Guest post by A serious dispute is brewing in the world of ebooks, pitting publishers and Apple against giant online retailer Amazon. A significant part of the appeal of ebooks is that they are (or should be) much cheaper than printed editions. In the publishing world, royalties paid to the author typically represent just 10% of the retail price. Both publishers and retailers take their cut. Printing is usually 30%, and then there are warehousing and shipping costs.
Since ebooks have virtually no printing, warehousing or shipping costs, one would expect them to be much cheaper than traditional paper books. And indeed, Amazon (which enjoys a 90% market share for US published ebooks) tries to hold the line, selling almost all their ebooks for $9.99. Reading an ebook sold by Amazon requires one to purchase a Kindle ebook reader.
Enter Apple, which intends to start its iBookstore business based on the new iPad. But unlike Amazon, Apple seems determined to push retail prices higher. Five of the USA’s six largest book publishers have reached agreement with Apple.
Under Apple’s business model, the publishers will set retail prices, and Apple earn a 30% commission. Retail prices are expected to average $12.99 to $14.99 per ebook.
This is forcing Amazon to respond by agreeing to allow major publishers to set prices in the Kindle store. In return, Amazon is demanding that publishers sign three-year contracts to guarantee that no other competitor will receive lower prices.
Apple is demanding that publishers not allow other retailers to sell ebooks for less than the iBookstore price. This is forcing publishers to renegotiate agreements they currently have with Amazon, where they sell ebooks at wholesale and allow Amazon to decide the retail price. Amazon is talking to smaller publishers that have not yet signed up with Apple, hoping to keep them in the old model which would protect the $9.99 retail price.
The dispute in pricing models got nastier in January when Amazon, in an act of retaliation, removed the “buy” buttons on its web site for printed editions of books published by Macmillan, one of its largest suppliers.
Publishers may like the higher retail prices – after all, it (theoretically) means more profit. But that is only true if the higher prices don’t scare off consumers. It would be ironic indeed if the new pricing model destroyed Apple’s iBookstore ambitions before it even gets off the ground.
An epic retelling of the classic fable: The goose that laid golden eggs.
They are so caught up bickering over the value of these digital products that only cost pence to deliver to consumers that they will put users off of e-books. Amazon will come off worse in this, and Apple will succeed in screwing over users with more heavy handed control.
It’s MP3s all over again, won’t somebody think of the end users!
Shame on you Apple for this iPad wonderful feature! Didn’t Steve Jobs say that DRM are wrong once? Now he seems to love them so much. eBooks made in Apple are just like eMusic, but made worse. It will lock users to the iPad or Apple hardware, and make them pay a shamefull price for an electronic format. And it will force other ebooks stores to raise their prices. 14$ for an electronic book? That I cannot even enjoy anymore if one day I decide to sell this magical device and go for another brand… But of course, why would I want to go for another brand? Silly me…
DRM is not wrong. it is a necessary evil manifested from our own selfishness. imagine a world where all books can be easily obtained from a p2p network, how is a writer going to make a living?
Edited 2010-03-19 21:14 UTC
By me and others who acutally buy books. Real books. Simply because ebooks offer less advantages and enjoyment than real books do, at least to me. It is also about the feeling, seeing a book in your bookshelf, being able to touch it etc.
Your argument is really wrong imo. DRM forbids borrowing and heck I can borrow my real book to whoever I want.
DRM forces me to use stuff a certain way and often it is not the way I want to use it. And before I forget it those that do not pay, those that do use p2p do not have to suffer from DRM.
DRM is punishing the honest people!
Dude, I LOOOVE reading books. You can hardly see me alone without a book in my hand. I know EXACTLY what you mean. Nothing beats the weight of a book, feeling of the pages, smells of ink… but it is just so much easier to travel with a kindle.
It pains me to be defending DRM, because it sucks. who gave amazon the right to tell me how to read my book? but piracy would KILL the industry and force out the writers. do you really think kids would want to grow up to become writers when ebooks are being sold for a dollar apiece?
