Check out this interesting essay on TUAW, Macmillan trying to sell ‘hardcover’ ebooks, which gives a technologist’s view of the e-book controversy.
Archive for the ‘Business’ Category
What’s a “hardcover e-book?”
Tuesday, March 2nd, 2010Amazon concedes
Monday, February 1st, 2010
In the words of Gilda Radner, “Never mind.” (Clic the pic for sound.) However, let’s not fool ourselves that the war is over. This is only a skirmish. There are some new insightful blogs on the underlying causes of the conflict. We suggest you check out: Scrivener’s Error and Charles Stross’ blog for a legal perspective and a supply chain analysis respectively. Great stuff.
UPDATE: A biting and appropriate summary by John Scalzi on his blog.
Amazon pulls Macmillan titles from online store
Saturday, January 30th, 2010Amazon will still allow customers to buy Macmillan titles from used book resellers as part of their partners program, but no longer displays the “Ships from and Sold by Amazon.com” text. The biggest impact is the elimination of royalty generating sales for authors on the web’s largest book retailer. The New York Times reports that the reason is the ongoing dispute between Amazon which wants to drive down the cost of e-books to $9.99, and publishers who want to hold up the price.
Technically Amazon is justified: book prices have risen due to increasing costs of manufacture and transport to place physical books on display in local bookstores. Ebooks have no cost of production, delivery or (shudder) returns. So ebooks don’t “need” to cost as much as paper books. Publishers, of course, don’t want to see revenues drop and want to continue the business-fiction that books are valued by the “format” of the book, rather than by the content. They are historically justified, because a hardcover costs more to produce than a paperback. But when there’s no physical object involved, the argument collapses. Alas, while my sensibility as an agent, makes me want to see strong, healthy publishers, there’s no good guy in this battle. And the only loser is the author.
Facilitators of delivery like Amazon and Apple don’t need the same margins as brick and mortar bookstores because they have no fixed costs for stores (not that Amazon doesn’t spend a lot of IT dollars on their computers). That’s why Apple’s iTunes and App stores have always passed 70% of the consumer price on to the rights holder. Amazon used to require 65% of the take for ebooks sold for the Kindle, but scared purple by the iPad, they dropped their share to match the Apple business model.
This fight, and the pulling of the Macmillan titles, is over the list price of the e-book. Publishers have been demanding agents and authors accept 15% of the ebook list price or sometimes a larger percent of the “Net receipts.” Our agency has been fighting the unfairness of publishers holding high percentages of e-book revenues for years. The problem is that 15% of the list price is not profitable for authors if business partners (say, Amazon and Macmillan) decide to price the e-book at $2.99. Likewise, the apparent niftiness of a 25% net receipts royalty is a bad deal if the delivery facilitator decides to collect 65% of the sale price, which Amazon used to do. Too many contracts have authors incomes tied to the publisher’s ability to artificially inflate the price of e-books; a fight I don’t think they can win.
It’s time to rethink the business model for publishing. Print runs are falling, even NYTimes bestsellers are being stocked in big chain bookstores in smaller quantities, and consumer spending is falling. Arguing over the wrong things for the wrong reasons and arguing against technological reality is not the way to improve the world. I’m concerned, but not worried; I love all the editors we work with and want them to have long careers, but my fiscal duty is to the cash flow of our authors. I think I’m the only literary agent who is also a computer software guy; someone who can edit books and refactor software. (They are very similar activities). I was in the BBN network control center the night the Internet, then called ARPAnet was first turned on. I’m pretty sure I’m the only agent with the iPad development system running on my laptop. All this e-book and web stuff is fun and it is not going away. So to Amazon and the Publishers, I want to say: stop fighting kids. The author, and agent–at least this one, is your friend. You can’t fool me; but you don’t have to.
E-books set to drive publishing in 2010
Tuesday, January 26th, 2010All the signs say publishing will change significantly by Noon, California time on Wednesday January 27th when Apple announces the iThingy. Speculation about what this iThingy will be sounds like publishing genres: from Romance (it will be love at first sight), to Fantasy (it will be a full color e-book reader that provides total laptop computer capability with a touch screen interface that plays games) to Religion (it will be the Jesus Tablet).
I don’t know any more about the product than anyone, but I can offer a few observations about Steve Jobs and about Publishing.
