the biggest book holding.

Then came surburban mall sprawl. Lauriat's put branch stores in malls. Walden Books showed up in malls. Other bookstores shows in mall. Department store put branch stores in malls. The malls had free parking, downtown Boston the parking kept shrinking and the prices at garages kept going up.... The original Jordan Marsh site in Boston, started shrinking. It stopped carrying antique and antique grandfather clocks. It stopped have a book department. It shutdown what had been a really really large fabric and sewing and knitting department.

Harvard Square when I was a college student had more than 20 bookstores. I don't know if it has even a full handful anymore... access to the place for anyone not with MBTA acces got more an more inconvenient and the parking situation got worse and worse and more expensive--and when big box bookstores showed up near malls, that plus rents in Harvard Square going up, up, up, spelledthe end of Harvard Square as bookbuyer paradise. Reading International went long long ago. Paperback Booksmith disappeared. Even Wordworth tanked, its record section once had held the record for most vinyl album sold in a day, when the original Rubber Souls album from the Beatles came out.

Even Pandemonium Books left, moving a mile east to Central Square, halfway between Harvard and MIT, where rent is lower.

The old style department stores featured customer service and loyalty to employees and participation in the community, in return there was customer loyalty to the service and retailer. The big box stores everything is loyalty to highest profit margins and fastest merchandise turnover. It's all short term profit maximizing, forget about building customer loyalty and service and a continuing relationship....

#13 ::: Kevin Marks ::: (view all by) ::: February 05, 2010, 12:10 AM:

What I don't get is how Amazon relates to best-seller-only big box stores. Their 'list everything, as we don't have to hold physical stock' model inspired the long tail idea, as this 2003 article says:

All of Amazon's important innovations - starting from the concept of a Web bookstore - have suggested a profound change in the bookselling business, a change that makes it possible to earn a profit by selling a much wider variety of books than any previous retailer, including many titles from the so-called long tail of the popularity curve. 'If I have 100,000 books that sell one copy every other year,' says Steve Kessel, an Amazon VP, 'then in 10 years I've sold more of these, together, than I have of the latest Harry Potter.'

Did Amazon forget this since then?

#14 ::: Carrie V. ::: (view all by) ::: February 05, 2010, 12:21 AM:

Amazon has gotten into hardware production and sales -- the Kindle -- since then. They want everyone to use a Kindle -- and buy e-books -- from them and no one else. That's why these discussions are relevant.

#15 ::: James Macdonald ::: (view all by) ::: February 05, 2010, 12:22 AM:

Mike Kozlowski #11 But I really don't see how an article about how big-box superstores wipe out small local stores has any applicability at all to the e-book market.

Mike, Teresa isn't talking about the e-book market. She's talking about the book market. Nor is she talking about big-box vs. indie stores. She's talking about publishers, and the sorts of things that publishers do.

#16 ::: Paula Lieberman ::: (view all by) ::: February 05, 2010, 12:24 AM:

Does the article mention payola and its role in the music industry?

#17 ::: hapax ::: (view all by) ::: February 05, 2010, 12:25 AM:

@Kevin Marks -- I'm no economics expert, but as I understand it, the argument goes like this:

If Amazon uses their market clout to force publishers to sell e-books at a price that cannibalizes their very few profitable releases, the publishers will have less "cushion" to invest in midlist authors, new authors, adventurous authors, the bulk of which will probably lose them money. Instead, publishers will put more and more emphasis on their guaranteed bestsellers, and encourage cookie-cutter imitations of the latest "hot" trends.

At that point, it doesn't MATTER if Amazon "lists everything"; there will be substantially less for them to list.

I'm sure them as actually know what they are talking about will correct me where I err.

#18 ::: meredith ::: (view all by) ::: February 05, 2010, 12:26 AM:

I work for a small independent music label. I have been saying for a few years now that publishing needs to watch and learn from the past 15 years of music industry history. Susan Piver's article is 100% spot-on, and it's about time the parallels between the two industries were brought into the conversation. (Amazon is also the 800-lb gorilla for music, but it's not the only one we have to deal with: iTunes weighs more like a ton.)

#19 ::: Teresa Nielsen Hayden ::: (view all by) ::: February 05, 2010, 12:29 AM:

Mike, it's late and I'm tired. What I'll say for now is that when Patrick saw that article, he sat there muttering "My god, this is familiar" while he read it. Then he forwarded it to other editors.

More explanations to come. For now: cease to think in terms of there being an ebook market. There's a book market. Ebooks are just another repro technology.

Kevin, science fiction has always had lower starting figures but a far longer tail than the mainstream.

The big boxes aren't bestseller-only. They just want simplified dealings with a small number of distributors, and a deeper discount than anyone else.

#20 ::: Teresa Nielsen Hayden ::: (view all by) ::: February 05, 2010, 12:32 AM:

See Meredith? Meredith knows what she's talking about.

#21 ::: Andrew ::: (view all by) ::: February 05, 2010, 12:38 AM:

So what's the solution, other than taking away pricing authority from retailers and forcing them to sell all books for MSRP?

#22 ::: TexAnne ::: (view all by) ::: February 05, 2010, 12:42 AM:

Andrew, 21: That's how they do it in France, which as far as I can tell has an extremely healthy book culture.

#23 ::: meredith ::: (view all by) ::: February 05, 2010, 12:46 AM:

Andrew #21: taking the "S" out of "MSRP", and replacing it with another "M" (for "Minimum") would be a good place to start, yes. But that's the crux of this kerfuffle, isn't it?

#24 ::: Andrew ::: (view all by) ::: February 05, 2010, 12:47 AM:

Can we include a restocking fee in the law too? Pulping seems like an incentive to too much turnover of stock and a disincentive to let a title develop a following before it's replaced with the next hopeful big hit.

#25 ::: Mike Kozlowski ::: (view all by) ::: February 05, 2010, 12:58 AM:

Jim@15, Teresa@19: I confess that I'm even more confused if this conversation goes beyond just the e-book market. As far as I know, that's all that Amazon and Macmillan are talking about, right?

Meredith@23: I really, really hope that everyone else who is arguing for the evils of Amazon is going to pop up and say that you're completely off-base and that they would never, ever advocate for that kind of thing. I can, very grudgingly, accept MAPs and their ilk for products that can't sell well without boutique dealers (high end speakers and the like, for instance); but books definitely do not fall into that category.

#26 ::: eric ::: (view all by) ::: February 05, 2010, 12:59 AM:

Andrew -- The solution is that Macmillan sets a wholesale price they can live with, and Amazon sets a retail price they can live with, given that wholesale price. And somewhere in there, there's a decision to buy or not buy.

What we're seeing now (is negotiation by other means, but) is the consequences of that decision, and it's not making a lot of third parties happy.

#27 ::: Lee ::: (view all by) ::: February 05, 2010, 01:15 AM:

Another seemingly-unrelated place where this sort of thing is happening: store selection in shopping malls. In the early days of the mall culture, every mall was individual and locally-run; they'd negotiate a couple of anchor stores, and the smaller locations would become a mix of well-known national chains and local/regional shops.

Then somebody got the bright idea of developing an umbrella corporation that did nothing but build and manage shopping malls, and along the way bought up most of the already-existing ones. That's why you can walk into any shopping mall anywhere in America now and see pretty much the exact same stores, all of them national chains. (And the big anchor stores, whose names do show some regional variation? They're all owned by one of 2 or 3 department-store umbrella corporations.) Those are the companies that have contracts with the mall management company.

It's neither books nor music, but it's the same principle in action -- centralization of distribution results in loss of specialization and lack of diversity.

#28 ::: Chris Meadows ::: (view all by) ::: February 05, 2010, 01:31 AM:

Please forgive me if this is slightly orthogonal to the topic, but I wanted to mention I'm going to be hosting a live call-in podcast talkshow on the subject of the Amazon/Macmillan feud Saturday afternoon at 4 Eastern. All viewpoints will be welcome, and I'd really like to have some folks from here come in to balance out the pro-Amazon people I expect to call in. I'll be moderating the show so nobody gets too out of hand.

Details and how to listen, chat, or join here:

http://www.teleread.org/2010/02/04/saturday-4-p-m-eastern-live-talk-podcast-on-amazonmacmillan-affair/

On an alternate e-book related subject, here's a year-old editorial from Ars Technica that I've found myself reminded of a lot lately. It provides a slightly different perspective on the growth of the e-book industry—and perhaps also explains some of the reasons for the long-standing strife between e-book fans and publishers that are causing so many to support Amazon beyond just the $9.99 price point.

http://arstechnica.com/gadgets/news/2009/02/the-once-and-future-e-book.ars

The essay mentioned here reminded me of it because one of the things the author of the Ars piece notes is that many execs of publishers during the dawn of the e-book age had previously been execs at music companies during the Napster troubles.

#29 ::: Earl Cooley III ::: (view all by) ::: February 05, 2010, 01:42 AM:

Negotiations by other means? Ok, which company is going to be the first to hire Blackwater to make a hostile takeover of an enemy company's HQ?

#30 ::: Lee ::: (view all by) ::: February 05, 2010, 01:49 AM:

Mike, #25: I'm even more confused if this conversation goes beyond just the e-book market. As far as I know, that's all that Amazon and Macmillan are talking about, right?

You seem to have missed the part where Amazon has de-listed all hard-copy Macmillan titles in its attempt to maintain a standard e-book price which is less than Macmillan itself spends on issuing that e-book. So yes, this is already beyond the e-book market.

#31 ::: Meg Thornton ::: (view all by) ::: February 05, 2010, 01:57 AM:

Ah, this is where my comment from a couple of days ago rightly belongs, I think.

Over the years, as things are becoming more and more centralised, I've noticed there are apparently less and less places interested in taking my money, because they're less and less interested in me as a customer, and more and more interested in me purely as an instance of demographic data. If I don't fit the demographic, I don't fit their store, and I'm therefore not worth marketing to.

This lack of interest in the consumer as something other than demographic data manifests in a lot of ways. It can manifest as a reduced stock line (such as those fashion stores where the two copies of anything over size twelve sell out almost immediately, but the size eights stay on the shelves for months). It can manifest as customer unfriendly behaviour (in this category I place the music stores which are blaring out the latest hit at a volume clearly audible from five stores distance - gods alone know what it's like inside the actual store). It can manifest in "edgy" displays (like those ultra-messy ones which are so prized by music, video and games stores these days, where the level of visual clutter is such that I despair of being able to find the title I'm after; asking the staff whether they have it in stock is no help, because they can't find it in the mess either). It can manifest in a reduced group of options (I dislike buying shoes, because I'm generally looking for something which doesn't have heels and is designed for someone with five toes; very few shoe stores offer this in their women's section). It can definitely manifest in the aiming of a product at a very deliberately targetted market (such as the large number of films, television and video games which are apparently designed with the manifesto that ALL consumers are fourteen-to-seventeen year old boys living in the continental United States, and anyone who doesn't fit this mould is a statistical glitch which can be ignored). It manifests in staff who aren't interested in developing a relationship with their customers, in shops which look like biscuit-cutter copies of each other, in malls which are so similar I can't remember which suburb I'm parked in.

It also manifests in people like me walking around a mall and realising they probably aren't really welcome in the majority of the shops there, and feeling very alienated, an unwelcome stranger in my own culture.

For any retail philosophers out there, here's what I'm looking for in a shop:

* A reasonably broad range of options within your range - for example, if your store specialises in left-handed widgets, I should be able to find them in a variety of colours, patterns and sizes; if you sell widgets, I should be able to find both left- and right-handed ones, as well as ambidextrous versions, and probably a few colours and sizes of each; if you're a shop which sells all-sorts, I should be able to find at least one example of a widget or a gadget on your shelves.
* Staff who are interested in what they're selling - I have one chain of game shops here that I love with a passion, because the staff there are all able to talk to me in great detail about whether or not my particular favourite line of games (the Square Enix Final Fantasy series) have something new out, when the next instalment is hitting the shelves, whether there's an adaptation planned for a particular platform and so forth. Those staff will also be able to point me to options for games I might be interested in, given I like the FF series. So I'll go there, even though it costs me a few more dollars than going to $CHAIN shop at the other end of the mall, because I enjoy the experience of shopping there.
* Tidy shelves. I realise this puts me into the "old fogey" category, but I like being able to find what I'm looking for without needing to duck under three tonnes of visual clutter (another reason why my favourite game shop wins out - they have nice, neat, easy-to-view displays, as compared to the near-constant visual clutter in the big chains). I don't care if you have fifty-seven varieties of left-handed widgets; if I can't even see six of them, I'm not going to go chasing through your shelves to try and find something which interests me in the other fifty-one.
* Staff who are interested in helping customers - I don't mean interested in the constant "can I help you" style. I mean staff who don't act as though being asked for assistance is a massive inconvenience. I mean staff who'll break off their conversation with their friend if there's a customer standing nearby. I mean staff who'll offer alternatives, and maybe even point you to a store which isn't part of their chain, if that store sells what the customer is after and their chain doesn't. Staff who know enough about what is and isn't available to be able to say "look, we don't have that at present, but if you like we can order it in and have it within a week; it'll cost $X then, or $Y if you want to wait a bit longer."
* Recognition of customers who fall outside the absolute target demographic the management's marketing division aims at. The parents who buy video games. The grandparents who buy CDs for their grandchildren. The "Secret Santa" shopper who's buying something for that person they have absolutely zero in common with at work. Make these people welcome in your store, too - or at least make them less unwelcome - and they'll probably come back.
* A willingness to allow variations from the store "formula". One of the things which appeals to me with independent bookshops and small retailers is the variety of little quirks they allow. For example, one of my favourite science-fiction/fantasy bookshops sells the Giant Microbe plush toys. The local independent bookstore has a display of World of Warcraft t-shirts, and those "Buffy Staked Edward: The End" t-shirts displayed alongside the Twilight publisher displays. The game store chain I like stocks figurines and merchandise for various games in each store, but each store has a different slant on what they display. The big shop in the city has a lot of Final Fantasy stuff; the local one tends more to World of Warcraft; another suburban store has a lot of Nintendo plush toys. But they aren't carbon copy, biscuit-cutter clones of one another.

A lot of this all defaults, in my head, under the heading of "good customer service". Of course, this appears to be a dying art in these degenerate days, but it's something I actually appreciate as a customer.

#32 ::: Victoria ::: (view all by) ::: February 05, 2010, 02:27 AM:

Mike @ 11

If you combine big box store predatory pricing experienced by the record industry and add the old VHS vs Beta fight, what happens is the vendors get to dictate to you, the consumer, what tech you get to use to entertian yourself. Plus, the looser is nothing more than a footnote in history -- unless you know how to get movies on Betamax tapes. You also get the HD vs Blue Ray fight for supremacy. Wal-Mart, the biggest of the big box stores, decided in favor of Blue Ray for the next version of video media. Once that was done, HD is nowhere in the market.

Amazon is trying to do the same with the Kindle and e-books. They want to be the main, if not only, purveyor of e-books and e-book readers. To do that, they will have to run the other e-book retailers out of business. If you go back and re-read Susan Pivar's article and replace "CDs" and "music" with "Kindle/e-book readers" and "the Kindle's proprietary format" it's clear what the long range plan is. They want a near monopoly on e-books and e-book reader sales.

This is not an unusual strategy. In the bad old days of the robber barons and railroad empires, it was call monopoly building. It's also why anti-trust laws exist in the US.