I would love nothing more than to be able to buy a ebook and lend it to my friends after im done with it. but if i HAD to choose between the pain in the *ss DRM and no DRM at all, I’d rather choose DRM because thats how much I love books.
Think about it for a sec: If the books were a dollar each, would there be more or fewer sales? Sure, maybe you’d only make $ 0.10 per sale … but you’d have 1,000, 10,000, 100,000 sales.
If books were a dollar each, would you be buying more books? Would you be reading less?
Personally, if I could get books for a dollar a piece, I’d be buying a whole lot more of them. Wait, actually, that’s exactly what I do by hitting all the used book stores, garage sales, and such.
Give me an e-book reader with easy-on-the-eyes screen, with two screens (like an open book) with “page flipping” gestures, and $1 books, and I’ll be buying books by the dozen. And if they’re only $1, what does it matter if I can’t lend them out or resell them?
Unfortunately, it seems that book publishers are even more greedy and out-dated then the RIAA/MPAA.
oh please, dont give me that econ 101 argument. ppl who dont read books are not going to pick up a book all of a sudden because it now costs less. reading is a habit. kids dont choose to watch movies/play video games because they cannot afford a book.
When ebooks came first came out I started buying them. The reason.. Our house was being overrun by paper books. My wife and I would read a book and rather than dispose of it (we reread books all the time) we would need to find a place to store them. With ebooks the storage problem essentially went away. I find the drm a pain but am willing to pay this price to have the convenience of not having to store physical books. I also find it easier to find my old digital books when I want to reread them than it is to dig though boxes of books in an attempt to find a book. You can accumulate a lot of books if you live long enough.
This looks like two incongruous arguments shoved on end. Is the problem cheap books that people are paying for, or people not paying for books at all? Perhaps both?
In any case, books are free at the library. That’s $0 USD. And yet the industry lives on.
Let’s make the options a little more obvious. If it cost $1 each to store a virtually limitless number of books on a small device for access any time, that system would actually compete healthily against free books at the library. The digital conveniences of access, storage, retention, supply, and selection are worth much more than a dollar. From the publisher’s end, we’re looking at the cost of one physical book per hundred readers in the library system versus one dollar per reader in a cheap electronic system.
Edit fixed an errant line return.
Edited 2010-03-22 04:54 UTC
I’m a book enthusiast, I actually spend alot of money on books (and even more on scientific books). But I expect eBooks to be no more than 10$ (it’s not hardcovers, it should not cost more than a pocket-sized book, and really should cost less or give more money to authors).
I wish they won’t screw it up, I’m looking forward to PixelQI screens and the next generation of ebook readers to make the switch to a purely ethereal library (I’m a graduate student too, I have way too much papers lying around…). Overpricing ebooks will slow this by years before they realize they screwed up.
Companies exist with the goal of feeding their owners (private or public). The most popular feed is money. Since the primary goal is to please the owner, the customer plays second fiddle. They are only there to provide the feed. The company is in the business of delivering the absolute minimum of product for the highest price the customer will bare.
Since the days of enlightenment, social awareness and long term vision are long over, we see these excesses all to frequently. Less cost to produce something these days doesn’t mean lower product pricing. No, less cost means more profit and happier owners.
In the case of e-books, it’s fleece people for the price near that of a physical book and screw them over with a string of remotely deletable, DRM-ed ones and zeros.
The only way to stop that is buying what holds real manufacturing costs and thus real value; a physical book. At least that book is not DRM-ed, can’t be deleted legally without your consent and you can give it away, sell it, store it indefinitely, tear the pages out of it, make a collage with it and you are allowed to quote from it.
As long as big corporations and publishers see me as a wallet they can queeze, I won’t buy an e-book reader. It might have a high, cuddly gadget appeal, but I refuse to be screwed over.