Today’s rumors report that Jobs thinks “it’s the most important thing I’ve ever done.” This supposed quote feels genuine and if so, and from what we know about Jobs’ Apple, should tell us something about the product. When Apple introduces paradigm-shifting products, the speculators and pundits always predict they will somehow encompass a whole bunch of historically desirable features and support traditional activities. What really happens is that Apple removes features and simplifies use. The immediate response of the Apple haters is to say, “Well no one will ever buy a product without that feature” and dismiss the Apple gizmo just long enough for Apple to dominate the unseen market that never cared about that feature anyway. For example:
The first iMac (thebrightly colored gumdrop), lacked a 3.5″ floppy drive. Pundits fried the iMac for its lack of backward compatibility. However, consumers appeared not to notice it was missing, and the line sold well.
The iPod completely revolutionized music players and electronic devices in general by replacing individual buttons (and the documentation required to explain them) with the click wheel. The iPod was the first all-digital device with an analog control. The iPod also simplified use: with “1,000 songs in your pocket” the iPod user had plenty of music available at all times. Of course today’s iPods hold many times the music, games and videos.
The same story unfolded with the iPhone. Most positive speculation of the iPhone design expected an iPod click-wheel that somehow turned into a rotary dial or some slide out keyboard that other vendors had done poorly. The iPhone offered a completely new interface that changed up the game for smart phones. The speculation that predicted the failure of the iPhone is now as faded as the earlier speculation that the iPod would fall to the superior resources of Microsoft and their partners. Remember the Zune?
So will the iThingy wipe out the Kindle and all the other, newly announced e-book readers? Technically, it probably will. From the business point of view, it has already caused change.
Here’s how music players, like the iPod, are different from e-book readers, like the Kindle.
First and foremost is the user experience. Music players, including the iPod are out of sight and seldom touched while being listened to. The minimal click wheel is all that’s required to control the iPod. iPhones and the iPod touch are highly visual and the touch sensitive screen is key to the usability. Reading a paper book is entirely a visual experience with a subjective tactile quality: the feel of the book.
So e-book readers must survive being looked at a lot and they must be good to touch. Many existing e-book readers certainly provide convenience, but beyond the steadily improving quality of e-ink screens, many are ugly and distractingly covered with keys. So any Apple e-book reader will have to do lots better.
The second aspect of e-books is the source of content. Music players were originally introduced to acquire songs from existing sources and make them available in your pocket. People seem to have forgotten that iTunes was free on all Apple computers for almost a year before the iPod was released. iTunes was a digital jukebox presented with the slogan “Rip. Mix. Burn.” It allowed users to move songs they already owned to music players and burn new albums as CDs. Personal creativity was not creating music (that’s hard and requires talent) but choosing how to combine music and share the playlist with friends. Piracy of music was well underway long before iTunes and the iPod, but with the iTunes Music Store, for the first time, consumers could purchase legal music, and they did.
But e-books are a different story. Despite advances in scanners, there’s no book reader to move an existing library onto any form of e-reader. To scan a book today, you either have to devote a lot of time to holding the book down on a scanner, or destroy the book to feed the pages into a scanner. So the only way to get content legally on an e-reader, other than texts that are in the public domain, is to buy each book as an e-book at published prices. This is fine for brand new front list titles, but the book business, before the “hits” model that developed in the 1980s, was a backlist business. Older books sold every year and good books could stay in print for decades. The very essence of publishing, backlist bestsellers, hasn’t driven e-books and e-readers; but it should.
How to make an e-book market explode?
The missing bit of technology that could explode e-books is the $200-300 book scanner that would read a paperback or hardcover book in less than an hour of clock time and spit out the book no worse for wear. For mechanical reasons, this would be a hard product to build. Lacking this device, e-book retailers and publishers could announce that anyone who bought the paper book (non-returnable paper book and some proof of sale required) could download the e-book edition for free or a nominal cost like $0.99.
Eliminating the need to ship heavy paper books around the country, e-books should be highly profitable for both publishers and authors whenever the pricing gets right. In the past two decades the price of all formats of paper books has risen to levels that drives down consumer book purchasing. Now, when e-books as a format, have the ability to remove the high price levels, all we hear from publishers is their intent to keep prices high. But trends can reverse.