Look at the Mac and PC debate. PCs running Microsoft products are nearly ubiquitious because Microsoft made deals with computer distributors early on and kept making deals. I still remember the anti-trust lawsuit against Microsoft. Those old jokes about Microsoft being the Borg are more true that some people care to admit.

What this whole Macmillian vs Amazon fight boils down to is one retailer telling all of their (book) suppliers "I don't care about your bottom line or the quality of your product. It's my way or the highway." I'm very glad Macmillian said "I'll take the highway."

#33 ::: Bruce Baugh ::: (view all by) ::: February 05, 2010, 02:45 AM:

Mike Kozlowski: I confess that I'm even more confused if this conversation goes beyond just the e-book market. As far as I know, that's all that Amazon and Macmillan are talking about, right?

Well, no. I guess you missed it, but Amazon de-listed every non-academic book by Macmillan publishing firms. The dispute is, for both participants, about book publishing and sales. It happens to center in this instance on e-books, but the same kind of argument has happened between Amazon and other publishers when e-books weren't involved, and will again, presumably.

There is no e-book market distinct from the rest of publishing. There are publishers focusing on e-books, publishers who don't deal with them at all, and publishers who deal with them and other media.

(For instance, audiobooks. North of $300 million in annual sales, 72% on CD, 21% via download, in 2008, according to their trade association. Compare this to $52 million in wholesale according to an ebook trade association.)

This isn't even like saying that men's clothes and women's clothes are part of the same general retail field. When it comes to books, we're talking about the differences between short-sleeved and long-sleeved shirts, button-ups and pullovers. It's about the shirts. Or rather the books, in all the various media they can be presented in, and it's about who gets control of small niches while they are still small.

#34 ::: Bruce Baugh ::: (view all by) ::: February 05, 2010, 02:51 AM:

Footnote to my last: I have no interest in arguing precise sales data for various book media. I intended only to illustrate that e-books are neither unique in being a medium other than print nor the largest such alternative medium, and that at least one other is actually several times larger in terms of sales and volume of goods. Specific data are not likely to come into my hands, nor do I want to spend a lot of time searching them out...nor care much, really. It's all subject to a lot of vagaries. If any of these figures is true within a factor of two to five, I'll be glad.

#35 ::: Avram ::: (view all by) ::: February 05, 2010, 03:02 AM:

Victoria @32, wait a minute. Macmillan wants to force a particular pricing scheme onto Amazon. Now Hachette, another of the "Big Six" book publishers, is joining in, demanding a similar (possibly the same) pricing scheme, and HarperCollins might be pushing for higher prices, too. Isn't that the kind of behavior (price-fixing) that anti-trust laws were created to stop?

#36 ::: Michael Holloway ::: (view all by) ::: February 05, 2010, 03:55 AM:

I don't really agree with any of this in conjunction with Ebooks. Books, yes. Not Ebooks. Nor did the author of that article get the music industry part right. Looking back at what happened in the 90 for the music industry doesn't help you with whats happening now because they are complete reversals of each other. Its more important to look at whats happening with the music industry in the last 5-6 years, because that DOES mirror the idea of the ebook industry.

The rise of the indie record labels is back in swing. As well as promotion of local bands. But it isn't happening in stores or radio stations, this time around, its happening on the internet. Companies that make profits are signing unknown bands, bands that can't sell in the current big box distribution chain, are recording records and distributing them through venues like itunes. They are promoting the musicians through the internet as well. Local websites for different cities, websites which cater to different tastes and subsets, and a host of other places. Some of those artists end up getting their contract bought out by the majors, just like the old days.

Itunes and things like it are also bringing more musical diversity into sales figures just by stocking everything they can gain access too. The big number one hit songs may hit sales peaks month to month, but the biggest amount of money generated from itunes for publishers is on their back catalogs and less notable musicians.

All this comes with a price though, that being the idea of an album is pretty much dead. Which is what is really hurting the big record lables right now. They pay for production of 10-15 songs on an album, but they only make money on one or two of them. This means they are making less profit per sale, so the contracts get worse and worse for artists.

That last paragraph doesn't really hold true for the ebook industry though, because who's only going to by 1/15th of a book title? They are going to buy the whole book.

Which btw, we see mirrored with the ebook industry. We're starting to see publishing houses which only deal in ebooks, of authors which can't be picked up by normal publishers. And where are they being distributed? Amazon, fictionwize, and a host of other ebook distributors. And guess what, they are also making a profit. Authors are being paid.

The problem with this whole article is it doesn't take into account how an internet economy works. No brick and mortar bookstore can hold the entire backlog of every publisher that has ever existed on their shelves. Ebook publishers can though, and you never have to pay for reprinting, ever. Once a publisher releases it, its done. They never have to give that book another thought beyond looking at how much it brings in before the copyright expires. And it'll be a lot considering its universally available everywhere.

But yet again, this comes at a price. The idea of "printings" becomes obsolete. You can't look at a book and say, "It only sold 1000 copies of a 10,000 book run". Instead you have to look at it as, "If it sold 1000 copies this year, do you think it'll sell 100 copies every year after?". So the initial 1000, copyright lasts near a century now, then 100 copies sold every year there after is 10,900 copies. Its a long tail proposition where you make more off your backlog than you do on the best sellers, year after year, but you are only selling a very small amount of each title. Given enough time most, but not all, books will become profitable.

Its just going to take time for publishers to switch over from physical media to digital media. Currently they are still making more money in selling physical copies of books, as that goes more and more away, the idea of the best seller will become less and less of an issue as well. The companies that will win are the ones who have a very deep backlog of books and can figure out how to aggressively promote it, while also churning out new books so they'll continually have that backlog as copyrights expire.

#37 ::: Dave Bell ::: (view all by) ::: February 05, 2010, 03:59 AM:

Earl Cooley III @ 29, I'm sure we could all nominate targets for that sort of hostile takeover.

Maybe somebody could subtitle a scene from "Enemy at the Gates". I recall that there's a piece in there which has printing and editing going on. And Zaitsev is a pretty good substitute, in that scene, for the bemused new author.

#38 ::: Brendan Podger ::: (view all by) ::: February 05, 2010, 04:55 AM:

The main problem it seems to me is that the people in the publishing industry who have followed the music industry down the exact same path, making the same mistakes, are suddenly saying "Trust me, I know what is best."

#39 ::: green_knight ::: (view all by) ::: February 05, 2010, 05:41 AM:

Have you had the experience over the last decade of checking out the paperback wire racks at your local grocery, or a small airport newsstand, or the sundries store at a highway rest area, and found they were full of famous-author bestsellers, none of which you wanted to read?

I have indeed. It took me several years of trying books and not liking them before I realised that I hadn't lost interest in reading, or reading new books, but that I wasn't interested in reading the books that were most easily accessible. Instead of being able to walk into a bookshop and finding a wide variety of books that were right for me, I now have to work much harder to source those books.

Where, sigh, Amazon had been handy in supplying them.

#40 ::: iucounu ::: (view all by) ::: February 05, 2010, 06:00 AM:

It's not just Amazon. I work in children's publishing in the UK. At Christmas, Borders imploded, leaving us with only one major bricks-and-mortar chain - Waterstones. Waterstones orders centrally; it only has one picture books buyer. So I can be working on a book for two years, and if that one buyer doesn't like it, I might as well not have bothered.

This distorts every aspect of our business. I think actually it's an even worse situation than with Amazon, because at least with Amazon we can get our books in front of customers, even if they can't pick them up and appreciate them for the beautiful objects they are. But if we can't get them into Waterstones, the opportunity to sell through a decent amount has more or less gone.


#41 ::: James Macdonald ::: (view all by) ::: February 05, 2010, 06:15 AM:

Mike #25: As far as I know, that's all that Amazon and Macmillan are talking about, right?

If that were all they were talking about, Amazon would still be offering Macmillan books for sale, wouldn't they?

Amazon already pulled the same dick move on Hatchette, where no e-books were in sight, and they pulled the same dick move on the POD publishers in general.

This isn't just about e-books.

#42 ::: Mike Kozlowski ::: (view all by) ::: February 05, 2010, 08:12 AM:

Jim@41 and others: Yes, I know that Amazon pulled all the print books as a (stupid, shortsighted, and futile) negotiating tactic. But the negotiations they're having with Macmillan aren't about pricing on books -- they're about pricing on e-books.

So if massive discounting will lead to consolidation will lead to retrenchment will lead to an unhealthy industry, then it'll still be happening with paper books the same tomorrow as it is today even if Macmillan gets the terms they're arguing for.

I do think there's a lot more to be said about how DRM makes the e-book market more prone to retailer control than the paper book market, as various commenters have noted... but Macmillan isn't pushing Amazon to get rid of DRM. (And my suspicion is that Amazon would be happy to get rid of DRM if the publishers allowed them to, but I suppose we have no way of knowing that.)

#43 ::: Tim Hall ::: (view all by) ::: February 05, 2010, 08:24 AM:

I can understand why self-publishing isn't the answer for authors, but self-releasing does seem to work in the long tail of the music business; a significant proportion of the best albums I've bought over the past 3-4 years have been bought directly from the bands - and most of these are on the band's own labels (although many have distribution deals with indie labels)

#44 ::: P J Evans ::: (view all by) ::: February 05, 2010, 10:17 AM:

35
Isn't that the kind of behavior (price-fixing) that anti-trust laws were created to stop?

My understanding (IANAL) is that anti-trust laws are intended to preserve competition.
So if several publishers do this, it's probably still legal, as long as they aren't getting together to set prices for their stuff or divide up the market in some way. They have to be able to prove it's all done independently, too.

#45 ::: Chris Meadows ::: (view all by) ::: February 05, 2010, 10:17 AM:

I think there's a fundamental disconnect in which many authors, editors, publishers, etc. just aren't seeing the reader's point of view.

Most e-book readers who have been following commercial e-books since their birth in the late 1990s have seen a decade-long systematic pattern of missed opportunities and mishandling by publishers who seemed either not to care about or to actively despise e-books, and this appears to be still more behavior along those lines.

For example, one reason people were so attached to Amazon's $9.99 pricing for e-books is that publishers have had over ten years in which to implement "variable pricing" at e-book stores—but even after all that time, books long since gone to mass-market paperback are still listed in e-book stores at hardcover price levels.

Not just a few that somehow "slipped through the cracks", but many of them.

In this LiveJournal thread, to prove a point, I searched Macmillan titles on Fictionwise priced at $19.99+, then checked the first 25 search results. 7 books were in paperback. Taken as a random sample, it means over 1/4 of their $20-and-up titles—over 1/10 of all Macmillan titles at Fictionwise—should be but aren't "variable". (It's a small sample, granted; it may be fewer, but it may also be significantly more.) And that's not even looking at ones under $20 but still more expensive than paperback.

And that's after having ten years in which to get it right (if they even gave a damn)!

I really doubt the error can be placed on Fictionwise in this respect. I've talked to and corresponded with Steve Pendergrast from Fictionwise, and I know he was always trying to get publishers to allow him to offer e-books at the lowest price possible (and to convince them to let him drop DRM as well).

Even if that wasn't the case, they would have been well aware by now that competition from lower-priced Amazon and Barnes & Noble was going to eat their lunch if they didn't come down on prices. I don't think they could have run a successful e-book business for ten years without knowing about demand curves.

A comment someone using the handle "Thiago" posted to an article on the TeleRead.org e-book blog this morning says it best:

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

Someone else said, when I suggested that it might be better not to attribute to malice what could be adequately explained by incompetence:

"Any sufficiently-advanced incompetence is indistinguishable from malice."

#46 ::: Graydon ::: (view all by) ::: February 05, 2010, 10:18 AM:

Mike @25 --

You need to go study some biology is the very short answer.

The longer answer is that systems evolve to keep themselves running. (The ones that don't keep running go away; iterate. What we've got now have been at this for awhile, and look up the definition of a Darwinian individual and tell me how a corporation doesn't qualify before you start complaining about the analogy, please.)

In order to keep running, any corporation in the US is expected to maximize profits. (Technically shareholder value, but it makes no practical difference in the great majority of cases.)

To continue the analogy, profit is analogous to eating in a biological system (intake of resources; tree roots would count, don't just think of teeth gnashing in tender flesh); you have got to be taking in more than you're putting out. Innovation and risk are analogous to reproduction; it usually doesn't work, but this is how you get copies of yourself into the future.

In an undistorted system, there's a balance, or, rather, a diversity of attempts at balance; you balance profit with innovation. ("IF it is a work of genius, THEN you may lose a thousand pounds".)

If you require profit maximization (or, in normal human timescales, *allow* profit maximization) what you're doing is saying "you must eat as much as you can but never reproduce". Iterated for awhile, this gives you a monoculture, and then it gives you a crash and a very low diversity environment that struggles to recover. (It will probably recover, in the very long term. This is also, btw., very probably why the US economy does better (as it is historically observed to do) when it has high marginal tax rates.)

What Amazon is trying to do is say "we get all the food"; think of this as intelligent trees fighting over who gets the sunlight and it's not very far off. (We're all down in the leaf mould wondering why there's nothing but pine needles to eat.) Amazon does not care if they're putting their suppliers out of business; they care that they're getting as much of the money as possible out of the value chain (it isn't, it's a revenue stream; value is the ratio of benefit to cost, and as a system legal requirements for profit maximization destroy value). If everyone else dies first, they're immortal and as profitable as possible.

Well, immortal until the environment changes, which it will certainly do.

The major publishers are deciding they don't want to be shaded out; they want to be able to set their prices so that they retain the option of some innovation. Presumably in part because they're run by competitive people who are disinclined to get into this game they're guaranteed to lose, and presumably in part because they know perfectly well you don't get books for the ages by selling only what's selling OK at the moment.

This is a pretty general problem with the US; textbooks have to be acceptable to Texas, frex. Huge distortions (and a huge value hit) of the rest of the market.

Throw in that a DRM'd ebook really is close to worthless -- it's certainly not worth what it cost the publisher to produce it -- and the problem is certainly interesting from the publisher's point of view.

#47 ::: Barbara Webb ::: (view all by) ::: February 05, 2010, 10:22 AM:

Tim@43

One of the big differences between music and books is that in 3 minutes I can decide if I like and want to buy a song. In 10 minutes, usually, I can make a decision about the artist in general. More often, we're even talking about 30 seconds listening to the preview on iTunes or Amazon. It's a miniscule investment of time to find music I like.

Books are different. Cover and jacket blurb will give you an idea what the book is about (hopefully), but no real idea of the quality of the writing or story. It takes a bit of time reading, either in the store or with the free sample chapters on Kindle (one of the things Amazon did get right). I'm a pretty dedicated reader, and even I can't give that kind of preview time to a comparable number of books as I could a number of songs/musical artists.

That's where publishers are so handy to me as a consumer. If I walk into a bookstore and see those racks of professionally published books in my genre aisle of choice, I can trust that someone -- usually several someones -- with expertise in books similar to other books I like -- has already done the hard work of panning for the good stuff.

#48 ::: meredith ::: (view all by) ::: February 05, 2010, 10:44 AM:

Mike #25: I'm not saying the minimum price should be ridiculous. It should be the minimum price the retailer can charge and still sustain the publisher's (or label's, or whatnot's) business.

So if an item will lose money for its maker if it's sold for less than $10, say, the retailer shouldn't be able to say "tough, we're going to sell it for $5 anyway".