Back when Apple first started getting cozy with the RIAA, the fanboy cognitive dissonance started to kick in. “But… but… but… Apple Thinks Different(tm), how can this be?!? Oh, I know, Steve Jobs is going to fix the system from the inside,” went the Maclot rationalizations.
The truly dedicated fanboys clung to that fantasy, even as Apple climbed into bed with all the remaining “Big Content” players, and copied every anti-competitive trick that Microsoft used in the 90s (Cupertino, start your photocopiers).
And now we have the final nail in coffin, which could have been copy-pasted directly from old Microsoft OEM agreements:
So can we put that silly myth to rest now?
Actually, the demand of not being undersold is being made by Amazon, not Apple.
Not quite, the OP was correct.
What it appears Amazon is after is a guarantee to be able to purchase at whatever the lowest price is that other retailers are offered.
What it appears Apple is after is to control what price any retailer sells ebooks for, which is a little odd to say the least.
The writer of this article obviously hasn’t done much research. Much of the info is plain wrong, and other important facts are missing.
Authors usually get more than 10% of retail. They usually get 10 to 15% of LIST. More when actual retail prices are taken into account. Printing, shipping, etc. is usually considered to be 25% of retail, not 30%.
The deal Apple has made with publishers gives publishers the OPTION to charge $12,99 to $14.99 for books just released in hardcover. But it’s already been said that some will be $9.99, and a few will even be lower.
In addition Mcmillian, who made the first deal, has stated that book prices will slide to $4.99 over time, as paperback editions arrive.
There are other omissions, and incorrect “information” in the post as well.
Curiously unmentioned in all this are these curious facts:
1. Book publishers pay, perhaps, a relatively small amount per book for the actual printing, but distribution and marketing eat up a lot of the budget: marketing isn’t going to go away or get cheaper, is it?
2. Book publishers like to be able to price to current market demands to get the best overall profit they can, but, at least with past Amazon.com agreements, that hasn’t been possible. Typically, for what would be a hardcover release, it may start out at its most expensive, and then will eventually be reduced to the bargain bin if it doesn’t sell well, or perhaps for some special promotion.
3. Amazon.com has explicitly resisted this model in the past, telling book publishers, “No, most books will be $9.99, PERIOD!” and that’s despite Amazon.com actually paying publishers (at least for some number of books) more than they’re selling them for: anyone see anything odd going on here? Well, that doesn’t exactly help anyone except (maybe!) the consumer short-term, and Amazon.com long-term, as they force all e-books to be a certain price. Surely not everyone thinks all e-books should be only $9.99, because, really, there are lots of books that the general public won’t buy in large enough volumes to pay for all the marketing and editing expenses, say, many types of technical and reference books that take a lot of effort to do correctly. If Amazon.com is able to do this for long enough, they’ll make it impossible for book publishers to make much money, as once customers get the idea that all books are worth the same maximum price, they won’t buy them at any other price, and then book publishers won’t take on the books that don’t have sufficient mass market potential at such low prices, and the only place people will be able to buy them is Amazon.com. Now, isn’t that the sort of thing people have accused Apple of doing in music?
I point all these things out, and, keep in mind, Amazon.com’s world headquarters are less than 6 miles away from me, and I’ve interviewed there in person. All for-profit corporations are run to feed the bottom line financially, let’s not forget that fact.
Like printing, distribution costs also becomes moot for e-books. In addition, marketing works for large volume sellers. Not much marketing is needed for lower volume sellers you say this will be problematic for.
With e-books, an independent writer for a niche topic where the type of mass marketing provided by publishers wouldn’t make much difference can publish the book him/herself, attract more people due to the lower price AND make more money. There are already independent artists selling MP3s directly on amazon for example.
Lets hope Apple wins. Then it will decide where and how you buy ebooks. And it will eliminate that awful burden of choice. Want the Kama Sutra? No, if you think about it, you’ll find you don’t. Unable to decide between Tolstoy, Dostoevsky and Lermontov? Don’t worry, we have made the selection for you. Want to read Norman Mailer? We think you will prefer James Jones.