With the recent announcement by Amazon that they are conforming to the iTunes model and dropping their share of the consumer price as well as the target price, Apple has already influenced publishing while having no product in the space.
Let’s see what Wednesday brings…
Authors, treat your work as an investment
Monday, January 25th, 2010The Ashley Grayson agency believes in the Berkshire Hathaway approach to business: we select our clients and their works as long term investments, not just for the drug-like rush from a hot sale. This year we will be more open about our approach, so read on to see how we think. And how you should be thinking about investing in yourself and your own works.
Last week, CNN Money ran an article derived from a new book by Professor Burton Malkiel (Princeton, economics) and author Charles Ellis, titled The Elements of Investing. For some reason, the article didn’t mention the publisher, which is Wiley. I haven’t read the book, but if it has even 10% more value than the article, it will be worth buying. While not new advice in any way, it’s smart. The 6 biggest investing mistakes should be read by every author. Click on the article title and enjoy the wisdom of Malkiel and Ellis (not our clients), which is all about finance and the stock market, but here are the key points, restated for authors.
The six biggest investing mistakes for authors are:
Overconfidence
Surveys show that everyone feels he or she is above average in most things. Authors are no different. Authors develop real confidence over time as they master their voice and craft. New authors should not expect to get everything right with their first work but have no recovery plan when faced with the reality that their book needs more work. The biggest external sign of overconfidence is self-publishing. Self-publishing is a valid tool, but it is best wielded by an experienced author to achieve a financial target, not as a way to get noticed. If Big Experienced Publisher (or agent) doesn’t feel they can make money with a book, why does the author so frequently assume they can?
Following the herd
Herd following investors can make money, and their willingness to pay ever more for stocks drives up overall shareholder value, but there is a top to everything and the big rewards belong to those who get in before the stampede. Herd following investors are often said to subscribe to the “bigger fool” theory: If I will pay $100/share for this stock, some bigger fool will pay $115 and then I’ll sell. At the moment, the herd-following authors are frantically turning out sparkly vampire novels and DaVinci Code-type books. Some trend-following books will sell, but when the market is saturated, there will be no place for those books to go; and unlike the herd investor, they can’t unload their investment at $80/share because an author can’t get his or her time back
Timing
Knowing when to get in and when to get out is key to success in both stocks and books. Often tied to herd following, timing depends on what the author feels about the nature of his or her work. Timing is frequently a danger for non-fiction authors. Offering a truly unique book that’s way ahead of the buzz may produce the “there’s no category for that” response from publishers, while developing a book to join six other robust titles may fail because the category is over published. Generally, if the author feels the book is likely to lose value in the short term, it is not a good writing investment as a book, but it might be a hot blog.
Control
Investors who are making the control mistake place too much faith in their system, be it day-trading, technical chart analysis or guru-newsletters promising hot bargains. Again, self-publishing teases authors with the illusion that with control of their sales, they can somehow outperform the big publishers at selling books. Our advice: don’t get obsesses with control. The author’s job is to write the book, not make the sales.
Fees
Even cautious investors who seek the security of funds and portfolios managed by certified professionals can end up with low yields or even losses if the management fees are too high. Authors have some protection in the standard 15% of agent commissions, but a dozen other pseudo-professions have arisen to suck up author assets: self-publishers,, publicity services, editorial coaches, and even fee-charging find-an-agent services. Good advice is always worth something, but paying for some information, like, “you are up in a balloon” doesn’t pay any return.
Trusting stockbrokers
Stockbrokers make money on every trade whither you make or lose money. They want you to trade because they make money either way. Traditional agents are different, we only make money when you do. But faux agents who charge a marketing fee, representation contract fee or other fee still thrive. Be careful in who you work with, even if they are apparently working for you.
Here’s the really interesting part. The six big investing mistakes for publishers are exactly the same.
