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This Is What's Wrong With eBooks: Amazon Loses $2 On Every eBook Sold

from the but-we'll-make-it-up-in-volume dept

We've had stories about consumers complaining that ebooks are too expensive and about book publishers complaining that ebooks are too cheap. Guess who's getting squeezed in the middle? According to this unsourced report (so, perhaps take it with a grain of salt), Amazon is losing $2 per ebook sale, because publishers are wholesaling the books at $12, while Amazon wants to keep selling its ebooks at $10. The conclusion is the same all the way around, however: the publishers are living in a fantasy world if they think that $12 makes sense as a wholesale price for an ebook. Without the cost of printing, binding and distribution, the wholesale price should be a hell of a lot lower.


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    Brendan (profile), Dec 8th, 2009 @ 8:07am

    Doesn't amazon have the power here?

    They're a (the?) main ebook outlet, so why would they not just refuse to carry items at that price?

    You want to be on Amazon "shelves"? Then charge a reasonable wholesale price.

    Otherwise Amazon informs customers that they _want_ to stockl this book, but the publisher is not offering a fair price, and here are the phone number to call and complain. Crowdsource the harassment.

    PS, publishers: You don't get to charge the same for ebook as you do for paper. Get over it. It's not going to happen.

     

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    Jon Renaut (profile), Dec 8th, 2009 @ 8:35am

    They all deserve to go away

    It takes a spectacularly screwed-up industry to create a situation where it makes business sense for Amazon to sell a non-scarce good at a loss.

     

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    R. Miles (profile), Dec 8th, 2009 @ 9:10am

    ---

    Agree with the article but disagree with "hell of a lot".
    Grammatically awkward to read.
    Considerably instead?

    Sorry. It just looks to weird not to comment on.

     

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    Designerfx (profile), Dec 8th, 2009 @ 9:11am

    Re: Doesn't amazon have the power here?

    please. amazon isn't the main ebook outlet by a long shot. They're just one company who wants people to believe they're the main outlet.

    Publishers will soon realize that $10 even for an ebook is not worth it considering you don't even own what they are calling a purchase, plus it's DRM locked and all.

    Best bet would be to do a $5/mo all you can eat ebook strategy which would *SHUDDER* gain customers! What an idea! Can you believe it might even be more sustainable since the money comes in steadily? Oh right, that might lead to reality: books will end up free and distributed.

    book publishers are even worse than mpaa/riaa in their sheer ignorance. They just want to keep a high price on their works as they think everyone will agree on the publisher's own value, but value is not something anyone ever agrees on.

     

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    Chronno S. Trigger (profile), Dec 8th, 2009 @ 9:11am

    Re: Doesn't amazon have the power here?

    "You want to be on Amazon "shelves"? Then charge a reasonable wholesale price."

    Then someone sues them for monopolistic actions like they did with Microsoft (plenty of reasons to hate M$ but not for including IE). It's stupid as f*%k, but the people that would sue are the same people who think they are entitled to sales.

     

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    Phillip (profile), Dec 8th, 2009 @ 9:20am

    That's why i don't buy too many

    I have a kindle and I love, but I don't buy many books with it. Between the free books and the ones on sale I can read a lot for less than $5.00 a piece. You can get a lot of public domain books in pdf and load them on the kindle yourself.
    If they come down in price to a reasonable level, considering I can't let someone borrow my copy, I can't sell it and they can disable things on it or remove it, I won't buy many.

     

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    Pangolin (profile), Dec 8th, 2009 @ 9:21am

    It's about Royalties

    I'm a published author - and my book deal with the publisher is 8% for published books - and 25% for electronic distribution. My deal was made in 1997 - when ebooks were not in vogue or even very much handled. Now - I love it. However, it's less money for the publisher. They'll get what the market will bear - that's basic economics. If Amazon is willing to pay it, the publishers would be foolish to charge less.

     

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    dorp, Dec 8th, 2009 @ 9:32am

    Re: It's about Royalties

    If Amazon is willing to pay it, the publishers would be foolish to charge less.

    You are confusing "Amazon" with final customer. Publishers should be worried about the number of customers they are reaching, not how stupid of a price Amazon (just one of many book retailers) is willing to pay.

     

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    Dark Helmet (profile), Dec 8th, 2009 @ 9:33am

    Re: It's about Royalties

    "and my book deal with the publisher is 8% for published books"

    That sounds really, really low based on the contracts I've dived into. Who is your publisher, if you don't mind me asking? The reason I ask is that there are some really devious companies out there bilking authors (got taken in by one myself once), and I hate to see folks get taken advantage of because not enough writers are talking to one another....