Jane Austen you say? Who was she?
“Reading an ebook sold by Amazon requires one to purchase a Kindle ebook reader.”
Not true. You can download the Kindle for iPhone, PC, Blackberry, or Mac *software* application and buy any Kindle titles even if you don’t a Kindle device.
Lemmon blustered..
Really? So where’s my Linux version of the software reader?
Ahhh. So the only way* to get a Linux version of the Kindle eBook reader is to buy the hardware version? Meaning…a kindle device…
–bornagainpenguin
* Sure, it is technically possible to run the Windows version under Wine, but that’s not a linux version of the application is it?
Edited 2010-03-19 17:11 UTC
Hi, I’m a dick! haha, look at me! I open my quoted posts with snarky slights aimed at the parent post!
You know, that crap really does your own posts a huge disservice. I tend to gloss over posts if people immediately start out with name calling (like mine, just now) or slights for no real reason.
Grow up.
unless OSN is randomly creating these openings, but I somehow doubt that :p
It’s a common misconception that ebooks should automatically be significantly cheaper because they are digital as opposed to dead wood. The way people go on about it you’d assume it’s a universal physical law that we all learnt at school.
As someone who works in publishing, let me tell you that only a fraction of a book’s retail price is on printing and shipping. Say 10% is a reasonable ballpark, although for larger publishers it may be less.
So fair enough, you should probably expect ebooks to be 10% cheaper. But if you listen, you’ll notice people are expecting considerably more. Something has got to give the market wants serious cheap books.
“As someone who works in publishing, let me tell you that only a fraction of a book’s retail price is on printing and shipping. Say 10% is a reasonable ballpark, although for larger publishers it may be less.
So fair enough, you should probably expect ebooks to be 10% cheaper. But if you listen, you’ll notice people are expecting considerably more. Something has got to give the market wants serious cheap books.”
With a printed book I can resell it, I can lend it to a friend, I can share it with people, I can give it away, and I can borrow friends books.
With DRM-encoumbered ebooks I can not do any of these things. So yes, it is very reasonable to expect an electronic version of a book to be not more than 40%-60% the cost of the printed version due to the limitations that are artificially imposed on the media.
Want to charge 90% of the printed versions cost? Remove DRM and that would be a fair price. You want DRM? Lower the cost to reflect how less useful the product is to the consumer.
This is not rocket science.
Edited 2010-03-19 21:53 UTC
Is it just me or Apple is becoming Nazi Germany? Too powerful at first, so angry and ambitious. They opened so many Fronts in the war that could not concentrate in one.
Too many war fronts = you lose the war.
Apple is doing just that. Books, phones, etc. I don’t see a good future for Apple. I do like they’re products but I hate their idiosyncrasy.
Ebooks are more valuable than their paper counterparts, at least if they aren’t too laden with DRM. If there is a way to loan the book to your friend or colleague, then it’s more valuable than a paper book. Here’s why:
1) It’s smaller, you can carry a bunch of books for you on any number of devices you’re already carrying. And you don’t need to have dozens of bookshelves at your house/office to store them all.
2) It’s searchable. The first time you read a book you probably want to do it cover to cover, but after that you’re more likely to just want to refer back to a specific part, and since it’s searchable it’s easier to do.
3) It’s context sensitive. If you’re laying on your couch you can read it old fashioned style, if you need to quote it on your computer you can copy and paste or screen cap it, and if you are driving you can turn on the “read for me” feature than many ebook readers have these days.
In nearly every way, an ebook is more valuable than a paper version. Therefore it should cost the same price as a normal paper version, because it’s extra utility makes up the difference in printing costs.