Amazon adopts Apple ebook royalty model
Wednesday, January 20th, 2010Authors have just won a great battle in the war over their royalties without having to negotiate anything. Since the Kindle was released, our agency has been unwilling to embrace the platform, not because of the technology but because of the business model. Amazon claimed 65% of all revenues, a full 15% higher than common retailer rates for paper books. We have always favored the Apple iTunes/App Store model that pays the owner 70% of all revenues. Apple just hasn’t been selling ebooks. With Publishers receiving only 35% of the retail price of Kindle books, they’ve been unable to offer authors more than 15% for selling the authors words in electronic form; a crazy bad deal since there’s no physical book involved and zero risk of returns. While some publishers have obtained better terms from Amazon, all details have been secret and authors and agents had to agree to royalty rates, the value of which lay beyond a locked door.
A few days ago, Amazon opened the Kindle to individuals who could format to their standards. This was big news because previously Amazon wanted authors to go through “publishers” who would rake off income, but do little beyond formatting text files.
Today, Amazon has adopted the Apple model. Why? Because the rumors of the Apple iTablet-thingy are so compelling. We will have more as this develops but you can read the news at many business websites. Here’s the Motley Fool Story.
There are hooks and obligations in this new Amazon business model, so this does not mean that every author should jump in blindly. However, it does mean that published authors with control of their out of print backlist can now consider ebooks as a viable business. Our advice is that while this is good news: good for Kindle owners, good for authors, and good for Amazon; we should all wait until after January 27 to start negotiating contracts so we can see what Apple announces.
Print is declining
Friday, December 11th, 2009As I was looking at our agency equipment expenses for 2009 and planning new purchases I suddenly realized that printing has all but ceased in our offices. We now have more scanners than printers. We print something every week, but we scan something almost every day. Print devices are better than ever: better color, faster speeds, higher resolution, but there’s little reason any more for us to print documents. We read author’s works on-screen, on the Sony Reader or on the iPhones. We review and negotiate contracts by email attachments. Looking forward, I see more scanners for us. They free up so much time to think and space to shelve those wonderful published books that make us all some money and provide a comfy read.
This year we acquired a small USB-scanner that looks like a fat foot-ruler. It will (slowly) scan a legal page but we use it primarily to scan those pesky lunch receipts, the financial record of an agent’s favorite sales activity. They fill up your wallet or purse, and have to be sorted, recorded and accounted for taxes and such. But now we don’t have to fight the paper clutter. One scan, a bit of OCR and the computer will tell me when I was where with whom. Cool. But even before we have pulled all the benefit from this small scanner, I can now take a picture of the receipt right in the restaurant with my iPhone and a new type of product that turns your mobile phone camera into a scanner will eliminate several steps.
Increasingly, what you see is all you need to keep.
WSJ and NYTimes say B&N’s Nook is underdone
Thursday, December 10th, 2009Both of the nation’s leading technology columnists, Walt Mossberg at the Wall Street Journal and David Pogue at the New York Times (Not Yet the Season for a Nook), roasted Barnes and Noble’s ebook reader in their reviews today. Click through and read what the e-sages have to say. Note: you may have to register or subscribe to read the columns. You can also read Walt’s review at his All Things Digital site.
I have no comment yet, because I (like everyone else) have never seen a Nook. In general, I applaud developers of e-book readers and hope this additional product will spur consumer choice, but I think we will still have to wait for Apple’s tablet to get an iPod-class example of e-readers. Of course the biggest obstacle to e-books is not the merit or temporary bug-level of individual models but the predatory nature of the business models. Vendors want to trap consumers in their business model rather than replicate and expand the nature of reading and pocketing a profit along the way.
Don’t be misled, e-books are coming. Partly because of technological advantage, and partly because of blind greed on the part of publishers and retailers. They hope to continue to make profits from owning 85-96% of the retail price for books while keeping the price to consumers at the level of physical books. This cannot continue. Publishers and retailers see making huge profits selling an e-book for $24 and never having to ship, inventory or display a physical object. I can’t see this. But then I never saw all the colored lights in the 70s either.
Credible Rumor: Apple e-book terms
Wednesday, December 9th, 2009In today’s Apple 2.0 blog at Fortune, Phillip Elmer-DeWitt has rounded up the latest rumors on the unicorn-like Apple tablet device. Read Apple tablet set for spring launch for the details. This is the first collection of tablet rumors that include details of what the cash flow deal will be with publishers for ebooks, and the numbers are right in line with our agency projections for the past two years.