     

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    Johnny Canada, Dec 8th, 2009 @ 9:34am

    It looks like the publishers last stand.

    Who needs them any more. They used to handle the Printing and Distribution.

    With ebooks that is no longer required.

    Sounds like the music biz

     

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    taoareyou (profile), Dec 8th, 2009 @ 9:35am

    Re: ---

    Perhaps it's a geographical phrase. I know where I come from, saying something like "that's a helluva lot more than I would pay" is not strange at all.

     

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    Anonymous Coward, Dec 8th, 2009 @ 9:36am

    Amazon Self Publish

    Most publishers make their money on the front end when the author ponies up 10-30k to publish a book. This cost that the author pays covers the book publisher's employee costs and gets the book press ready. By this I mean edited and through layout.

    The problem is that the publisher often requests all exclusivity to publishing, even though the author oftentimes gives up these rights. The only exception is if the publisher goes out of business, in which case the author can then gain their rights back.

    It seems the work for marketing and developing the Kindle/Nook platforms and hardware is solely on Amazon/B&N, without input from the legacy print publisher. Thusly, Amazon/Nook in a way, is duplicating the digital publisher's work, and provides it on digital media, using a digital distribution system, they developed and all things not available to the legacy print publisher. It's weird because Amazon/Nook essentially developed their own printing press, their own binding capability, and their own covers by developing the Kindle, Nook, establishing relationships with wireless companies, and the like.

    Ideally, Amazon/B&N would acquire a separate digital reproduction right from the author, separate from the print publisher. But this is not how the law is written. Exclusive is exclusive, even if the print publisher won't enter into an eBook marketplace.

    So, in a way, it seems better for aspiring authors to use self-publishing platforms such as Amazon's http://www.createspace.com/ provided that you have editing and layout folks who can help.

    I know I'm dreaming, but what would be best is for publishers to consider exclusive agreements that pertain to their specific business. If you're print, you negotiate print exclusivity. If you're digital, you negotiate digital exclusivity. Audio, you go for audio rights. See each as separate and stay focused in the area you are good at.

    If you're an author, negotiate exclusivity to each media type for a period of 3-5 years. Otherwise, it will be for ever minus one day.

    When Kindle is selling a $10 product at a $2 loss, it's seems because the rightsholder is using the new business media and business model to subsidize the old business.

     

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    Anonymous Coward, Dec 8th, 2009 @ 9:40am

    $5/mo all you can eat ebook strategy which would *SHUDDER* gain customers!

    yeah but your new formula of

    X * $5 > Y * $Z

    is lacking some info, because even at an attach rate of 1 best seller ($9) per month they are almost doubling the "all you can eat strategy" with less likelihood of the service being abused.

     

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    Tim Raleigh, Dec 8th, 2009 @ 9:44am

    but-we'll-make-it-up-in-volume

    Publishers are able to set a high price for a (nos-scarce good) content because Amazon wants the Kindle to succeed. Amazon has created a market by agreeing to pay those (ridiculously high) prices because Amazon needs to fill the Kindle pipeline. This is the same as GM agreeing to the demands from their union because they didn't want to disrupt production for fear of loosing market share.
    Amazon should have stayed out of the "hardware" business. They will live to regret the day they used their leverage in online retailing to underwrite their mission to make ebooks successful.

     

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    John Doe, Dec 8th, 2009 @ 9:46am

    Re:

    Ding, ding, ding, we have a winner. The ones complaining the loudest about piracy/stealing are the middleman/distributors. Their services are no longer needed; at least not in their current form. The smart ones, if there are any, will figure out how to add value to the transaction to stay relevant. The rest will cry and moan to the press, and run to the government for protection. Eventually they will go the way of the dinosaur, but it is going to be painful until they finally die out.

     

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    CR, Dec 8th, 2009 @ 9:46am

    Re: Doesn't amazon have the power here?

    Amazon has a hardware platform that they want to become the defacto in the marketplace. They have a catch-22 which partially explains why they are taking the hit.

     

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    Designerfx (profile), Dec 8th, 2009 @ 9:47am

    Re: Re: It's about Royalties

    what do you mean? Cory Doctorow makes 8% on ebooks at least per his essay on content. I guess it depends on how big you are? What is the number you had in mind DH?

     

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    RD, Dec 8th, 2009 @ 9:47am

    Never work

    "$5/mo all you can eat ebook strategy which would *SHUDDER* gain customers!"

