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Thursday, December 15, 2011

E-Books Sticker Shock

The Wall Street Journal today had an article about ebook sticker shock and how ebooks have now risen to the point where they're as expensive as paperbooks or even hardcovers, because while paperbooks are still sold via the old model (wholesale price to retailers who can discount the books and even use them as loss leaders to drive traffic), ebooks (as sold by the big six) are sold under the agency model, where the retailer is not allowed to set prices.

There's a general denial in the industry that this increase in prices is driving down ebook sales, even as ebook adoption increase. Think the two aren't compatible? Then you don't understand piracy, or library use. For instance, when The Snowball first came out at $9.99 on Amazon, I bought it and read it right away. My reviews on this blog drove further purchases. The Snowball is now $16. Can you imagine a 3 year old car selling for more than it did 3 years ago? Probably not, especially since a used copy of the same book has the same information and can be had for much less. Now that Steve Jobs and Thinking Fast and Slow are $15 and $13 respectively, I opted to check them out from the library instead. The unscrupulous would just download them.

The publishers would argue that ebooks are more portable, easier to carry and easier to store. But there's one huge thing wrong with them: with license terms as they are today, ebooks are impossible to resale, difficult to lend to your friends, and of course, the added cost makes no sense.

Furthermore, most books sold are not non-fiction (as the three are above). For non-fiction, most books are not fungible, not even mine. When someone on Quora asked Why are my books so expensive, my reply caused a flood of sales. Fiction, however, is more easily fungible. The next best-sellers will probably be independent phenomena, not traditional publisher-driven ones. The regular publishers are going to lose their stand as gatekeepers if they insist on pricing ebooks for the 19th century. Like the music publishers, they will become gradually more and more irrelevant.

The lesson for you if you're a fiction author? You have a window of opportunity right now where traditional publishers have provided an incredible price umbrella. Take that opportunity and ride it for as hard as you can.


Shane Liu said...

I didn't read in the article any denial from the industry? They just don't want decrease profit from increased sale of ebooks. That seems perfectly logical to me.

I also wouldn't discount the publishers' role as the gatekeepers of quality. It takes only couple mins to try a song. A book takes much longer. This may not saved the traditional publishers, but alternative might not be that much better.

Piaw Na said...

Did you read the same article I did? In that article, the publishes admitted they would have made more money if they'd sold ebooks at wholesale and let Amazon discount it out of Amazon's profits, because the volume would have been higher!

The gatekeeper role will be played by Amazon's bestseller lists, as well as review blogs like the one you're reading.

Shane Liu said...

"Mr. Makinson agrees that lower prices result in higher unit sales...revenue generated by those increased sales doesn't make up for the lost revenue from sales at higher prices.." Perhaps I phrased it badly, but even in your interpretation, they're not in denial. They're making logical business decision on maximizing profit for now and for the future. BTW, Amazon was discounting it not out of its profit, but taking a loss every time they sold a book to push on Kindle sale. A book retail space dominated by Amazon is bad for all publishers, even if in the short run it brings them more money.

Yes, but Amazon best seller list will always cater to the lowest common denominator, and quality works will lost out. I am not saying old way was better or that new way (like your blog) can't do a better job of promoting good works. Just pointing out there are benefits to the tradition, and middle man are not always completly unless leeches.

Piaw Na said...

The quote you used illustrates my point. By going to the agency model, they denied themselves higher sales at the higher price. Amazon was using those books as loss leaders to sell the Kindle. There's nothing to stop the publishers from adopting the agency model later... unless what they wanted to do was to delay the adoption of ebooks.

This sort of behavior is exactly what led to the irrelevance of the record labels.

Shane Liu said...

But no, they didn't go to agency model because they were afraid of ebooks. They went to agency model because they were afraid of Amazon. That's why they are happy to work with Apple and sell ebooks through itune store. There might be short term extra $$, but long term they'll be at Amazon's mercy.

It's a different debate, but I actually think record labels' actions were also perfectly logical. Digital sales will never make up for the lost revenue, so you can argue is right action is delay using lawyers.

Piaw Na said...

Digital revenues will not replace lost revenue, especially if you encourage piracy by pricing higher than analog formats.

I don't think it'll be an issue in the long term. Apple will always be there, and there were already a ton of ebook stores. What they really should be afraid of is authors selling directly on their own web-sites, bypassing Amazon and everyone else. That's going to happen regardless of whatever they do. Books are so low bandwidth that I can't imagine that not eventually happening.