Ebooks are more valuable than their paper counterparts, at least if they aren’t too laden with DRM. If there is a way to loan the book to your friend or colleague, then it’s more valuable than a paper book. Here’s why:
1) It’s smaller, you can carry a bunch of books for you on any number of devices you’re already carrying. And you don’t need to have dozens of bookshelves at your house/office to store them all.
2) It’s searchable. The first time you read a book you probably want to do it cover to cover, but after that you’re more likely to just want to refer back to a specific part, and since it’s searchable it’s easier to do.
3) It’s context sensitive. If you’re laying on your couch you can read it old fashioned style, if you need to quote it on your computer you can copy and paste or screen cap it, and if you are driving you can turn on the “read for me” feature than many ebook readers have these days.
In nearly every way, an ebook is more valuable than a paper version. Therefore it should cost the same price as a normal paper version, because it’s extra utility makes up the difference in printing costs.
Without DRM you have somewhat of a valid point. With DRM I cannot do the following with a ebook which drastically reduces its value:
– Return it if it is not the correct book or an error
– Resell it when I am done with it
– Lend it to friends and family
– Borrow other peoples books
Add those abilities into the current ebook scheme and you have something.
Edited 2010-03-19 21:55 UTC
DRM may not be popular, but is there a better way to curb piracy? ppl may point to the music industry, musicians can still make money through concerts. how in the world are the writers going to make a living if ppl start sharing their unencrypted books?
Amazon has an ulterior motives for selling ebooks for $10, it is establishing the kindle as a platform and trying to corner the market. I say, let the free market decide how much ebooks should cost.
Edited 2010-03-19 21:02 UTC
DRM may not be popular, but is there a better way to curb piracy?
Yes! Price the product at a fair market value where the vast majority of people view it a a reasonable price and won’t go through the hassle of pirating.
Remember when VHS’s were new technology? The movie companies charged $100 or more for a movie. Gues what happened? Almost no one purchased them and everyone pirated movies. When Top Gun came out for $24.99 (I think if I remember correctly), it shattered that pricing model. All new movies started coming out at reasonable prices and piracy almost vanished.
You will never completely get rid of piracy, as some people will pirate just because they can, and others will because they can’t even afford the much lower prices. These are not lost sales however, because these people would not purchase your product regardless of the price.
Reasonable prices = people purchase your product
Unreasonable prices = people pirate your product
Again,not rocket science.
Songs are being sold for a dollar apiece. what do you think “fair value” for an unencrypted ebook should be, when the same book is available for free a few more clicks away? Some people will pay, but unless the ebook is priced wayyyy below $10, most people will choose to pirate.
Musicians can live off tour revenues, writers cannot. Real life is not as simple as you would like it to be.
I’d choose to buy a tattered, dog-eared used book over pirating e-books. Oh, wait, buying used books is stealing from the authors! So is using a library!
Songs are being sold for a dollar apiece. what do you think “fair value” for an unencrypted ebook should be, when the same book is available for free a few more clicks away? Some people will pay, but unless the ebook is priced wayyyy below $10, most people will choose to pirate.
Songs are also available “just a few clicks away”, but Apple has managed to sell over 10 BILLION of them…huh..price a product fairly and you will sell a metric f–k-ton of it…go figure. Yes people still pirate, and always will.
I don’t know what fair market price for eBooks is. It depends on the book obviously. a 2,000 page technical reference will cost a whole lot more than a 200 page pulp novel.
Musicians can live off tour revenues, writers cannot. Real life is not as simple as you would like it to be.
So I take it you are totally against libraries and second hand book stores? Honestly, this is basic economoics here. High prices depress sales and profits, lower prices encourage sales and increase profits.
This is especially true of non-physical products that have ZERO production and distribution costs.
I can tell you at $10 for a work of fiction ebook, I buy maybe 1 every other month. If they were $2-$3, I’d probably buy 3-4 a month. If you can’t do the math, that comes out to $5/month at current prices, or $6-12 if the prices were lower.