Amazon has a program where albums by independent artists can get the same front-page, "if you like this, you'll also like that" promo as the major label folks -- which is great. Except for the part where you have to allow them to put a *much* lower price point on the albums in the program. We indies need Amazon too much to be able to stand up to that ... but that's the same kind of thinking that's behind their stance on e-book pricing.

#49 ::: linnen ::: (view all by) ::: February 05, 2010, 10:50 AM:

I would say that I'm with Brendan Podger @ 38.

I'm a reader, so I am most likely missing quite a bit of the picture, but the sentence that gave me a pause was; 'How did the American public get hoodwinked into believing that the suppliers are the bullies rather than the retailers?'
On re-reading this, it occurred to me that suppliers is assumed to be the publishers. Aren't the author the headwaters of this supply chain?

For the music industry, substituting 'recording industry' for 'suppliers' gives this a straight forward if simplistic answer. While the stereotypical retail store demand cut-rate formalistic shlock from ITS suppliers, the supplying recording industry in turn looks for cookie-cutter music to maximize profits on top of loan-shark recording fees. The original source of all of this then gets pennies on the dollar.
There are two bullies in this scenario.

#50 ::: iucounu ::: (view all by) ::: February 05, 2010, 11:02 AM:

Linnen, that attitude kind of irritates me, but then I'm a publisher, so it's unsurprising! I recommend John Scalzi's recent three act play on the role of publishers: http://tinyurl.com/ylsek4h.

#51 ::: Michael ::: (view all by) ::: February 05, 2010, 11:21 AM:

Graydon @46

You're making the exact same mistake the article is making. And that publishers in general are making(both music & book). The problem is a fundamental disconnect with the idea of selling physical objects vs digital objects.

The only cost is the original cost of producing the work. That's it, you don't have to pay to reproduce it on hundreds of thousands of paper copies, or shipping, or warehousing, or even worry about stock room. More or less they are free. Yes servers and bandwidth cost money, but are several orders of magnitude less expensive than the current model. It also means nothing ever goes out of print, its always available. That huge back catalog that hasn't seen the light of day since the 60s? Guess what, its still a marketable resource. People will still buy from it. Currently they can't because publishers don't offer it for any but the most important works from the time frame because its too cost prohibitive. Guess what, its no longer cost prohibitive.

That is one of my biggest problems in this whole ordeal. I still, 10 years after ebooks started off, can't buy out of print books. Publishers simply don't care because its not the new big thing. They are throwing away revenue streams because they are still caught in the old mindset of how publishing works. And trust me, there is money to be made there.

But lets forget that for a minute and look at a publisher that gets it right, and STILL turns a profit. Baen. The shining example of why publishers worries don't ring true. I can go on their website and buy almost any book from their catalog, except where the silly author actively prohibits it, for 6 dollars. Thats under the amazon $9.99 mark. Just came out in hardcover? 6 dollars. Been out for years and years? 6 dollars. The only exceptions are ARCs and omnibus editions. They also learned that its in their best interest to give books away for free. They actively promote all of their authors to give away a book or two on their back catalog to help sales with their current books, and their catalog as a whole. And it works! Not only that, some people will actually turn around and pay for the book that were given to them for free. None of it with any sort of DRM. And somehow, through all of that, they still consistently get books on the NY Times Bestsellers List.

Sure, Baen is a niche publisher who doesn't do all types of books. Scifi/Fantasy shop. But whats wrong with that? They know their market, and they do it well. Whats stopping the other publishers from doing the same, and still making a profit off it?

Simple. Laziness, greed, and incompetence. If publishers had any sense what so ever they would be trying to find ways to push as many of their customers over to ebooks as quickly as possible, and then trying to scan their backlog with inhuman speed. But.. They seem to have no idea that what they are selling isn't books, but instead the information inside the books; no one is going to pay cover prices for blank pages. Books have simply always been the best delivery system to get that information out to people.

And publishers, of all types, need to learn that in a hurry. It doesn't matter if you're selling books, movies, music, or some other media; the internet flips the economy of scale on its head. And its only going to get worse as technology progresses.

#52 ::: Teresa Nielsen Hayden ::: (view all by) ::: February 05, 2010, 11:23 AM:

Avram: It's the other way around. Amazon's been bullying the publishers. John Sargent's taking a stand has become the occasion for Hachette and HarperCollins to push back as well.

Think. How often do you see publishers openly fighting with major distributors? It's very rare, even if the distributor has gone way over the line, because by the time you've established that you're right, you might well be out of business.

#53 ::: C. A. Bridges ::: (view all by) ::: February 05, 2010, 11:26 AM:

Personally, I'd like to hear authors/publishers respond to Chris Meadows' comments. The author of the linked article seems to be ignoring them (while answering others) but I think it's an widely-held opinion that needs to be addressed.

I don't trust Macmillan to set variable pricing until they can prove they'll actually do it. Once they update their existing e-book backlog in Fictionwise and other sites to the same reasonable pricing levels they demand Amazon adopt, then I'll pay attention. Not before.

#54 ::: C. A. Bridges ::: (view all by) ::: February 05, 2010, 11:30 AM:

Adding: no, I'm not supporting Amazon here, I think they've thrown away a lot of goodwill from readers and authors they'll never fully get back with such a boneheaded, hissy-fit move. But Macmillan needs to demonstrate its variable e-book pricing model by, you know, actually varying some of their pricing.

#55 ::: Mike Kozlowski ::: (view all by) ::: February 05, 2010, 11:31 AM:

Meredith@48: What Amazon pays the publisher isn't at issue here. Amazon's wholesale price is, and has always been, negotiated between Amazon and the publisher. What's at issue here is Amazon's selling price to the consumer.

Amazon would like to take a thin-to-negative margin, for whatever reason. (Possible reasons include: 1) driving the competition out of business, 2) ensuring that e-books are cheap enough that people don't decide that piracy is a better option, 3) the belief that they can push down their wholesale costs in the long term and get the better sales volume caused by low prices plus better margins.)

Macmillan insists that Amazon take a fat margin, for whatever reason. (Possible reasons include: 1) ensuring that they don't drive the competition out of business, 2) ensuring that e-books are expensive enough that people don't move away from paper books, 3) the belief that they can push up their wholesale costs in the long term and get even more revenue at the eventual cost of Amazon's margins.)

The key point here is that Macmillan wants to make a decision about what margins Amazon can operate at in the e-book world, in a way that they never could do with regular books (where they would doubtless otherwise have shot down Amazon's 30% discounts as being discomfiting to B&M bookstores). This used to be illegal, but a Supreme Court decision in the Bush administration now allows manufacturers to set minimum retail prices.

That music industry article was arguing in favor of just this sort of price-setting by manufacturers, eliminating the ability of retailers to set their own prices to the consumers, and you seemed to be in agreement with it. Most consumers find this reprehensible, though, which is why I was so shocked to see someone espousing it openly.

#56 ::: linnen ::: (view all by) ::: February 05, 2010, 11:31 AM:

iucounu, a new John Scalzi post on this. Thanks!

I do realize that book publishers =|= music publishers, and my re-stating of the situation left out large swathes of the music industry's ecology.

The problem is that the scenario that I described is a framing of the relationship that holds currency with buyers of music. Valid or not, I would not be surprised for it to be used here.

#57 ::: Chris Meadows ::: (view all by) ::: February 05, 2010, 11:32 AM:

C.A. Bridges @53: Give her time, I only posted them late last night or this morning. I expect she'll get around to it. I was encouraged to see she is actually engaging in dialogue with people of opposing viewpoints.

#58 ::: P J Evans ::: (view all by) ::: February 05, 2010, 11:35 AM:

51
You're making the mistake of assuming that editors, artists, authors, and all the production and distribution people work for free.

It costs money to produce stuff, even if it only exists as bits in computers.

(For that matter, servers require people to run and maintain them, keep their software and their firewalls up-to-date, and pay the bills for their power and communication lines.)

#59 ::: Michael ::: (view all by) ::: February 05, 2010, 11:49 AM:

58

No I'm not. Go read my post up on 36. I know it costs money for editors, artists, and authors. I don't expect them to work for free and I know the publishing houses will still have large overheads.

What I expect though, and this is just from reading about where the profits in Itunes really are, is that books will continue to sell copies throughout its entire copyright lifetime that the publisher owns it. Not just through the current idea of initial print run when its found not to be profitable enough to continue printing in physical form. What that means is that you aren't looking at a book simply on this quarters sales figures, but instead all books that sell only so so, will turn a profit in the end.

Make sense now?

#60 ::: Teresa Nielsen Hayden ::: (view all by) ::: February 05, 2010, 11:51 AM:

Mike Kozlowski, here's another version of the consequences of Amazon's plan: it essentially turns publishing houses into unfunded R&D labs that are obliged to turn over the rights to their products to other companies at rock-bottom prices. It's not viable.

#61 ::: John Chu ::: (view all by) ::: February 05, 2010, 11:59 AM:

Michael@51: I don't think resuscitating out of print books from the '60s is actually zero cost or even near zero cost. As much as we might think it happens for free, getting a work into ebook form incurs a cost. Especially if we're talking about books that pre-dates the modern computer age. Actually, in the case of out of print books from the '60s, I suspect rights have reverted back to the authors, so that may be a bad example.

I agree that Baen is doing it right. It's worth pointing out then that Baen ebooks are not available at Amazon. They're selling ebooks on a model that's different from the one that Amazon wants publishers to operate on. Incidentally, the Baen model is similar to what Macmillan proposes. If you want it right now, it costs you $15. (Look at the prices for the ebook version of their ARCs.) If you're willing to wait, you will get it for cheaper.

The right answer ultimately may be for Macmillan etc. to set up their own stores rather than going through Amazon, Fictionwise or any of the other ebook stores. Of course, the analysis isn't that simple. Lots of people go to Amazon. Can Macmillan get enough to people to go their own websites?

C.A. Bridges@53: The situation I'm expecting is some sort of deadly embrace where Macmillan doesn't feel they can implement variable pricing until they know that retailers will actually honor those prices and retailers won't honor the prices Macmillan wants to set until they know that Macmillan will actually vary them. FWIW, Macmillan has long had books priced below $9.99. That's a fact that doesn't get mentioned very often. (I don't know if they've actually varied prices over time though.)

#62 ::: C. A. Bridges ::: (view all by) ::: February 05, 2010, 12:14 PM:

C.A. Bridges@53: The situation I'm expecting is some sort of deadly embrace where Macmillan doesn't feel they can implement variable pricing until they know that retailers will actually honor those prices and retailers won't honor the prices Macmillan wants to set until they know that Macmillan will actually vary them.

Fictionwise honors the publisher prices. Always has, as far as I know. And yes, many Macmillan books are priced under ten bucks, but they're not at all consistent and far too many are still priced at hardback-e-book levels on Fictionwise and eReader.com years after the print paperback has come out. Robert Jordan's first Wheel of Time book came out in paperback 19 years ago but it's still priced at $15 at Fictionwise for no other reason I can tell besides Macmillan wants more money for it. Why should I trust them with more control?

I think we will see e-books move toward this sort of varied-pricing system, and I've been a loyal Baen fan for years with just such pricing. But Baen drops their prices on schedule, reliably, dependably. Macmillan notably does not.

#63 ::: Chris Meadows ::: (view all by) ::: February 05, 2010, 12:27 PM:

John Chu @61:

FWIW, Macmillan has long had books priced below $9.99. That's a fact that doesn't get mentioned very often. (I don't know if they've actually varied prices over time though.)

As I mentioned up in #45, they haven't, at least not very well.

Yesterday I did a price search for Macmillan titles on Fictionwise and found that only 285 of their 2032 titles there are priced at $9.99 or less. 857 are priced at $19.99 and up. (Do the major publishing houses keep 40% of all titles, including their entire backlist catalog, exclusively in hardcover? 85% of all titles exclusively in trade paper + hardcover? Can someone with publishing experience clear that up?)

As I said in #45 (which see), of the first 25 $19.99 search results, 7 were "erroneously" priced at hardcover level while their paper versions were in $7-$9 paperback.

If the ratio holds, 7/25 = 240/857, so there are plausibly 240 "invariably priced" Macmillan books in the $20-and-up range, to say nothing of "invariably priced" e-books in the between-paperback-price-and-$20 range—not to mention all the "invariably priced" e-books in both ranges from other publishers.

Is it any wonder e-book consumers hailed Amazon and its $9.99 pricing as a savior? Is it any wonder they're getting mad at Macmillan taking that away from them, and that they don't believe Macmillan's pledge of variable pricing?

For all the "e-books should be cheaper because they don't have marginal costs" rhetoric of some, I suspect many or most consumers would be satisfied if e-book prices were even at parity with equivalent paper versions, or perhaps a little cheaper. They could wait until the book goes into paperback to get an e-book, just as lots of people wait until paperback to get a paperback now.

But we don't have that. We've never had that, at least not reliably.

Is it any wonder e-book readers are pissed? (Not to mention puzzled at why authors and publishers seem to hate them so much?)

Here's a post another contributor made to the TeleRead blog today. It's not what I would have written, but I think it sums up those hurt feelings rather well.

#64 ::: C. A. ::: (view all by) ::: February 05, 2010, 12:34 PM:

Wrote a response to #61 that's currently in moderation limbo, so when it/if appears it's going to sound a lot like #62.

Try to act surprised :)

#65 ::: Xopher ::: (view all by) ::: February 05, 2010, 12:52 PM:

Amazon would like to take a thin-to-negative margin, for whatever reason. (Possible reasons include: 1) driving the competition out of business, 2) ensuring that e-books are cheap enough that people don't decide that piracy is a better option, 3) the belief that they can push down their wholesale costs in the long term and get the better sales volume caused by low prices plus better margins.)

Why are you ignoring the obvious reason? They want to sell lots of Kindles, and below-cost pricing on ebooks will help them do that. I'm not sure how you could have missed that.

#66 ::: Mike Kozlowski ::: (view all by) ::: February 05, 2010, 12:55 PM:

Teresa: I absolutely agree that publishers should and must have the right and ability to sell their product at the price of their choosing. To the extent that Macmillan is negotiating wholesale prices with Amazon, that is absolutely uncontroversial and business-as-usual in my mind.

But once Amazon has the product to sell, I also believe that they should have the right to sell it at a price of their choosing. And that's what Macmillan is trying to take away from Amazon. Setting the final retail price that consumers pay to Amazon doesn't change Macmillan's share of the money, it simply prevents Amazon from effectively competing with other retailers on the basis of price.

From what I understand of their negotiations, this question -- who sets the retail price -- is the key change that Macmillan is insisting on and which Amazon is so furiously resistant toward; so I don't see how publisher pricing and profit come into it. Am I misunderstanding something, or are you just looking down the road to the point where you believe Amazon will have more leverage to put the screws on the wholesale price?

#67 ::: Mike Kozlowski ::: (view all by) ::: February 05, 2010, 12:58 PM:

Xopher@64: That's another possibility, yes. I don't believe it's a particularly plausible one, though. Steve Jobs is in the business of selling hardware and uses content to sell that hardware. Amazon is in the business of selling... well, everything, really; but in this specific case, I (and most analysts, FWIW) believe that Amazon is selling the Kindle to expand its capability to sell ebooks, not vice versa. Given that they have a Kindle app you can run on your iPhone (and presumably will have an iPad version, too), it seems clear that their goal is to get Kindles into as many hands as possible so that people can buy ebooks from Amazon.