    Nope, sorry, will never work for books. You might get away with this for music, tv, or movies, but never for books. People dont read entire books frequently enough to justify a monthly expense. They read a book, then put it away and maybe read it again later, like 1-2 years later. The would have to keep that monthly payment up indefinitely to "keep" their books. No one, and I mean NO ONE, will be interested in maintaining a monthly fee for books they might only read every few years. And few people read enough to justify the cost at all, let alone on an ongoing basis

     

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    Dark Helmet (profile), Dec 8th, 2009 @ 9:47am

    Re: Amazon Self Publish

    "Most publishers make their money on the front end when the author ponies up 10-30k to publish a book."

    Er, where are you getting that from? That's a self publishing solution you're talking about, and they rarely charge that anything close to that number. Traditional publishers do require payment by the author to publish their work. Publishers are supposed to pay authors, not the other way around.

    "The problem is that the publisher often requests all exclusivity to publishing, even though the author oftentimes gives up these rights."

    That's standard. It's part of the incentive for the publisher to publish. What's the problem?

    "It seems the work for marketing and developing the Kindle/Nook platforms and hardware is solely on Amazon/B&N, without input from the legacy print publisher."

    Absolute nonsense. Publishers don't promote printed works or eBooks exclusively; they promote the works themselves, regardless of format. Retailers, other than perhaps Amazon, tend to push paper versions more now because they want to get people into the stores to see/buy the other stuff they're selling (other books, CDs, DVDs, Coffee, Food, etc.).

    "So, in a way, it seems better for aspiring authors to use self-publishing platforms such as Amazon's http://www.createspace.com/ provided that you have editing and layout folks who can help."

    Here I tend to agree with you, though I have no experience with Amazon's service. But only because the traditional publishers are closing their doors more than ever. On average, it is still a better option for the average writer to publish traditionally when invited to do so. The reasons to self-publish are more preference oriented than business, usually.

    " know I'm dreaming, but what would be best is for publishers to consider exclusive agreements that pertain to their specific business."

    Impossible. Publishers wouldn't make money that way. They require rights for all the niches you mention because they aren't really niches, but different parts of traditionall publishing.

    "If you're an author, negotiate exclusivity to each media type for a period of 3-5 years."

    I'm sorry, I don't want to sound mean, but this is simply more nonsense. A standard publishing contract is good for somewhere between 4-5 years, not forever minus a day. The contract can only be renewed upon both party's consent. Even the really shady publishers like Publish America contracts only last for 7 years.

    And trying to negotiate separate contracts or each media type would simply get you thrown out of the publishers office altogether. At that point you're better off retaining all rights and doing the duplicating yourself on a 3rd party contract basis.

     

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  20.  
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    Comboman (profile), Dec 8th, 2009 @ 9:54am

    Re: Re: It's about Royalties

    8% is at the low end but still pretty common for first-time authors. The average is around 10%. The absolute top end for a well-established, best-selling author is 15%. Even 8% is generous compared to royalties in the music industry.

     

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  21.  
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    DRG, Dec 8th, 2009 @ 9:54am

    In a rational world...

    I see the natural price order as Hardback > paperback > electronic. You can twist reality all you want, but you'll have a hard time convincing me otherwise.

     

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    Dark Helmet (profile), Dec 8th, 2009 @ 9:57am

    Re: Re: Re: It's about Royalties

    "what do you mean? Cory Doctorow makes 8% on ebooks at least per his essay on content. I guess it depends on how big you are? What is the number you had in mind DH?"

    He said 8% for "published books", which I took to mean dead tree books, and 25% for "electronic distribution", which I took to mean eBooks. 8% flat rate on dead tree books is at a minium 2 points off, since standard rates are roughly 10% up to the first 5000 copies sold, and they go up from there, usually capping somewhere around 15-16%. That 8% number sounds like a Publish America contract, which ain't good.

    25% on the eBook side isn't glaringly low, but standard rates, which are far more fluid in this case, tend to be closer to 50%, usually in the 30-35% neighborhood.

    His contract isn't grossly terrible, but it isn't good. It might be one altered for a first time author consideration, but it's well below standard.

     

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    reboog711 (profile), Dec 8th, 2009 @ 10:07am

    Re: Re: Doesn't amazon have the power here?

    I hardly think that refusing to "stock" items because you can't buy it for lower than you can sell it will qualify as monopolistic.

     

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    Anonymous Coward, Dec 8th, 2009 @ 10:07am

    Re: Re: Re: Re: It's about Royalties

    Another consideration: Some authors’ percentages are a flat % what the publisher gets from the retailers, while others are sliding scale deals where “special sales” (read Walmart, Costco, etc.) are computed at lower rates.

