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 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.
All 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 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.
Today’s Wall Street Journal reports on a negotiation between HarperCollins and Apple to release ebooks for the new Apple tablet device to be announce next Wednesday. The article indicates HarperCollins staff leaked this story but a photo caption in the WSJ online edition claims an “announcement” by the publisher. This is probably sloppy journalism unless this is an Apple sanctioned leak as Apple normally never permits partners and suppliers to pre-announce anything. Read the WSJ article here.
This should be good news for both authors and the reading public, but the story suggests the price of these ebook editions will be between $14.99 and $19.99. I suspect this is bogus or simply HarperCollins’ hoped for position. At such high prices, the viability of ebooks will depend largely upon the physical appeal of the Apple product rather than the content of the books themselves. We will have more on the state of ebooks and Apple thingys later this week.
Both 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.
I see from today’s New York Times, that columnist John Markoff sees Apple on the verge of introducing a digital book. I hope John is right.
Amazon has introduced their version of an electronic book reader, called Kindle, and while they deserve a star for trying, I’m not too impressed. Daniel Eran Dilger has posted a thoughtful and lavishly illustrated review over at AppleInsider, which you should read to get up to speed on this new gadget.
AppleInsider | In-depth review: can Amazon’s Kindle light a fire under eBooks?