#68 ::: Tim Hall ::: (view all by) ::: February 05, 2010, 12:59 PM:

Barbera@47

That's just one (very significant) factor as to Why Music Is Not Like Books - others I can think of:

* Making music is often a collaborative exercise to start with. A five-piece band is more likely to have a mix of skills; one person might be great at coming up with original melodies, another might be good at arranging and producing, etc. Compare that to the writer who needs an editor.

* Musicians tour to perform live, which gives them a revenue stream and sales channel not available to authors.

* Some performers tend to be more extrovert than writers, and are therefore better at self-promotion. (I'm prepared to be shot down in flanes over this one).

#69 ::: Xopher ::: (view all by) ::: February 05, 2010, 01:11 PM:

Mike, the Kindle is overpriced and a profitable item for Amazon. The ebooks are loss leaders. Your theory is refuted by these two facts.

#70 ::: Xopher ::: (view all by) ::: February 05, 2010, 01:13 PM:

To elaborate, you don't sell things at a profit in order to sell more of a different thing at a loss. It's the other way around.

#71 ::: John Chu ::: (view all by) ::: February 05, 2010, 01:14 PM:

Chris@62:They could wait until the book goes into paperback to get an e-book, just as lots of people wait until paperback to get a paperback now.

This, incidentally, is the other proposal Macmillan made. Everyone is so bound up about $14.99 that the other proposal hasn't gotten much attention. Macmillan said that if they stay with the current terms of sale, they will simply delay releasing the ebook until after the hardcover release.

This seems like a perfectly workable solution to me. Amazon gets control over its retail prices. Macmillan gets the dynamic pricing that it wants. I suspect though that out of sheer impatience, ebook readers would still hate publishers. (Witness the kerfuffle when it was feared that the ebook version of The Lost Symbol might not be released at the same time as the hardcover.) To be fair, they may be worried that the book may never come out as an ebook. After all, not every book comes out in a mass-market paperback edition.

Mike@66: I think you and Xopher both agree that Amazon want to get Kindles into as many hands as possible. If Amazon has the cheapest prices on ebooks, that ought to encourage Kindle sales.

#72 ::: C. Wingate ::: (view all by) ::: February 05, 2010, 01:21 PM:

re 51: One thing I would like to point out is that in spite of big box retailing, local appliance retail still persists-- and there has always been big box retail as a major force for them to have to compete with (see under "Sears, Roebuck, & Co."). The reasons? Buying a dishwasher requires a LOT of mediation: beyond selecting one, it has to be delivered and installed. This stuff is all non-trivial, and it's all service-oriented; a computer can't do it (or rather, enable the consumer to do it themselves). Music is at the extreme opposite end: anyone can pick out a download online and install it, and publishing (assuming the original recording was well done, and decent sound engineers are not hard to come by and can even support themselves through that profession) is absurdly easy. Just to take it back a notch technologically, there I was at Dupont Circle at lunch, and there was an Andean band busking, and they had a stack of very attractive and very professional CDs in a guitar case. One wonders whether the Music Industry provides any added value beyond publicity. Publishing decent books isn't that easy; music performance itself accomplishes most of the editing that text publishing requires as an intermediate step.

which takes me to

re 61: Well, the worst thing about turning an OOP paper work into an ebook is that it costs exactly those nasty editing costs that self-publication so frequently stints on. I'm doing some work on CPDL translating original publications of Billings's music into modern, electronic scores, and it's a lot of tedious handwork, plus playing the stuff back to make sure it makes sense, and all in all it's a festival of copyediting on top of the transcription. (I did make one interesting find: the currently performed version of Kittery deviates considerably from that in the original plates; there's a lot of sacred-harp-telephone behind the characteristic sound of early American shape note music, it appears.) Practically the only "free" part of such republication is the original authorship!

#73 ::: Chris Meadows ::: (view all by) ::: February 05, 2010, 01:24 PM:

John Chu @70:

This, incidentally, is the other proposal Macmillan made. Everyone is so bound up about $14.99 that the other proposal hasn't gotten much attention. Macmillan said that if they stay with the current terms of sale, they will simply delay releasing the ebook until after the hardcover release.
Oh, plenty of people are aware Macmillan says they want to institute variable pricing. That's not the issue.

The issue is that, given the pricing irregularities I mentioned in #45 and #62 that they've had over ten years to correct and have never bothered, why should we believe them now? What proof do we have that, as Pratchett put it, the leopard has changed his shorts?

If they want to prove they really want "variable pricing", how about they make some phone calls and fix the prices on all those "invariably priced" e-books at Fictionwise and elsewhere I mentioned?

#74 ::: Kelly McCullough ::: (view all by) ::: February 05, 2010, 01:31 PM:

Chris Meadows @ 72,

why should we believe them now?

Perhaps because the ebook niche is finally starting to become big enough for it to be worth the time and resources it costs to deal with it?

#75 ::: Mike Kozlowski ::: (view all by) ::: February 05, 2010, 01:32 PM:

John@70: Amazon isn't the only seller of ebooks, so Macmillan's "offer" was a pretty obvious threat -- that they'd give their books to Amazon's competitors exclusively for some time (a year?), and only then allow Amazon to sell them. Amazon understandably viewed those terms as unacceptable.

#76 ::: Chris Meadows ::: (view all by) ::: February 05, 2010, 01:36 PM:

Kelly @73: Then why were they providing e-books at all if it wasn't "worth the time and resources"? Surely the time and resources could have been better spent on publishing more print works if that was the case.

Apparently it was worth doing, it just wasn't worth doing right.

But even granting that, then why aren't they "dealing with it" now?

There are still hundreds or thousands of mispriced e-books on Fictionwise, eReader.com, Mobipocket.com, and other such stores as I speak. It needn't require renegotiation of payment model to call up (or e-mail, fax, etc.) the e-book vendor and say, "Please lower the prices on the e-book versions of [list of books] to reflect their current paperback status."

#77 ::: John Chu ::: (view all by) ::: February 05, 2010, 01:52 PM:

Chris@72: I wasn't talking about variable pricing. I was talking about delaying ebook releases. Yes, the net effect of that is variable pricing. I'm merely expressing puzzlement over why Amazon simply didn't let them do that. Call their bluff, as it were.

Or to put it another way, the mere suggestion that Macmillan might delay ebook releases caused Amazon to remove all Macmillan books from their store. I don't get the intensity of Amazon's reaction at all.

You'd suggested that ebook readers could simply wait until the paperback comes out. I was just pointing out that Macmillan had suggested something similar. However, this is unacceptable to Amazon. Or, if it were acceptable, I assume they would have simply accepted it and life would have gone on. If variable pricing is unacceptable because you don't trust that they would actually do it, this other option has been on the table from the very beginning.

I do think that Macmillan would increase readers' trust if they implemented their new scheme at Fictionwise etc. However, I suspect that would require Macmillan go to into new negotiations with them too. (Pure speculation on my part, but what if their scheme was calculated assuming 70/30 split? In that case, we'd have to wait to see how they behave within Apple's iBook store.)


Mike@74: I assumed they'd do the same with every ebook vendor. After all, the impetus here was clearly to get the same terms with Amazon that they have with Apple. Maybe I'm just being naive. Or perhaps Amazon's being naive in thinking that they'd lose sales to ebooks at hardcover prices. I mean the whole point of this discussion has been that people won't buy ebooks at hardcover prices. It seems to me that people would just wait until Macmillan made the ebooks available at Amazon (who would sell them at $9.99) and buy it then. Without Amazon selling a given ebook at $9.99, even if their competitors have the ebook for sale, they may not feel the need to match a price that Amazon isn't offering.

As threats go, it seems pretty ineffective to me. It relies on customers behaving exactly the way everyone claims customers won't behave. (Also, if Macmillan offered it to other vendors but not Amazon? Talk about incurring customer hate. If that's the case, Amazon really should just call their bluff...)

#78 ::: Chris Meadows ::: (view all by) ::: February 05, 2010, 02:00 PM:

John @76:

I do think that Macmillan would increase readers' trust if they implemented their new scheme at Fictionwise etc. However, I suspect that would require Macmillan go to into new negotiations with them too.
"Hello, Fictionwise? This is Macmillan. You know that book we want $13 wholesale for each copy you sell? Well, now we just want $4. Feel free to adjust your price accordingly."

Pretty simple negotiation, that.

#79 ::: Kelly McCullough ::: (view all by) ::: February 05, 2010, 02:05 PM:

Chris Meadows @ 75

1) I suspect that contractually it very well might require a significant renegotiation. Having seen a few book business related contracts in my time (admittedly all from the authorial side), I have found they can be quite a bit more complex than someone not familiar with them might expect and it would not surprise me if that is also the case with distribution agreements.

2) Perhaps it has something to do with the distraction of some larger entity entering the market (oh say, Apple?) and working on the response to that along with the ongoing mess inflicted by Amazon's decision to pull their titles. It would seem quite likely to me that whatever experts Macmillan has to field issues on the topic are pretty thoroughly engaged with those two items at the moment.

That said, it would be nice to see them do something on that front as a matter of good faith if nothing else. I'd certainly never claim that Macmillan should be sainted or anything, I just feel that their interests in this matter are much better aligned with mine than are Amazon's.

As a side note, might I ask why you chose to drop my last name in your response to me but did not do so when you responded to John Chu or C.A. Bridges?

#80 ::: Paula Lieberman ::: (view all by) ::: February 05, 2010, 02:08 PM:

#27 Lee

Content servers are very different from big box stores. Big box stores have to physically have merchandise in them. Content servers can access terabytes of storage...

When I was working for Infolibria a decade (1) ago I was one of the testers of unified server farm which had more than 20 servers, content storage, and could deliver 20,000 simultaneously streams of 300 kilobit per second digital video on-demand from whatever combination of stored canned content was in storage and live streaming video available for the system to replicate. The last I new that system was operating at Comcast's facility in Denver--the original customer for it was AT&T before AT&T sold that branch of itself to Comcast.

That was a -decade- ago. That system cost more than a million dollars way back then, similar capability is a lot less expensive today. The system could also serve up lots of webpages....

Billing and ecommerce for digital content which the last time I was involved in that business had the name "Content Mediation" isn't really all that complicated--there's a database such as Oracle or Sybase or I forget the name of Microsoft's, there is Apache or Darwin or Internet Information Server or whatever may have superseded it, and there is software for content mediation which generates end user customer accounts and keeps track of who's requested what content and does ecommerce transactions for content access and generates reports for the operator and the content providers.

And the systems are a lot less expensive for purchase and operating expenses than printing presses and Book Machines, and there are NO NO NO NO!!! consumables.....

The "publisher" equates to "content provider" -- the content server system and operations don't care who provided the content or -what- the content is, the content provider if not running their own content distribution system, contracts with a company which provides content distribution services (Akamai for example I think) or "web hosting" where the web hosting service used also includes ecommerce support, which makes content available and charges "end users" for end users to access/download/receive-via-email the content the end user is paying for.

The storage costs are small--some small per megabyte fee. Inventory control is near-automatic, see "reports" above, the reports include details of what customer end user accounts spent what on what in how many accesses for how long, rank-ordering with statistics of what got accessed and how much revenue each title got and when and who accessed each and for how long (yes, the reports include information that "there were 20,000 accesses to this content, and 16,000 of them were under 5 minutes (for a 90 minute movie. I don;t think that theaters keep track of how many people walk out when... content mediation systems even list -who- walked out...)

Big box stores want to limit the number of suppliers and maximize sale volume per individual item (SKU). For ebook, the servers don't -care- whether those 20,000 streams are 20,000 copies of the same content, or one copy each of 20,000 different titles. The database is keeping track of it, and there aren't stock clerks running around inside having to put out merchandise, restock the shelves, move merchandise out of the way for new merchandise coming in....

There are terabyte hard drives available for $100 there days. At under a megabyte a novel, that's a million novels, which would fit on a terabyte drive.... storage cost per novel, a ten-thousandth of a cent! The inventory control and "warehousing" and "distibution" costs, are all subsumed by what the "publisher" is paying for the webhosting/ecommerce expenses.

There may be costs for website designers for the website which the end users visit to get to the ecommerce backend, but website expenses belong to marketing expense and promotion and product information, rather than order fulfillment and distibution....

The more I think of it, the less impressed I get with the Macmillan executive.... I am not denying that there are editing and production expenses for ebooks, but ebook have zero costs and expenses for physical product handling and inventory control and warehousing and spoilage and shipping. Ignoring those when talking physical books versus ebooks is disingenuous. Oh, and as regards inventory taxes, there are only the origial and backup copies of the book data files, there are no stacks of boxes of books or unbound pages to be bound later if orders come in, of physical merchandise books to be taxed on as inventory.

Getting back to Big Box stores, their model works off -volume- and economy of scale. Econtent distribution, that model is much less relevant--the marginal cost for adding another book, is trivial, most of the issue is people finding what they want amidst a huge volume of options, and having the server system having enough power and the right software to handle the load--but I suspect that that's not really much of an issue. What I did to make a content server get three hours behind on database operations, was an overload level that even most malicious crackers wouldn't do (simulation of hundreds of different users being served a few seconds of content from a whole bunch of different titles and then changing to request something else... the database management system really did get backlogged three hours... In the real world I suspect that the front end "switching" system would finger that as form of Denial of Service attack.... and again, I was doing that eight years ago, and systems have gotten a lot more powerful and less expensive per capability, since then).

#81 ::: Paula Lieberman ::: (view all by) ::: February 05, 2010, 02:12 PM:

#76 John Chu
The cynic in me popped up and says, "If the publisher won't allow ebook publication at "reasonable" price to consumers, enterprising capitalists will scan printed books and distribute counterfeit ebook versions instead...."

Where there is sufficient demand, someone will create a supply....legally or illegally. There were many more coins in circulation in the Roman Empire, than produced by the official mints of Rome....

#82 ::: IreneD ::: (view all by) ::: February 05, 2010, 02:17 PM:

Jay Lake did a little link digging and came with two interesting articles on the Apple "agency model" for ebooks prices which lay at the heart of the Amzon/Macmillan controversy. What's more, they predate the clash, so it's a good read for anyone interested in non-confrontational discussion of the facts.

#83 ::: Chris Meadows ::: (view all by) ::: February 05, 2010, 02:17 PM:

Kelly McCullough @78:

I don't think it would require renegotiation of anything. Fictionwise and its ilk have for years said they had variable pricing arrangements with the publishers whereby the publishers were supposed to lower their prices when the book went into paperback. But actually getting the publishers to follow through (because they had to have explicit permission for each price change) tended to prove pretty hard in practice.

And on the name thing…I don't know, maybe because it's several times longer and much harder to spell? :)

#84 ::: Craig R. ::: (view all by) ::: February 05, 2010, 02:22 PM:

One thing that I keep hearing, over anmd over, is that this is "just about e-books, not about paper books"

This Is Just So Wrong.

The issue is about what the publishers can make on the Big! New! Bestseller! (which we will call the B!N!B!)

The B!N!B! margin is what gives the publisher the cushion to be able to publish *other* than the B!N!B!, and to write contracts with new writers, and not-new-but-"less-commercial" authors that might bring new people into the field.

Oh, the publishers have no illusions about being altruistic -- they *know* that if they just keep mining the same field eventually it will pan out. Where is the next Steven King novel to cpome from if he decides that he is Wealthy Enough And Is Now Tired and retires from writing?