     

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    interval, Dec 8th, 2009 @ 10:10am

    Re: They all deserve to go away

    Well said.

     

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  26.  
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    reboog711 (profile), Dec 8th, 2009 @ 10:14am

    What are the real costs?

    I understood that e-books are not as cheap to produce as it appears that they should be due to the multitude of formats that they needed to be converted into.

    I also understood that the cost of printing and distribution of paper books makes up a very small portion of the actual cost of producing a book.

    If my two understandings are true, perhaps the 'production cost' is not nearly as low as people assume it is.

     

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  27.  
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    Matthew Cruse (profile), Dec 8th, 2009 @ 10:15am

    Re: Never work

    So, how about the Baen Webscription model?4 books a month, that you keep forever for $15 dollars. Not a true "streaming" type service or all you can eat, but7 a great idea. It has been working for them for several years. I don't know if it generates any income/profit, bu it surely does build fan involvement and brand loyalty. They also have an Ala Cart model that works pretty good too. DRM free books, any many different formats for $6.00 each. Sounds like a great formula for lots of other publishers. And as I understand from Essays by author Eric Flint, these free and low cost options have not hurt the sale of physical copies, but have only caused that side of the Business to grow.

     

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    Dark Helmet (profile), Dec 8th, 2009 @ 10:20am

    Re: Re: Re: Re: Re: It's about Royalties

    "Another consideration: Some authors’ percentages are a flat % what the publisher gets from the retailers, while others are sliding scale deals where “special sales” (read Walmart, Costco, etc.) are computed at lower rates."

    Absolutely, but flat rate contracts are by nature HIGHER than tiered rate contracts. Either way, the standard contract numbers for DT/eBooks are 10%/35%, not 8%/25%. It doesn't sound like a huge difference, until you consider that it's a 20% cut in cost for DT rates and 29% for eBooks.

     

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    Brooks (profile), Dec 8th, 2009 @ 10:20am

    Re: Re: Doesn't amazon have the power here?

    I'm curious about your assertion that Amazon isn't the biggest seller of ebooks. Who do you have in mind that sells a more "by a long shot"?

     

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    alsma, Dec 8th, 2009 @ 10:22am

    Good Policy Wonk, But Bad Economist

    "The conclusion is the same all the way around, however: the publishers are living in a fantasy world if they think that $12 makes sense as a wholesale price for an ebook. Without the cost of printing, binding and distribution, the wholesale price should be a hell of a lot lower."

    Talk to a publisher before you spout off on things outside your sphere of knowledge. Recruitment, editing, formatting, copy-editing, and marketing don't happen for free. Self publishing is a great way to go if you don't mind missing out on all of these - or do them yourself.

     

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  31.  
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    B. Webb, Dec 8th, 2009 @ 10:22am

    Re: ---

    You should talk about grammatically incorrect...

    to should be too :-)

     

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    Brooks (profile), Dec 8th, 2009 @ 10:23am

    Hey, wait a minute

    Definitely take the figures in the article with a grain of salt. But if we accept them, it goes like this:

    - Ebook wholesalers want $12
    - Amazon wants to sell for $10
    - Amazon covers the extra $2

    Now, I'm a down on the publishing industry as anyone, but if Amazon's actually paying the premium, isn't this a case of *smart* business by the publishers in extracting some of Amazons' profits? What would be their advantage in selling to Amazon for $10? It's not like they'd move more volume, since it wouldn't change consumer pricing.

    So, yeah, fantasy world and all that... but it seems to be working, at least at the moment. What am I missing? Why shouldn't they cash in on Amazon's willingness to take a loss to buy market share?

     

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    Dark Helmet (profile), Dec 8th, 2009 @ 10:26am

    Re: What are the real costs?

    Much like other industries we discuss here, the top two line items on a publisher's costs books are 1. HR/Staff and 2. Marketing, and sometimes those are reversed.

    The problem is that most publishers don't see their major income coming from actually selling books anymore, save for a few bestsellers. They, like many authors today, are trying to leverage film deals, either by directly negotiating the deals if the author is unagented or if the publisher is a conglomerate that also owns a studio, or else they're trying to use the movie to sell books.

    What this means is that publishers don't want to sell lots of works in small runs. They want to sell few works in HUGE runs, and that makes it nearly impossible for new authors to break in without some kind of nepotism involved.

     

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    Ariel (profile), Dec 8th, 2009 @ 10:28am

    Publishers...

    Aside from the physical book distribution, publishers DO serve a valuable purpose for authors: Editing, cover art, formatting and promotion.

    If you read a lot of ebooks (like I do), these things are not trivial. It is easy for people to self-publish, but most books really do need other sets of eyes.