Currently the Kindle Portable Bookstore device has kept 65% of the retail price for e-books giving authors ultimately only 15% of 35% for electronic editions of their works. That’s a 5% royalty on an ebook sale where no physical product is involved. It has always been our agency position that authors should get at least 33.5% of the retail price of an ebook sale, sharing a third each for Publisher and Retailer. The Fortune story also quotes a Wall Street Journal story that Simon and Schuster and Hachette are holding off on e-books, you can read that through Fortune or here.
Today’s e-book market is the wild west with publishers making corporate edicts that they must control e-rights, will never revert titles kept available on some spinning disk somewhere and offering a pittance to the authors. The publishers are not totally at fault; they are greedy but they didn’t think up this mess alone. E-book channels are murky and schoolyard bullies who make devices and try to sell electronic books either demand large shares of the cash flow or tie the works to their proprietary devices. The agent’s and author’s business challenge has been to cope with publishing deals in which we are offered 10-20% of the “net” when the net is computed behind a closed door that even the publishers cannot always see behind. The Apple model should clarify things a lot.
More as we learn it.
Bookstore Baksheesh Revealed
Monday, December 7th, 2009Adam Pennenberg has written an informative piece at Fast Company, the business news website, that reveals a business practice agents and publishers have bemoaned for years: bookstores have to be paid to promote the books they stock. I won’t recap the issues in the article, just go read it here. In brief: placement on the front table in a major chain bookstore costs the publisher up-front, about $30,000. Yes, after the publisher has paid the author’s advance, the costs of publishing and manufacturing the books, they also have to pay the booksellers to try to sell the book.
What Adam omitted from his article is that the chains only guarantee a 65% to 75% compliance with the “promotion.” This is why, even if your publisher paid a co-op fee, you can’t find your book in some stores at all.
Ever since executives fleeing the collapsing retail grocery business joined booksellers a decade ago, they’ve made two changes that damage their own adopted industry.
First, they switched the book retailing model from selling books, to charging for shelf space for displaying books. This works in the grocery business where beer and canned soup turn over every day and the consistency of content is key to retailing. Everyone wants every can of Campbell’s tomato soup or Pepsi to be exactly the same. Books are different. An obscure novel by Mark Twain might sit in the store for two years before selling. Bookstore space devoted to shrinking backlist choice is a casualty of mentally valuing space over variety of titles. The practice of pricing space hurts books and opens the door for Amazon to stock titles that can’t be economically carried in every bookstore. Amazon wants to be paid for promotions too, but that’s just the spread of a bad practice. As Adam explains in his story, only a small part of a bookstore’s space is pre-paid, compared to a retail grocer, but just enough to hurt new authors and publishers. Inescapable point: every can of beans is substitutable; every book is unique.
The second error of the grocers in the book business was to abandon all marketing technique except discounting. Discounting and couponing work in the grocery because money saved by the consumer on the weekly, or coupon, special can be recovered by impulse purchases of high profit items. Unfortunately in bookstores, discounting new or unique works, makes them less profitable to publish and channels the impulse money into candy and trivial works that can be jammed up near the register. Since everyone goes in the grocery at least once a week for milk, bread and whatnot, creating the image that everything is discounted at your grocery chain, can draw business. Discounting is an effective draw for pure commodity retailing; milk is mostly milk. Books are different. Except for uniform series novelists, every book is different, and even in series like Harry Potter, the substance of the novel changes from book to book. By continuously broadcasting the message to consumers that low price is the decision criteria for buying books, booksellers have poisoned the concept that content matters. If low price is the qualifier for all books, why do I need to buy any particular book today?
I believe that book chains don’t really want to be in the book business. They just want money because they control the access to readers. This allows them to dodge the question of responsibility for doing their job (selling books) and instead to collect an entitlement (basically a tax) for being in control of a step in the process. Unfortunately, they never draw new book buyers into their stores. The message is always: if you buy books we got a bunch of cheap stuff here, but they don’t even try to get new people to buy books. That would require a different type of marketing.
Last year, one chain did try something new. Picking up a CEO from the department store industry (and you know how well that business is faring) he explained that “we sold more dresses displayed full front, than sleeve out in racks, so we are now going to feature more copies of fewer titles racked face out.” I don’t know how this is going but I await the new bestseller in petit, small, medium, and full figure in a choice of pink, teal, and cocoa.