Where would be the incentive for an outfit to take a chance on the next potential J.K. Rowling?

The publishers know that the public is a fickle beast and that they need to keep diversified, but if all that they *can* sell and make any money on is that B!N!B!, and the margin is *not* high enough to provide for that diversification they, as publicly-held corporations, will be forced to stop looking for more new talent, and will just stay with the B!N!B! and its clones.

(as a side note to this, I recall hearing that there was a certain series of Really Offensive To Me books set in a nasty slave-holding and fetish-ridden fantasy world sold well enough that the publisher told those objecting that the proits from *those* books enabled him to take chances on people who might, or might not, turn out to be really well-selling authors as well, but were better writers.

ANd the tell-all was that, if you didn't like those books, nobody forced you to buy them. But you certainly *might* like buying the volume from that *other* writer the publisher was able to try out.

Again, if the artificially-constrained e-book market price poinjt is able to take a big enough
bite out of the print best-seller market, that flexibility in choice will be gone.

#85 ::: Mike Kozlowski ::: (view all by) ::: February 05, 2010, 02:26 PM:

Craig@83: Explain to me how the publisher setting the retailer's margin affects the publisher's revenue or profit. Nobody -- not me, not Amazon, nobody -- is asserting that Macmillan can't set their own wholesale price on books. They can. They do. They always have.

What Macmillan is asserting is the right to set retail prices, thereby determining how much money Amazon makes, not how much money Macmillan makes.

#86 ::: John Chu ::: (view all by) ::: February 05, 2010, 02:35 PM:

Chris@77: You snipped off the bit where I suggested why they might need to go into negotiations. That's not exactly playing fair.

#87 ::: Kelly McCullough ::: (view all by) ::: February 05, 2010, 02:36 PM:

Chris Meadows @ 82,

You're typing names and numbers instead of cutting and pasting, or dragging and dropping? Dude, that's awfully pre-digital distribution of you. ;-)

Okay, so I cut and paste at least as much because it reduces the chances of mistyping someone's name or a post number as I do because it's faster, but still…

#88 ::: Chris Meadows ::: (view all by) ::: February 05, 2010, 02:45 PM:

John: Sorry, I thought it was irrelevant. As I said in a comment just a couple posts before yours, they don't need to change their pricing model. They've still got the same arrangement they've always had, the wholesale/retail deal whereby the wholesaler controls retail prices by setting his wholesale price. Change the wholesale price, change the retail price. If it's been good enough to sell books for ten years, why do they need to now?

(Of course, from what I've seen elsewhere, they probably are anyway, since the agency thing is going to be how they sell through everyone from now on I suppose.)

#89 ::: David Dyer-Bennet ::: (view all by) ::: February 05, 2010, 02:46 PM:

I've done a mediocre scan-and-OCR job in about 6 hours. Better than some of the pirate ebooks I've seen out there, but not that good. I think mostly I could produce a better-than-print quality ebook in about two man-days. So bringing old stuff that exists only on paper back into print is nowhere near free, but probably not that expensive. I think you could pretty easily find $35/hour contractors who would provide their own computer and scanner, and produce you a pretty darned good RTF file (good source to produce various formats from) for about $600. You might be able to find people for half that, or you might decide to go for higher quality and pay even more.

It certainly makes bringing "thousands of old works" back into print look fairly expensive.

Just finding the rights holders can cost more than this, and often takes many months. (That wouldn't be the case if a publisher currently holds the rights, probably.)

Of course you could perhaps license the text from Google Books :-).

#90 ::: B. Durbin ::: (view all by) ::: February 05, 2010, 02:52 PM:

Way back at #31, Meg Thornton wrote about good vs. bad customer experiences, and how centralization hurts that.

Yes.

A number of years ago, I worked at a Borders store in Denver. During my tenure, we made a lot of nifty changes— one employee started up a monthly Game Day, for example, which led to an increase in interest in the science fiction, comics, and games sections of the store. So we prettied those up, made sure they were in stellar condition, and brought in things such as Hero Clix. The general manager started a few trends of his own, getting authors to come in for talks and signings, recommending certain books to the point where we had authors visit because their books were selling anomalously high at our store, and doing in-store campaigns for certain products. (My "Pumpkin Spice" girls were all created as part of this process.)

What happened? After a few years— which were very good for our customer base— a new CEO came for the chain and started complaining. Our events and signage weren't standardized. Our purchase lines were weird. I moved to another state around this time but my friends who remained told me what happened— pretty soon, that wonderful general manager quit and went to work for the Chamber of Commerce. And most of his hand-picked staff moved on as well, including those who had been Borders employees for decades.

I miss that store, though I suspect I wouldn't recognize it now. Just as messy as my local Borders, I suspect. (I swear, I can't find anything in the computer section, or the comics section. Yes, they get messed up rather thoroughly. That's why you need to stay on top of them.)

P.S. I love the comment about trying to find shoes for women with five toes. It's so very true— and online is no place to buy shoes, because you have to know how they fit. "When a man's feet hurt, his soul is in peril."

#91 ::: Victoria ::: (view all by) ::: February 05, 2010, 02:53 PM:

Avram at #35

No.

For Macmillian to be a monopoly, it would have to buy up the other five big publishers and run the small presses out of business. That would give them a monopoly over books and book pricing. Right now, Macmillian and the other houses have to compete with each other for authors and shelf space in bookstores as well as things like printing press access. They also have to compete with small press publishers.

Amazon.com is not a publisher. Amazon is a distributor. A distributor takes goods from a supplier and delivers them to a store for resale.
Because Amazon has cut bookstores out of the author to reader pipeline, they also claim status as a wholesale retailer. They're not wrong, they're just not being completely honest.

What Macmillian and other publishers are doing is defending their business model against a distributor who wants the largest market share they can get away with.

Macmillian and other publishers know how much it costs for them to buy a manuscript and turn it into a professional quality book. Those overhead costs (payments to the author, staff wages, office rent, utilities, printer fees, shipping fees, etc.) are figured into the cover price of the book. Some of these costs are set by others and can't be changed. Some can be negotiated up or down. However, there is no getting away from them. No one works for free. That is why hardbacks cost more than trade paperbacks. That is also why mass market paperbacks are the cheapest dead tree format in the market. Each format has its own scale of production costs.

When Amazon tells Macmillian and other publishers, "We will only sell e-books in this price range," that set warning bells off in my head. (Please note, that Amazon is not trying to dictate dead tree cover prices, just e-book cover prices.) Amazon is trying to start up a robber baron railroad*. They are, essentially, telling Macmillian to work for free or have their employees and authors work for free. Being a distributor, the only book costs Amazon cares about are their costs in regards to distribution and wholesale pricing.

The way I see it, Amazon wants to corner the e-book distribution market. That's the newest sales frontier, and it's only now getting popular. The biggest things holding back e-books are the lack of compatible formats across multiple platforms and/or industry standards that are book owner friendly. (Whether it's "both/and" vs "either/or" depends on the consumer and their feelings about DRM.)

That is why they provide the Kindle and all the services that Kindle offers. The consumer just has to put up with their proprietary format.

Just like the robber barons did back in the 19th century, Amazon wants to underprice the goods they sell to run their competitors out of the e-book market. Once they have the market secured from all other competition, they can start charging more per book download.

Sure, Amazon will charge you $10 now. How about later? Who will stop them from charging $30 or more per title if they corner the e-book market?

As for the paper books' buy now buttons being non-functional... That's just the hammer.


-------
* I still remember my history lessons on 19th century monopolies created by robber barons, the reasons child labor laws were enacted and why unions exist to this day.

Businessess forcing employees to work for less than they can afford is not new. Larger businesses forcing smaller ones to pay for the privledge of supplying goods because someone else with more power and influence wanted more money is not new.

The monopolies of the 19th century got started because a few people saw an undeveloped market in the form of new technologies. Then they did whatever they could to own that market and all the things associated with it. When it comes to predatory business practices, there is not a lot of difference between an 1800's factory and an e-book reader.

#92 ::: iucounu ::: (view all by) ::: February 05, 2010, 03:14 PM:

linnen, the asymmetry here is that I think a publishing house adds more value to a book than a music label adds to a band. I know it makes me sound like a wretched hipster, but most of my favourite music came out underground; the big record deal often seems to result in 'that difficult second album'. It's very different from the situation with print. I really don't want to read a lot of self-published books; unpublished books, you have to pay me to read. So it is a very different ecology.

At the moment in the UK there's a controversy over ebook royalties that seems like the crack where the wedge is about to be driven. There's a perception that not having to print books means that there's a vastly improved profit margin in a digital books business, and everyone would like a piece of it. IIRC the Society of Authors would like us to pay up to 75%; we're talking more like 25%, which is three times more than your average paperback royalty. And consumers want to pay lower prices for their ebooks, because after all they're just data. We're going to get squeezed from both ends, and it isn't like the profit margins in publishing are anything to shout about to begin with.

People have begun to say, why don't writers just cut out the middlemen and sell direct to the public? Those people have never read slush for a living. Publishing houses are excellent spam filters, and excellent at making desirable and convenient objects out of the good stuff. If you want to know what buying a book would be like in a world where you cut out the middlemen, browse the PublishAmerica site. It's exponentially worse than hitting Myspace to pick up a mixtape.

If that isn't enough, the fucking retailers are now throwing their weight around! We have a monopsony on the high street - Waterstones - which is causing all sorts of grief. And then we have Amazon and Apple maneuvering around busily trying to corner the futures market in digital distribution. Meanwhile I think most of the people at the top in the UK book trade are still thinking of setting up a committee to talk about how they might decide to respond, or something.

#93 ::: heresiarch ::: (view all by) ::: February 05, 2010, 03:21 PM:

I'm trying to make sense of all this. I'm definitely not an expert on publishing, so if I'm wrong in any of this I hope someone will correct me. As I understand it, the publishing industry has traditionally played three (maybe four) different roles that are crucial to getting books into the hands of readers.

1 - Serving as a source for specialist skills such as typesetting, copy editing, cover designing, etc.

2 - Acting as a risk-pool, using the profits generated by bestsellers to fund the development of the next batch of books (the vast majority of which won't ever become bestsellers.)

3 - Printing books

(4 - Distributing those books to retailers--maybe this is close enough to the previous point to be combined)

The people defending Macmillan tend to emphasize the first two, sensibly noting that e-publishing doesn't replace either of these vital functions. The people attacking Macmillan tend to emphasize the latter two, noting that e-publishing really does change them, and that it's not unreasonable to assume that e-publishing will substantially affect how publishers work. (You might notice I'm leaving out the extremes here.) I feel like people are doing a lot of talking past each other, because each side is talking about a different aspect of the industry.

#94 ::: Christian Höltje ::: (view all by) ::: February 05, 2010, 03:21 PM:

Victoria @90 -- Amazon can never be a robber baron. For that to happen, the barriers to competition have to be so high that no new competitors can form.

If I wanted to start selling eBooks, assuming I had ebooks available to sell, it would take me less than a week in my spare time.

The barriers to enter the eBook "retail" market is incredibly low.

#95 ::: John Chu ::: (view all by) ::: February 05, 2010, 03:23 PM:

Paula@80: Isn't that already happening? You're talking about pirated ebooks.

I realize that ebooks aren't mp3 and they aren't video. However, I think there's enough track record to show that if the price is reasonable and it's easy to buy, people will buy the legit version rather than pirate it.

Of course, the big question here is what is a reasonable price. Personally, I think it's pretty low because we as a culture don't seem to place much value on a bunch of bits on a hard drive or in flash memory (as opposed to the reification of those bits in a physical object). If it's not possible to produce ebooks such that selling them at a really low price is profitable, then none of this matters because the business is not sustainable.

The incremental cost of another copy of an ebook is really low. The problem is that the money required to come out with that first copy of an ebook is akin to the money required to come out with the hardcover edition. Either publishers need to figure out how to do this much more cheaply to match our expectation of ebook prices, or we need to learn to place value on a bunch of bits stored on a hard drive or flash memory. I suppose more likely, publishers and customers will meet somewhere in the middle.

Chris@87: As I said, it's not unreasonable to guess that they think their dynamic pricing model needs a split that's more favorable than 50/50 to work profitably. To change the split would require negotiations. Now, as it happens, I don't know if a change in split is necessary for them to stay profitable if they lower their prices, but you don't know that it isn't.

If you want, read "split" as "the ratio between wholesale price and MSRP-wholesale price." However, IIRC, in publishing, it's not specified this way. I think the bookseller buys books from the publisher at a contracted discount from the suggested retail price. That's usually 50%. Given where I'm writing this, if I'm wrong, I'm sure lots of people will correct me.

If we go with that presumption, the 50% discount to booksellers is then the reason why we have the retail prices we have now. Macmillan may have crunched the numbers and decided the way to reduce retail prices, and maintain profitability, is to reduce the discount to booksellers to 30%. Like I said, the money spent to get to that first copy of the ebook is akin to the money spent to publish the hardcover edition. If that's the case and profit margins are thin, then they can't just reduce retail prices without altering the discount unless they want to lose money on each sale.

Amazon may be willing to lose money on ebooks but that doesn't mean that Macmillan ought to be willing too. For one thing, Macmillan doesn't have a ereader they want to push. (Incidentally, substitute any other publisher you'd like for Macmillan. I obviously have no inside knowledge. They're just the handy example of the moment.)

Like I said, this is one possibility. I don't know if this really is the case, but I don't think one can simply dismiss it.

#96 ::: heresiarch ::: (view all by) ::: February 05, 2010, 03:23 PM:

Mike Kozlowski @ 65: "Setting the final retail price that consumers pay to Amazon doesn't change Macmillan's share of the money, it simply prevents Amazon from effectively competing with other retailers on the basis of price."

It does, actually, because Amazon isn't offering to pay Macmillan a flat per unit rate--they're negotiating for a percentage of sale price. So if you're getting paid 70% of retail, then the final retail price is rather important.

#97 ::: Mike Kozlowski ::: (view all by) ::: February 05, 2010, 03:34 PM:

Heresiarch@95: No, that's not true. Amazon wanted to continue using the model it had been using for paper and e-books, in which they pay the publisher some fraction (apparently 50%) of the publisher's list price, and Amazon is free to price the book however it wants. For over a decade, they've sold paper books this way, and up until last week, they also sold e-books this way.

Macmillan then insisted that Amazon change its model to the agency model (incidentally, follow the Jay Lake link above; he links to very lucid explanations of this), wherein the publisher gets paid a percentage of the actual retail sales price, which they also get to set.

It is Macmillan's revolutionary and novel demand to control retail pricing that set off Amazon's (stupidly self-destructive) retribution, and it's precisely that revolutionary and novel demand that some people here seem to believe is essential to saving publishing, for reasons that are still unclear to me.

#98 ::: heresiarch ::: (view all by) ::: February 05, 2010, 03:36 PM:

iucounu @ 92: "the big record deal often seems to result in 'that difficult second album'."

The sophomore slump is a predictable pattern, actually. It can be explained via the interaction of two trends: bands' outputs tend to vary in quality/popularity along a normal bell curve, and that "break outs" tend to be of higher than average quality. If a band is more likely to break out with (what is for them) an unusually good album, then it follows that their next album is statistically likely to regress towards their typical quality, i.e. considerably less good. Add in a preference for bands that have already proven successful, and it's probable that the second song you hear/second album you buy from a band is not going to be as good as the first.