So let’s see…more sales, more gross revenue, more net revenue, more profit, and more money to the author. Yup, terrible idea to price an encumbered piece of media lower.
As it stands, I may buy a book if it is $10.00 with DRM, or if I’d only be willing to spend $2-$3 for the book and it is not available for that price, I will hit the p2p to see if I can find it. So there is a lost sale due to insisting on over pricing the item.
Following that logic, you will always pirate the book because it’s just as easy or easier and you don’t have to switch between TPB and Amazon. The only time you’ll pay for it is to buy karma.
Justifying theft because you don’t like the price is still theft (IP theft/copyright infringement whatever you want to call it.) Especially when you get used to that market, ZERO dollars will become your new average asking price, and suddenly every book that costs more than a stick of gum is “overpriced” and now acceptable to pirate.
How did writers survive the Xerox machine?
Apparently you don’t read many paper books: unless they come in an easy to disassemble 3 ring binder, you’d need to take out each page and copy it, put it back in the original book, and then bind the copy, which is likely not going to be the same size, possibly larger or smaller, and if the original book is color, it’d be a fortune to do a color copy of a whole book, unless it’s just spot colors here and there, where you then have the complication of making most of the copy on black and white, and then doing those parts in color. Oh, and the new xerox copied book will likely be made of lower quality paper, the toner is more likely to rub off, etc. so what you ask only remotely makes sense if your time has no value, you like a messy process, and aren’t afraid of destroying the original book, and you don’t care about the fully assembled result’s usability.
Meanwhile, an eBook by comparison can be copied via a command line or a nice GUI, and zero quality is lost in the process, and it isn’t made anymore difficult for usability, either, if it is a true bitwise copy, and it would only take a few seconds and presence of mind.
Now, will eBooks take out authors and publishing companies, one way or the other, based on having DRM or not, and all the pricing pressures? We shall see! But your question, how did they survive xerox machines, is clearly that of someone that hasn’t thought things through very well: other than expense, it’s just too darn much hassle for most people, and takes too long to accomplish, and the resulting copy quality is rarely as good as the original, when, for most books, most people would work for a shorter time to pay for a legit copy rather than the effort and time they’d need to put into getting a xerox copy.
It won’t. If it does, it will only take out those that are in it for the money.
And I’m not sure that’s a loss.
There are much easier ways to make money than publishing. Liquor stores, for instance.
My wall of bookcases would like a word with you. Fine post, lousy opening.
But do the contractual requirements mentioned in the article actually qualify as “free market”, or are they aimed at distorting the free market?
Apple is nothing more than a lame bully.
They themselves copy like hell, but god forsake if someone copies holy Apple stuff.
They enter new markets at wish, but omg someone is entering “Apple’s” market …
If Apple was a person then for sure it would be best not to tangle with him.
Wuaaa, that company sucks so much that just thinking about it hurts.
I am a technology enthusiast. But I will never buy eBooks or any kind of digital media. First of all I cannot transfer these things to any device I want to. Can I lend an eBook to a colleague?
I also cannot sell them on eBay if I don’t like them! Besides, I think a crowded bookshelf is a thing of beauty 🙂 It tells something about you. A collection of PDF or eBook files doesn’t.
Oreilly now sells all their ebooks DRM free in a variety of file types.
Somebody needs to start a Magnatune-like store for e-books.
When e-books can be distributed for basically $0, there should be no publishers. The writer should get at least 90% of the profit (and I don’t see why Magnatune should take 50% of the profit, although it’s better than anywhere else…), and the store should get the rest.
It makes me sick every time I buy a book or a song because I know that very little of the money is actually going to go to the writers. Most of my money is going to corporations like the RIAA who have no respect for either the artists or the consumers.
There is SmashWords, which gives authors between 70 and 85% of the net sales.
FWIW, Magnatune doesn’t take 50% of the profit; they do a 50/50 split of the gross, so the authors get paid out of the total sale, not the profit.