#99 ::: Craig R. ::: (view all by) ::: February 05, 2010, 04:05 PM:

Mike Kozlowski (#84)

What Macmillin is trying to do is control just how much of their own seed corn they are going to have to eat and how much gets planted.

The setting of the $9.99 price point for e-books by amazon has nothing to do with the profitability of the individual e-book sale, but to do with the profitability of the monopoly on e-book prices that Amazon wants to build.

Amazon pushing the $9.99 maximum price point on e-books make a very real impact on expectations on what prices will be, and not just in the e-book market. And that expectation will determine just what, and at what level of profitability, the publisher can agree to produce, themselves, and at what wholesale price.

ANd you really also seem to be missing the fact that Macmillin *did* say to Amazon that, "yes, you can set your price point where you want, but unless you conform to the price schedule that we want, you will have to wait a certain amount of time before we will release our e-book versions of B!N!B! for you to sell."

ANd that will be no different than the wait for a DVD of a movie being released only after a certain amount of time for the movie to be seen in theatres.

#100 ::: Mike Kozlowski ::: (view all by) ::: February 05, 2010, 04:09 PM:

Craig@98: Yes, there's the price expectation thing. But that's a second-order effect, and it only really hits the publisher if Amazon is able to successfully use that expectation to drive wholesale prices down -- a prospect that I'm skeptical of, given how empirically little influence Amazon has over publisher pricing.

And I am very much ignoring the delayed release thing, because Amazon has competition, and not getting a product until months after your competitors have it is not acceptable to any retailer.

#101 ::: Charlie Dodgson ::: (view all by) ::: February 05, 2010, 04:22 PM:

Xopher@68, you say the Kindle is "overpriced and profitable" for Amazon. Could you cite a source?

Here's what I've got: Parts cost of a Kindle 2 was estimated at roughly $186 shortly after it shipped. I'll assume that parts cost for the current "International" model is roughly the same, since the main difference is the wireless chip. The Kindle 2 cost $259 retail when discontinued, and the International version costs $259 now, for a difference of roughly $73 over the parts cost.

I'm not sure that $73 is enough to pay for the Kindle's wireless access, let alone assembly, testing, packaging, and customer support. It's certainly a lot lower than common markups on consumer electronics. (Examples: an unlocked Nexus One will set you back over $500 for $174 worth of parts, and as of last April, the parts of an $80 iPod Shuffle cost about $22. That's to pay back the costs I've mentioned --- though wireless plans aren't bundled with the Nexus One, and aren't even applicable to the iPod.)

So, I'm actually not sure that the Kindle is profitable, let alone overpriced. If there's a profit at all, I can't see how it amounts to much, and they may very well be selling it at a loss. (As per common practice in the industry for stuff like game players, where the producer expects to make up the loss in profits on the media.)

But if you think you've got a better estimate, please feel free to correct...

#102 ::: Christian Höltje ::: (view all by) ::: February 05, 2010, 04:30 PM:

So, of course, the publishers will now allow physical retails to set their prices as they wish, right? They'll remove the prices printed on the covers, right? No? Huh...

#103 ::: Tim Hall ::: (view all by) ::: February 05, 2010, 04:35 PM:

heresiarch @ 97 The sophomore slump is a predictable pattern

I think the whole "difficult second album" syndrome is overstated, and it's become one of those things people believe simply because they hear it repeated so often.

It has far more to do with the hype/backlash cycle and the (often) limited talents of many of the artists the record industry choose to promote. Far too many artists are massively promoted very early in their career, before they've really had the chance to prove anything. As a result of this hype, and more time and effort spent on developing their image rather than the music, the end result is often bands who are too much style and too little content. By the time the second album comes out it's the middle of the backlash against the overhyped debut. Often it isn't significantly worse than the first one, but by then the novelty has worn off, and people notice the emperor wasn't wearing any clothes.

Maybe that's an over-generalisation, perhaps because I prefer genres like metal and progressive rock where bands typically don't start producing their best work until three or four albums in when they've developed their technical skill to do their musical ideas justice.

#104 ::: fidelio ::: (view all by) ::: February 05, 2010, 04:55 PM:

Tim Hall @102 and others--another reason for weaker second albums is that when the contract shows up, the band/solo artist often has a larger pool of songs to pick from--music they have developed over a course of time, from when they first formed to when they were signed and put together the first album, so they can pick their very best stuff; the second album will pull from the songs that didn't make the first cut, or from things written since--and given the push to have an album every year, as well as to tour and sell the first album, there's often less time to develop that new material. There may be less time to rehearse as well, depending on other calls on their time, and perhaps less time to think about and discuss what #2 should sound like.

These aren't the only cause of weaker-seeming second efforts--but we shouldn't overlook them as factors.

#105 ::: John Chu ::: (view all by) ::: February 05, 2010, 05:06 PM:

Christian@101:Haven't physical retail stores always set their prices? I've certainly seen bookstores discount NYT best sellers as a matter of course.

While I'm here, Tobias Buckell wrote a terrific post with worked out examples of the compressed price range of ebooks at Amazon. The profit on the backlist subsidizes the loss on new releases. He goes on from there to make some interesting points about Amazon's strategy.

#106 ::: heresiarch ::: (view all by) ::: February 05, 2010, 05:08 PM:

Mike Kozlowski @ 96: "No, that's not true. Amazon wanted to continue using the model it had been using for paper and e-books, in which they pay the publisher some fraction (apparently 50%) of the publisher's list price, and Amazon is free to price the book however it wants."

You are right. I thought I'd read somewhere that Amazon had been negotiating under the agency model, but I must have been mistaken.

Still, the fact that Amazon prefers a model where they lose $5 on every Kindle book they sell is a bit strange. There are only two reasons I can think of to sell e-books at a loss. One is to use cheap e-books to drive Kindle sales, and make up their losses on Kindle profits. This would be a bit of a strange profit model though: the combined Kindle/e-book revenue stream would go severely negative once people stopped buying Kindles, even as they kept buying e-books.

The second reason to sell e-books at a huge loss is to undercut other e-book suppliers in order to dominate the e-book market, with an eye on future monopoly. Once they controlled the market, they go back to publishers and extract lower prices from them. Amazon would be trading short-term profit for long-term monopoly-based negotiating power: the Walmart model, in other words.

Why do you think Amazon is so eager to sell e-books at a staggering loss?

#107 ::: heresiarch ::: (view all by) ::: February 05, 2010, 05:12 PM:

Nevermind, Tobias Buckell explains it.

#108 ::: Avram ::: (view all by) ::: February 05, 2010, 05:14 PM:

TNH @60: it essentially turns publishing houses into unfunded R&D labs that are obliged to turn over the rights to their products to other companies at rock-bottom prices.

Isn't this basically how publishing houses treat authors? Doesn't the typical author get paid not-enough-to-live-on, in the hope that maybe one day he'll write a big hit?

Victoria @90: For Macmillian to be a monopoly, it would have to buy up the other five big publishers and run the small presses out of business.

In order to be a trust or a cartel, it would just have to collude with the other publishers, perhaps to the extent of agreeing on a common pricing scheme.

I'm not denying that Amazon would like a monopoly, though I don't think they'll succeed in becoming one. I'm just saying that a bunch of publishers all adopting the same pricing model looks like a cartel.

#109 ::: Larry ::: (view all by) ::: February 05, 2010, 05:14 PM:

Lots of great thoughts and posts here. Apple, whatever else you may say about them, has managed to throw another bomb into an established industry. This time publishing. I think it's a good thing they did since Apple's decision to go with an "agency model" will be good for the consumer in the long run.

Mike @96: It's simple really. Amazon is in the middle of a price war with the likes of wal-mart, B&N and other big box chains. Macmillian, rightly, doesn't want to have their feet cut out under them because of this. If Amazon starts pricing all books at $4.00 then the loser in the end is Macmillian only.

#110 ::: James D. Macdonald ::: (view all by) ::: February 05, 2010, 05:15 PM:

It's intuitively obvious that the only reason for Amazon's move is to corner the market in e-books.

Give them a monopoly and just see how well that goes for consumers.

#111 ::: Charlie Dodgson ::: (view all by) ::: February 05, 2010, 05:30 PM:

The notion that Amazon's trying a monopoly play in ebooks makes a lot more sense than some of the other conspiracy theories that are flying around. It's also consistent with their restrictive EULA, screwy proprietary DRM, no-cost readers for the PC and iPhone, etc., etc.

Much more sensible than the idea that this is all their play to somehow make boatloads of money in the not-at-all cut-throat consumer electronics market...

#112 ::: Ursula L ::: (view all by) ::: February 05, 2010, 05:47 PM:

Why do you think Amazon is so eager to sell e-books at a staggering loss?

Well, it pushes other e-book distributors out of the market, as has been noted by others. Amazon can afford to take a loss on e-books for a while, while smaller retailer can't, and will drop out of the business.

Then, the Amazon prices will go up, and buyers will have few choices for other sources.

And part of the reason why publishers mind, I suspect, is that many distribute e-texts directly, so they're among the competing e-book sources that Amazon is trying to shut down. They owe their authors royalties, and can't afford to sell e-books at the kind of loss Amazon can (for now.)

Loosing publishers as a source of e-texts would be bad. Some have been willing to take risks in e-publihing that even Amazon hasn't, such as tor.com's free giveaways and the Baen free library.

In the process, publishers become better known, and develop a brand-identity that they haven't had before. Ten years ago I don't think I could have named any publishers offhand. Now, I go to publisher websites to browse and find what books I want to buy and read next. They do a better job of providing text previews than Amazon's preview feature, and if I'm in the mood for a particular genre, it is straightforward to go to the website of a publisher I know that does the genre.

If Amazon can push publishers out of selling e-texts directly, how many will continue to put the effort into maintaining the promotional websites? That's a concern I have as a reader.

#113 ::: James D. Macdonald ::: (view all by) ::: February 05, 2010, 05:55 PM:

Chris #45: In this LiveJournal thread, to prove a point, I searched Macmillan titles on Fictionwise priced at $19.99+, then checked the first 25 search results. 7 books were in paperback. Taken as a random sample, it means over 1/4 of their $20-and-up titles—over 1/10 of all Macmillan titles at Fictionwise—should be but aren't "variable".

I can't prove it, but I strongly suspect that that's because there's no one at Mcmillan who's tasked with updating the prices at Fictionwise.

Perhaps a summer intern might be given the job of going around to all the various on-line venues and setting the price for all e-versions to one dollar less than the lowest-price print version?

#114 ::: Constance ::: (view all by) ::: February 05, 2010, 05:57 PM:

"At the moment in the UK there's a controversy over ebook royalties that seems like the crack where the wedge is about to be driven. There's a perception that not having to print books means that there's a vastly improved profit margin in a digital books business, and everyone would like a piece of it."

Bad Author! Bad Creator! Bad! Bad! Bad!

Love, c.

#115 ::: eric ::: (view all by) ::: February 05, 2010, 06:09 PM:

I'd like to use Barnes and Noble as an alternative to Amazon. From a technical point of view, Amazon tends to execute very well, and they don't pull a whole lot of hidden crap on the customers.

I had a bit of a falling out with BN a christmas or two ago when an in-stock book took 6 weeks to ship, and the order couldn't be cancelled for some reason or another as the 12/25 deadline went whooshing by.

I got BN gift card for christmas, and today decided to pick up a few things with it. At checkout, I saw this, which is evil. If you click anywhere in there, It's considered authorization, your creditcard information gets sent to a third party, who then (some time later) proceeds to charge your card X dollars a month and makes it very hard to get it cancelled. BN gets a kickback. It's misleading, evil, and anti-customer.

Amazon values their customers far more than that. (not that that excuses their other behavior. I'm quite sympathetic to the authors and publishers in the current battle)

#116 ::: John Fiala ::: (view all by) ::: February 05, 2010, 06:16 PM:

#89:

Assuming you mean the Borders that was on County Line Road, you wouldn't recognize it, as it's moved across the street to be part of the Park Meadows Mall. They still have boardgames nights there, but I suspect that's more because of the amazing activity of the boardgaming community in Denver than anything Borders is doing.

Sadly, these days I tend to find Borders boring, and spend more time at Barnes & Nobles. I can't really put a finger on why, though.

#117 ::: Christian Höltje ::: (view all by) ::: February 05, 2010, 08:02 PM:

John Chu@104 -- And have you ever seen the price *higher* than the one printed on the book? No. The suggested retail price is the maximum any physical store can charge, even if it's a "best seller" with limited copies on the shelf. Not to mention, lower prices are always viewed as discounts or sale prices. This makes marketing a physical book difficult.

#118 ::: John Chu ::: (view all by) ::: February 05, 2010, 08:17 PM:

Christian@116:Actually, if you go to Amazon Marketplace, it's not hard to find stores that sell new, in print books for greater than MSRP. (I don't know who buys them.) Also, IIRC, the giant warehouse stores sell books for less than MSRP as their regular price.

#119 ::: lmashell ::: (view all by) ::: February 05, 2010, 08:26 PM:

Why would I want to pay the same price for an eBook as a paper book? I shop Amazon all the time, and if a book company wants to sell me their book they had best put it on Amazon, prefereably as an eBook. After reading all the comments above, I am still of the opinion that Macmillan is (for some reason) out to kill eBooks and force me to buy the paper book.

Yesterday I went shopping on Amazon for two books - Sleepless and Impact. Sleepless was available in a Kindle edition and I purchased it - Impact was not. Whenever it finally becomes available as an eBook hopefully I will still remember that review I read and buy it.

#120 ::: heresiarch ::: (view all by) ::: February 05, 2010, 08:29 PM:

Ursula @ 111: "And part of the reason why publishers mind, I suspect, is that many distribute e-texts directly, so they're among the competing e-book sources that Amazon is trying to shut down."

Rather, I think it's because their business model depends on recouping the average book's losses by selling a disproportionately large fraction of (more expensive) hardbacks of bestsellers. If Amazon succeeds in creating an expectation among consumers of a flat $10 price, that high-profit sector could vanish the instant Amazon decides to stop selling at a loss and demands lower prices. If Amazon is big enough, they'll have to comply. I think that's why they're pushing the shift in pricing models: if they can set the price they don't have to worry that Amazon will promise an impossibly low price and force them to deliver on it.

James D. Macdonald @ 112: "I can't prove it, but I strongly suspect that that's because there's no one at Mcmillan who's tasked with updating the prices at Fictionwise."

Which would itself be strong evidence of Chris' assertion: that Macmillan hasn't been paying much attention to the e-book market.

#121 ::: Chris Meadows ::: (view all by) ::: February 05, 2010, 08:41 PM:

John Chu @94: By the way, there's at least one person who says Fictionwise already does work on an agency model. I haven't been citing him because I'm not sure whether or not it's true.

I honestly can't remember if I've heard they worked that way or not. I do know they said the publisher set their prices, but I wasn't sure whether that was just a firm suggestion. (On the other hand, Fictionwise does give store credit rebates rather than putting things directly "on sale". Hmm.) I had thought the agency model was something brand new with the iPad and couldn't think why the publishers would be selling to Amazon wholesale/retail in the first place if they already had agency deals with someone else.

#122 ::: P J Evans ::: (view all by) ::: February 05, 2010, 09:21 PM:

Avram @ 107

They'll only get in trouble, I think, if they're all setting their prices to the same levels. Or at least that's about the only thing that will get pricing looked at.

#123 ::: Joel Polowin ::: (view all by) ::: February 05, 2010, 09:32 PM:

Christian Höltje @ 116: I've often seen books sold in stores at prices higher than those printed on the books -- price stickers cover the printed value. This was common when the books had a single price intended for the U.S. market, and the Canadian dollar was significantly lower in value than the U.S. dollar.

#124 ::: Bruce Baugh ::: (view all by) ::: February 05, 2010, 09:34 PM:

For what it's worth, I have the same guess as Jim Macdonald: that pricing for Fictionwise was never made a matter of routine, but something has to be negotiated each time Fictionwise requests a change. As for what's changed, well, Fictionwise says they move about 16,000 volumes a month. Amazon moves...just a few more than that. It's worth a publisher's while to make something routine given the extra volume, and I would be slow to take their behavior with regard to a really niche venture as indicative of how they'd like to deal with the single largest sales point in the whole market.

Which isn't to say there's no ground for skepticism. I've been using Fictionwise a long time, and Peanut Press before that, and I share the complaint that there's really no history of visible interest in tiered pricing. But the situation is different enough with Amazon that I also think a suspended judgment is in order.

#125 ::: DavidS ::: (view all by) ::: February 05, 2010, 09:57 PM:

I'm seeing a lot of people claiming that publishers take losses on midlist books, and make up for it with best-sellers. (EG Heresiarch @119, but also a lot of other people.) I don't believe it for two reasons. (1) Publishers are out to make a profit. If midlist books statistically lost more than they made, publishers would just put out bestsellers and reap the savings. (2) I seem to remember Patrick mocking the idea of just publishing bestsellers as the sort of thing that an MBA with no publishing experience would propose.

My guess is that the right statement is that midlist authors are more variable than best sellers; they take a long time of gradual sales to earn back the overhead involved in producing them, and it is harder to predict what will sell when. A business which makes $3 M in some months and $1 M in others is stable, while one which makes $5M in some and loses $1 M in others risks bankruptcy. Thus, it is important to have some reliable bestsellers as cash cows in order to be able to take profitable risks with the midlist.

But that's my completely uninformed guess. Could someone who knows publishing economics explain what the real situation is?

#126 ::: Mike Kozlowski ::: (view all by) ::: February 05, 2010, 10:03 PM:

Jim@109: That's one reason, but it's not the only reason. Big other reasons are:

1. Spurring a move from legacy books to e-books. (Which Macmillan probably dislikes, but may not.)

2. Trying to ensure that an e-book piracy scene never becomes widespread (as it did with music, because music labels were late to offer people reasonable terms for buying music). (Which Macmillan should like.)

3. Setting a price point that becomes fixed in consumer's minds, so that later they can push for better wholesale terms so that they can make a profit at low prices. (Which Macmillan would dislike, unless the volume grew by enough to make it worth it.)

Anyway, if Macmillan wants to prevent an Amazon monopoly, the obvious thing to do is not to screw around with retail prices; it's to insist that Amazon not use any DRM. Because if Amazon has no DRM, then I can put my e-books on any device and buy them from any store for any device. That'd be absolutely huge, and would certainly free them from retailers dominating the market.

But Macmillan isn't doing that, which indicates that Macmillan doesn't think Amazonian domination is the problem -- they just want to ensure that whoever dominates does so on their terms. (Either that or Macmillan is insanely afraid of piracy, which is probable.)

#127 ::: Ursula L ::: (view all by) ::: February 05, 2010, 10:05 PM:

DavidS wrote:

I'm seeing a lot of people claiming that publishers take losses on midlist books, and make up for it with best-sellers. (EG Heresiarch @119, but also a lot of other people.) I don't believe it for two reasons. (1) Publishers are out to make a profit. If midlist books statistically lost more than they made, publishers would just put out bestsellers and reap the savings. (2) I seem to remember Patrick mocking the idea of just publishing bestsellers as the sort of thing that an MBA with no publishing experience would propose.

You do realize that this blog is run by a bunch of people who work in publishing, and deal with these financial matters as part of their daily work? You not believing doesn't mean much if you have only reason behind your belief, when you're addressing people who are basing their explanations on both reason and experience.

#128 ::: heresiarch ::: (view all by) ::: February 05, 2010, 10:20 PM:

David @ 124: "I'm seeing a lot of people claiming that publishers take losses on midlist books, and make up for it with best-sellers. (EG Heresiarch @119, but also a lot of other people.) I don't believe it for two reasons. (1) Publishers are out to make a profit. If midlist books statistically lost more than they made, publishers would just put out bestsellers and reap the savings. (2) I seem to remember Patrick mocking the idea of just publishing bestsellers as the sort of thing that an MBA with no publishing experience would propose."

The problem being: how do you know which book is going to be a bestseller before you put it on the shelves? Simply put, you can't. So you publish a large enough variety of books that statistically, some small percentage of them will become bestsellers. As I understand it, anyway.

#129 ::: Chris Meadows ::: (view all by) ::: February 05, 2010, 10:37 PM:

Bruce Baugh @123: Here's some evidence that at least some of it is intentional: someone in Digital Mac confirming that $14 is the "correct" price for an e-book of a $7.99 paperback.

They're going to be looking at the 7 other examples of overpricing I came up with. Bets on how many of those are intentional too?

#130 ::: Meg ::: (view all by) ::: February 05, 2010, 10:47 PM:

I'm confused. I'm not sure what the difference is between Amazon telling us what we should read and the Big Six telling us what we should read.

They're both bottlenecks cutting out a great many authors because of the bottom line. I understand that there must be a bottom line, but why is one company's bottom line worse than another's?

#131 ::: Meg ::: (view all by) ::: February 05, 2010, 10:49 PM:

I'm confused. I'm not sure what the difference is between Amazon telling us what we should read and the Big Six telling us what we should read.

They're both bottlenecks cutting out a great many authors because of the bottom line. I understand that there must be a bottom line, but why is one company's bottom line worse than another's?

#132 ::: P J Evans ::: (view all by) ::: February 05, 2010, 10:57 PM:

Meg, the difference is that Amazon is a bookseller, not a publisher. Not selling an entire line of books is, well, not very smart.

Publishers are not obligated to put out everything that comes to them, but if they think it will sell, they'll try to find a way. (That's editing.)

#133 ::: Ursula L ::: (view all by) ::: February 05, 2010, 11:46 PM:

I'm confused. I'm not sure what the difference is between Amazon telling us what we should read and the Big Six telling us what we should read.

They're both bottlenecks cutting out a great many authors because of the bottom line. I understand that there must be a bottom line, but why is one company's bottom line worse than another's?

From the point of view of a reader, a publisher decides what to publish, and what will be available to read, based on the quality of the text, as judged to the best of their abilities. And their business is to improve what is available to read, both by choosing quality to begin with and by refining what they choose through skilled editing.

So if Macmillan, or Tor, put something on paper (or online) with their imprint on it, as a reader I've got a clue as to what is inside the book, and a professional promise of a minimum level of quality.

Since what the publisher is doing directly improves the quality of my reading experience, I have an interest in their being able to continue to do that job, unless someone can show some evidence of a better way to provide me with a similar service for my reading-habit.

Amazon, on the other hand, has decided to drop the availability of books based not on the quality of the books, but on a business disagreement with the publisher of the books.

Their decision has nothing to do with the quality of what is available to read. No consideration was given to the reading quality on the books they've dropped, or how their policy will affect the quality of books available in the future.

And I have no particular interest in having what is available to read limited by Amazon's desire to maneuver to control the e-book market.

***

So, from my point of view as a reader, I benefit from the control that Macmillan has over my reading options. I don't particularly benefit from Amazon deciding it doesn't want to carry Macmillan books. I prefer control over my reading options to be done in the interest of improving my reading options, and in the hands of companies whose business model is dependent on improving available reading options.

#134 ::: Bruce Baugh ::: (view all by) ::: February 06, 2010, 12:13 AM:

Chris: Oh, sure, I've run into that kind of thing myself. Pretty sure I've traded gripes about our experiences with it in years gone by, in fact.

#135 ::: Paula Lieberman ::: (view all by) ::: February 06, 2010, 12:28 AM:

#94 John Chu
Publishers seem to turn profits on books in mass market paperback original form factor, how/why then your assertion, The problem is that the money required to come out with that first copy of an ebook is akin to the money required to come out with the hardcover edition.

Meanwhile, I'm suddenly remembered a short-lived experiment which got -stomped- on by RIAA, of there being an audio CD burning system developed as an in-store kiosk where customers could pick tracks to burn to the CD, and pay for the resulting CD, with royalties paid to the performers and the songwriters, and to the distribution companies.... RIAA, againt, STOMPED on it.

The text publishing industry, however, does'[t have a cartel structure as the audio content and motion picture content publishig industries have... The Harvard Book Store's Book Machine the content is licensed by authors directly and other rights holders and perhaps Public Domain content.

[Note, I represent negative income to Amazon--as far as I can remember, I have never purchased anything from Amazon. I have used Amazon on numerous occasion as an online book information search resource, to find out what the current books from particular authors are, full title and author and publisher information when I have part of a title, looking at reviews of books... ]

#137 ::: Earl Cooley III ::: (view all by) ::: February 06, 2010, 03:14 AM:

Dave Bell #37: Maybe somebody could subtitle a scene from "Enemy at the Gates".

My current favorite subtitling is Hitler finds out that Drupal 7 may release without Panels.

#138 ::: Susan Piver ::: (view all by) ::: February 06, 2010, 10:31 AM:

Teresa:

Many thanks for the careful read and excellent commentary on my HuffPo piece. It is very good news that the Publishing industry has an example to look to of exactly what NOT to do.

As for Mike Kozlowski who said: "Plus, yeesh, you're approvingly quoting a music industry executive who is arguing for these higher prices alongside Rupert Murdoch. Doesn't it give you the slightest bit of pause that the lowest and most verminous of all businesspeople are arguing strenuously for Macmillan's position?"

You cut me to the quick, sir. I assume you make this comment from experience in or with the music business? Nonetheless, I get quite tired of such stereotyping. It is always, always, ALWAYS more complicated (not to mention interesting, informative, and cool) than labeling any one entity as bad guy.

And I'm not "arguing for higher prices." I'm arguing for the right of the supplier to determine pricing. Without arm-twisting. Period and double period. Yeesh.

BTW, I only worked at hipster-approved indie labels.

BBTW, it was way fun reading all these comments. An invested, smart readership you have.

#139 ::: Jim Henry ::: (view all by) ::: February 06, 2010, 01:11 PM:

David Dyer-Bennet @88:

I timed myself while proofing several pages at Distributed Proofreaders, getting an average of 4 minutes 12 seconds per page. For high quality you'd want at least two people proofing each page; so, for SF paperbacks of the 1960s, around 200 pages * 252 seconds * 2 people = 28 man-hours, or 3.5 man-days assuming eight-hour workdays, just for proofing (not counting scanning, or adding formatting mark-up, or re-proofing after the mark-up is added to make sure it displays correctly on various ebook platforms). There are probably people who proofread faster than me with similar error rates; but on the other hand, I was working in the second (of three) proofreading rounds. When one does first-round proofing, it takes longer because you're fixing more OCR errors, so those factors probably roughly cancel out.

(This is for reprinting an out-of-print book; someone earlier in the thread was talking, I think, as though effort and time for publishing a raw manuscript was similar, which is silly. I'm sure editing and copy-editing a raw manuscript takes a lot more time than proofreading the scans of an already published book -- how much more, Teresa or Patrick might can say -- and that's not counting the overhead time of reading slush to figure out which raw manuscripts can be made publishable with a reasonable amount of effort on the editor's part.)

#140 ::: Patrick Nielsen Hayden ::: (view all by) ::: February 06, 2010, 03:10 PM:

Claiming that someone is part of the class of the "lowest and most verminous of all businesspeople" because they were an executive at Rounder Records is kind of like attributing the sins of Rupert Murdoch to the person running a scrappy alt-weekly in Duluth.

There are good arguments, moral and practical, for holding the big music conglomerates of the 1990s in low esteem. But smart little outfits like Rounder don't deserve to be tarred with the sins of MCA.

#141 ::: Russell Coker ::: (view all by) ::: February 06, 2010, 05:46 PM:

Patrick@139: The music industry in question is speaking of trends in the entire music industry. They may not endorse or have personal involvement with some of the worst practices, but they certainly failed to understand the fact that a large portion of the dislike of the music industry is based on the treatment of musicians.

http://www.news.com.au/entertainment/music/australian-idol-winner-damien-leith-struggled-to-pay-the-bills/story-e6frfn09-1225776875349

For example read the above article about how Damien Leith suffered at the hands of the music industry. If the music industry would guarantee that everyone who is successful would earn at least as much as someone who makes burgers at McDonalds then there would be a lot less animosity towards them, but paying the musicians a decent income would make a slight impact on the millions that the recording executives earn. In the case of Australian Idol all the judges were on salaries greater than $1,000,000 a year while the contestants earn nothing - even if they win there is no guarantee that they will profit from it!

Back to the publishing industry, in various discussions we have heard a lot from the authors who are relatively successful - some of whom don't seem to be earning nearly as much as fans would expect.

But what about newbie authors? Are there publishing companies that do to newbie authors what the RIAA types do to newbie musicians?

#142 ::: Teresa Nielsen Hayden ::: (view all by) ::: February 06, 2010, 08:13 PM:

Avram @107:

TNH @60: it essentially turns publishing houses into unfunded R&D labs that are obliged to turn over the rights to their products to other companies at rock-bottom prices.
Isn't this basically how publishing houses treat authors? Doesn't the typical author get paid not-enough-to-live-on, in the hope that maybe one day he'll write a big hit?
No. It's not how we treat authors.

Recall that "advance" is short for "advance against royalties." Recall also that most books lose money, or come close to it. Based on their sales, we pay the authors as much as we can, and frequently a little bit more. If they sell a lot more than we expected, we pay them those royalties too.

Publishing can only be understood as an interdependent system. Between them, the publishers, authors, distributors, booksellers, readers, reviewers, etc. have built up a complex, nuanced book ecology that supports a more numerous and specialized range of literary species than would otherwise flourish. That's why we're so defensive of it. It furnishes us with more books, better books, more diverse books, more authors who get paid to write books, and all the publishing professionals who labor to make and sell the books.

When the system is healthy, we can in theory publish any good book that has a large enough commercial audience to cover its costs. It won't yield a huge advance. Should we not publish it? The only way to guarantee that authors' advances will provide them with a decent standard of living would be to not publish those marginally profitable books. I don't think the authors would like that.

One way to understand Susan Pivar's article is that she's describing how the consequences of letting retailers use recorded music as a loss leader reduced the once-complex ecology of the music business to Bermuda grass, kudzu, purple loosestrife, Ailanthus altissimus, cockroaches, pigeons, and albino sewer alligators. If you look at it solely in terms of transactions, you'll see that someone who wants purple loosestrife and cockroaches for dinner can get them. It's only when you look at it as a system that you can see how much damage has been done.

Trade book publishing is imperfect and weird and messy. Granted. But there truly are reasons why we do what we do.

#143 ::: Teresa Nielsen Hayden ::: (view all by) ::: February 06, 2010, 08:44 PM:

Addendum, Avram @107, me @141: Having big-box retailers strip several extra percents off the narrow profit margins of the magazine and paperback distribution system was enough to trigger the collapse of that formerly complex system into the simpler, coarser, more centralized, more impoverished, and in some significant ways less functional mass-market distribution system we have now. The mass-market paperback is in bad shape, in spite of there being publishers who want to publish and sell them, and readers who want to buy them.

What Amazon has been trying to do with its Kindle strategy would over time suck up a good bit of the profit margins of trade publishing and bookselling. When we say that's not sustainable, we're not woofing. No one goes to war with their distributors over unimportant issues.

#144 ::: Patrick Nielsen Hayden ::: (view all by) ::: February 06, 2010, 08:55 PM:

Teresa is not woofing. The fact is that the last 25 years have seen a radical reduction in the number and diversity of titles published in inexpensive mass-market paperback. Eminent literary writers used to get their books reprinted in mass-market paperback. Important works of topical nonfiction like Silent Spring used to appear in that form. Avon Books had an entire line of translated Latin American literature in mass-market paperback. Yes, right here in the United States of America, in my lifetime.

The loss of all this had nothing to do with readers not wanting to buy cheap paperbacks, and nothing to do with publishers not wanting to sell them.

#145 ::: John A Arkansawyer ::: (view all by) ::: February 06, 2010, 10:21 PM:

Teresa @ 142, Patrick @ 143: I think that's exactly the discussion I was curious to hear when I first started reading here, way back when Warren Zevon was alive.

And it matters to me, as someone who owns a lot of those old Avon paperback.

#146 ::: Earl Cooley III ::: (view all by) ::: February 06, 2010, 10:36 PM:

Some of my mass market paperbacks are starting to fall apart from over-reading. Not much chance of most of them becoming ebooks or being gutenberged in this corner of the copyright disneyverse. I might get a few of them rebound as hardbacks, if that turns out to be feasible.

Some of those books are available as illegal downloads; I wonder if an author would narc on me if I sent them a confession letter that included $15 (or the hardback cover price, whichever is more)? heh.

The previous paragraph is not an actual or implied confession of wrongdoing; I snarl whenever I find an illegal torrent with books from one of my favorite authors.

#147 ::: Spherical Time ::: (view all by) ::: February 07, 2010, 09:21 AM:

Three points that I've been thinking about after reading this post and thread.

1. Susan Pivar in the post: "…How did the American public get hoodwinked into believing that the suppliers are the bullies rather than the retailers?"

I think that this is fallout from the RIAA, and I'm surprised that no one else has brought it up. True, the RIAA represents the distributors, but they've branded themselves as representing the artists and creators. So the general public who have been listening to people getting sued for $20,000 per downloaded song by the Recording Industry "Artists" of America feel that it's the suppliers that are partially responsible for these attacks.

2. Paula: "Harvard Square when I was a college student had more than 20 bookstores. I don't know if it has even a full handful anymore..."

The Harvard Book Store, The Globe, that weird multilingual bookstore. Three comic book stores that are decent. Those are all that I know, and I buy a lot of books in the area now.

3. Victoria @ 90: "Sure, Amazon will charge you $10 now. How about later? Who will stop them from charging $30 or more per title if they corner the e-book market?"

That is not a good argument to make in defense of Macmillan. Of the two parties involved it is Macmillan that wants to increase prices. People aren't going to look at the situation and see Amazon charging them more later as justification for being charged more now.

Whether justified or not, I don't think that argument will not win you a lot of converts.

#148 ::: Tim Walters ::: (view all by) ::: February 07, 2010, 10:50 AM:

C. Wingate @ 71: Music is at the extreme opposite end: anyone can pick out a download online and install it, and publishing (assuming the original recording was well done, and decent sound engineers are not hard to come by and can even support themselves through that profession) is absurdly easy. Just to take it back a notch technologically, there I was at Dupont Circle at lunch, and there was an Andean band busking, and they had a stack of very attractive and very professional CDs in a guitar case. One wonders whether the Music Industry provides any added value beyond publicity. Publishing decent books isn't that easy; music performance itself accomplishes most of the editing that text publishing requires as an intermediate step.

If the band paid for professional work at every stage of the process, that CD probably cost two thousand dollars or so to produce (not counting actual replication). And that's one of the cheapest possible cases, an acoustic band doing a straightforward documentation of their live performance. If you're making a commercial pop record, or something else that requires using the studio as as creative tool, it gets much more expensive. I read John Scalzi's post about the absurdity of expecting him to front seven to ten thousand dollars to self-publish; this is perfectly routine in the music business, and while I don't quiz my friends about their album budgets, I'm pretty sure more than one of them has spent that kind of money on a self-published album. This is all before hiring a producer, who is the equivalent of an editor in book publishing, and who will tack on another hefty fee.

Of course, there are many ways to avoid paying full freight, and I for one use them all. But the tradeoffs and risks are exactly the same as in book publishing. You have to spend lots of time learning to do stuff unrelated to playing your instrument, and run the risk of reduced product quality. What's more, even if you do everything yourself, the ante is much higher than for a writer. You can buy every bit of software you need to self-publish a book for less than one of my instruments costs, let alone the computer recording system, monitors, microphones, and innumerable bits of bric-a-brac in my home studio.

From where I sit, self-publishing a book seems trivial compared to self-publishing an album. A filmmaker, of course, would say the same about music.

#149 ::: Paula Lieberman ::: (view all by) ::: February 07, 2010, 11:39 AM:

#146 Spherical

There isn't even a poetry books/chapbooks/magazines store there anymore? What about the Harvard Coop, does that not still have books?

As for the Recording Industries Association of America, they -are- "suppliers" -- they are mainly distributors, but they also have studios which produce and arrange the manufacture of CDs, and they are also doing web distribution--they're publishers of musical performances, some live most manufactured in studios. The "performing artists" are the "talent" who do the performing, which songwriters are the ones who generate the material the performing artists perform.

The sound engineer has a position analogous to people who perform editing and pre-printing production work in print publication, and is about as visible to the general public.

Areas of analogy breakdown include that with major record labels it's rare for there to be a sole performer--usually there are additional people singing backup if not solely instrumental, and there are the instrument player/additional instrument players (some performances, such as REO in Boston years ago, LITERALLY have people playing instruments behind the curtain, to make up for the inadequacies of the Media Personalities' actual musical ability (or limitation thereof).

#150 ::: Doug ::: (view all by) ::: February 07, 2010, 12:12 PM:

It's been more than 15 years since I got out of bookselling (went into newspapering; I seem to have a tropism for industries with structural challenges), but trends TNH writes about were apparent even then.

For example, in the early-to-mid '90s, publishers were perfectly willing to give Borders and B&N large-order discounts so deep that they could sell books at prices below what independents paid at wholesale and still make a profit on them. I think I remember the American Booksellers' Association litigating this issue on behalf of their smaller members, though I do not know what became of it. In any event, publishers are not blameless in the rise of big-box retail and the consequent thinning of the ecosystem.

The point made several times above that publishers have had a good ten years to figure out and implement e-book pricing strikes me as a good one.

In re #143, the last 25 years have also seen the rise of the trade paperback. I've heard that publishers prefer this format because it brings better margins. Anyone care to comment in general terms?

#151 ::: Lee ::: (view all by) ::: February 07, 2010, 12:43 PM:

Spherical Time, #146: "Charging less now in order to gouge you later when you have no other options" will make sense to anyone who ever saw Wal-Mart move into a small town and destroy its economy. Perhaps that's the model we should be talking about.

#152 ::: Chris Meadows ::: (view all by) ::: February 07, 2010, 01:29 PM:

Lee: @150

Spherical Time, #146: "Charging less now in order to gouge you later when you have no other options" will make sense to anyone who ever saw Wal-Mart move into a small town and destroy its economy. Perhaps that's the model we should be talking about.
Yeah. So instead of Amazon, let's take our business to Barnes and Noble…oh, wait.

#153 ::: Randolph ::: (view all by) ::: February 07, 2010, 02:12 PM:

Reflections on the advantages and disadvantages of ebooks, here.

Advantages: size, portability, ubiquity. These are exactly the advantages of the mass market paperback. Less obviously, they are also the advantages of the cell phone.

Disadvantages: (currently) poor reader marking and annotation, small, poor visual quality, poor usability of graphical content, (currently) short lifespan. So far, still sounds like the mass market paperback.

Disadvantages, non-DRM formats: hard to make money from them. Various alternate financial models: tips, tie-ins, serialization followed by compilation into physical books (successful in graphic novels), patronage (successful in software.)

Disadvantages, DRM formats: dependency on owner of distribution network, probable short lifespan, user resentment, inability to lend and copy, temptation to overprice.

Hmmmm.

#154 ::: individualfrog ::: (view all by) ::: February 07, 2010, 02:31 PM:

Lee @ 150: does Wal-Mart ever raise its prices? Even after its competition is all gone? I've never heard of that happening, but then I don't read the business news.

#155 ::: Spherical Time ::: (view all by) ::: February 07, 2010, 02:54 PM:

Paula @ 148: "There isn't even a poetry books/chapbooks/magazines store there anymore? What about the Harvard Coop, does that not still have books?"

I dunno. I've never been in there. But as far as poetry books/chapbooks/magazines, only the suffering Out of Town News stand that I'm familiar with.

Paula: "As for the Recording Industries Association of America, they -are- "suppliers" -- they are mainly distributors [...]"

All the more reason to blame them for the backlash.

Lee @ 150: "'Charging less now in order to gouge you later when you have no other options' will make sense to anyone who ever saw Wal-Mart move into a small town and destroy its economy. Perhaps that's the model we should be talking about."

AFAIK, Wal-Mart doesn't usually raise it's prices once it has destroyed the small town economy, or at least it doesn't enough to make any particular section of market competitive. It sticks with the super-cheap model which makes them money even with few competing businesses.

Regardless, I suspect any idea that Amazon could absolutely kill off any competing company and then raise prices through the roof is disingenuous. The cost of entry into the ebook market would be too low for any other online retailer willing to offer a marginally better product for a marginally lower cost. It would only keep the monopoly if it kept the prices low, e.g. Wal-Mart.

#156 ::: Charlie Dodgson ::: (view all by) ::: February 07, 2010, 04:35 PM:

Harvard Square still does have a poetry specialist: Grolier, around the corner from the Harvard Book Store. For periodicals, Out of Town is once again under local ownership, and there's also Crimson Corner (formerly Nini's) right across the street. There's also Raven Books, a high-end used bookshop on JFK street; the Globe Corner Bookstore, which specializes in travel; Schoenhof's foreign books; a childrens' book specialist at Curious George; the aforementioned comic shops; and a well-stocked chain outpost at the Harvard Coop (independently owned, but operated by B&N --- they've got a Nook store display and demo unit).

If you're willing to take the subway a bit, there's Porter Square Books and the current incarnation of McIntyre and Moore's used bookshop one stop north at Porter Square; and Rodney's used books and Pandemonium (SFF and games) one stop in the other direction. And a quick ride on the 66 bus will get you to Coolidge Corner and the excellent Brookline Booksmith.

(And there are other resources slightly further afield; the superb Brattle Bookshop for used and antiquarian books, for instance. But this is long enough.)

Not as much as there used to be; the Harvard University Press store closed within the past few months, and Wordsworth is sorely missed. But it's not a desert yet.

#157 ::: John A Arkansawyer ::: (view all by) ::: February 07, 2010, 09:41 PM:

Spherical Time @ 155 has it right. Wal-Mart plays fair with their customers. It's their suppliers, their vendors, and their workers that they grind to the bone.

This is the New Americanism: Down with labor and down with citizens, but up, up, up with consumers.

#158 ::: Russell Coker ::: (view all by) ::: February 07, 2010, 11:27 PM:

Doug@150: I think that steep discounts to major retailers are common for every industry. When I ran a small cafe I could often buy Coke from K-mart cheaper than the price that Coca-Cola would sell it to me wholesale. But even when Kmart had it's sale I had to keep buying some Coke wholesale to keep them happy. Presumably I could have found similar instances with the other things I bought wholesale if I had looked, but Coke is the only thing I've bought in enough quantities to care about saving a few cents per item.

John@157: According to documentaries I've watched the Wal-Mart model is to open a store in every town and crush the local stores. Once the local trading areas are dead they close their local store and force customers to go to a bigger Wal-Mart store that is further away. Customers pay more in petrol but not more for the goods. Wal-Mart saves money by running a smaller number of larger stores which makes them more profitable without raising prices.

Amazon doesn't seem likely to squash diversity directly (it makes good money from the long tail). But it does seem likely to harm the consumer by crushing the content creators and making it less economical for them to produce more content, and it could raise prices.

#159 ::: Doug ::: (view all by) ::: February 08, 2010, 02:49 AM:

158: True enough, Russell, but I don't think that Coke people say anything parallel to TNH's "We co-enable good bookstores and booksellers." The publishing talk is talked, but is the walk walked?

#160 ::: John A Arkansawyer ::: (view all by) ::: February 08, 2010, 07:46 AM:

Russell Coker @ 158: There's something to what you say about Wal-Marts and geography, although now Wal-Mart is building what they unironically call "Neighborhood Markets". There's one in Newton County, Arkansas, with a population of under ten thousand, just outside of Jasper, which has a population of under a thousand. (It's possible that store was built for politial purposes.)

I don't know what their current plan for expansion of those is, but I suspect they take the long view and are filling in spaces so as to keep their customer base as gas prices rise again.

It may have been an overstatement to say Wal-Mart "plays fair with customers", but in comparison to the way they treat everyone else, it's a lot more bearable.

#161 ::: Susan Piver ::: (view all by) ::: February 08, 2010, 05:52 PM:

Teresa: "...how the consequences of letting retailers use recorded music as a loss leader reduced the once-complex ecology of the music business to Bermuda grass, kudzu, purple loosestrife, Ailanthus altissimus, cockroaches, pigeons, and albino sewer alligators. If you look at it solely in terms of transactions, you'll see that someone who wants purple loosestrife and cockroaches for dinner can get them. It's only when you look at it as a system that you can see how much damage has been done."

Ha! That is exactly right. What I said in a bunch of words, you said in these few.

Welcome to Making Light's comment section. The moderators are Avram Grumer, Jim Macdonald, Teresa & Patrick Nielsen Hayden, and Abi Sutherland. Abi is the moderator most frequently onsite. She's also the kindest. Teresa is the theoretician. Are you feeling lucky?

If you are a spammer, your fate is in the hands of Jim Macdonald, and your foot shall slide in due time.

Comments containing more than seven URLs will be held for approval. If you want to comment on a thread that's been closed, please post to the most recent "Open Thread" discussion.

You can subscribe (via RSS) to this particular comment thread. (If this option is baffling, here's a quick introduction.)

Post a comment.
(Real e-mail addresses and URLs only, please.)

HTML Tags:
<strong>Strong</strong> = Strong
<em>Emphasized</em> = Emphasized
<a href="http://www.url.com">Linked text</a> = Linked text

Spelling reference:
Tolkien. Minuscule. Gandhi. Millennium. Delany. Embarrassment. Publishers Weekly. Occurrence. Asimov. Weird. Connoisseur. Accommodate. Hierarchy. Deity. Etiquette. Pharaoh. Teresa. Its. Macdonald. Nielsen Hayden. It's. Fluorosphere. Barack. More here.















(You must preview before posting.)

Dire legal notice
Making Light copyright 2001, 2002, 2003, 2004, 2005, 2006, 2007, 2008, 2009, 2010, 2011, 2012, 2013, 2014 by Patrick & Teresa Nielsen Hayden. All rights reserved.