    Also, I've seen a lot of self-published books where the font sizes or line spacing is off, chapters aren't linked in the TOC, etc etc.

    eBooks *should* be cheaper, but there is a lot of pre-production that goes into just the digital copy. Or at least there is on quality content. It's what happens to that PDF *after* all that I don't want to pay for: Printing, shipping, storage, re-shipping, re-storage and destruction of un-purchased Dead Tree Books.

     

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    Dark Helmet (profile), Dec 8th, 2009 @ 10:29am

    Re: Hey, wait a minute

    "What am I missing? Why shouldn't they cash in on Amazon's willingness to take a loss to buy market share?"

    Because you're thinking short term rather than long term, and that's going to get you into trouble. Today Amazon doesn't have a stranglehold on the dead tree or eBook retail market, but if they're allowed to gobble up enough marketshare this way, they could literally bring the publishing world to its knees by demanding certain cost restrictions. Amazon isn't doing anything wrong by doing this, IMO, but from the publisher's perspective, they're heading for a world of trouble.

     

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  36.  
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    Anonymous Coward, Dec 8th, 2009 @ 10:36am

    Re: Re: Amazon Self Publish

    >>Absolute nonsense. Publishers don't promote printed
    >>works or eBooks exclusively; they promote the works
    >>themselves, regardless of format.

    If this was true, then Publishers would find a way to partner with non-traditional outlets such as Google Books.

    >>That's standard. It's part of the incentive for
    >>the publisher to publish. What's the problem?

    The problem is that many publishers lack an online presence and ability for books to be searched and found. The problem is that the current system doesn't work. It needs to be fixed.

    >>I know I'm dreaming, but what would be best is for
    >>publishers to consider exclusive agreements that
    >>pertain to their specific business.

    >Impossible. Publishers wouldn't make money that way. They >require rights for all the niches you mention because they >aren't really niches, but different parts of traditionall >publishing.

    Then what's your solution?

    >A standard publishing contract is good for somewhere
    >between 4-5 years, not forever minus a day.

    Not necessarily true. Many publishers negotiate for lifetime exclusivity. This may lead to books being orphaned yet rights are still held by the publisher.

    >And trying to negotiate separate contracts or each media
    >type would simply get you thrown out of the publishers
    >office altogether.

    If it's not a media they're good at, why sign that right away?

    >At that point you're better off retaining all rights and
    >doing the duplicating yourself on a 3rd party contract
    >basis.

    Could this be why HP is getting into the book business? Granted, 20¢ a page is real high, but if they manage a virtual storefront, can assign an ISBN, and an author can retain rights, their service may be worth it. Plus, the 20¢ a page cost will inevitably come down.

     

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    Jimr (profile), Dec 8th, 2009 @ 10:38am

    I have yet to fully read an ebook... I tried but just could not get 'into it' as I would paper. For me the future for the eBook is not books but other traditional media. I have read magazines and newspapers and for me that is what I want - a drastically reduced rate for an enewspaper only subscription.

     

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  38.  
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    Andrew D. Todd, Dec 8th, 2009 @ 10:44am

    Both Amazon and the Publisher are Unrealistic.

    Maher and Blodget's balance sheet for a book selling a hundred thousand copies seems to be an exercise in "Recording Studio Accounting." A lot of the overheads assessed for an E-book are unreasonably high. I realize that these are conventional percentages, but they would have to be renegotiated. The same goes for the publisher's overhead. I would say that the actual sum at risk, exclusive of author's advance, is about seventy-five thousand dollars for an E-book, viz. sixty thousand for advertising/promotion, and fifteen thousand for editing/production, versus about four hundred thousand dollars for conventional printing and distribution. They expect, even after all the padding, to make fifty thousand dollars in clear profit on an E-book, instead of a hundred thousand for a paper book. A realistic publisher's profit for an E-book would therefore be much less, say about twenty thousand dollars, or a quarter of the sum risked.

    Reputable author's agents traditionally take a modest percentage, ten or fifteen percent. Given the simplification of electronic publishing, I don't see why an agent could not take over the business of dealing directly with major booksellers such as Amazon. An established author could reasonably expect to get about sixty or eighty percent of what Amazon pays. The traditional formula for subsidiary rights, eg. paperback rights, is a fifty-fifty division of the gross income between author and publisher. In the case of Amazon, this is still overly generous to the publisher. Amazon deals with self-publishing authors on reasonably equitable terms, provided that they agree to use its preferred distribution systems (Kindle, and Amazon's print-on-demand system).

    Of course, it might be objected that the publisher has to make high gross profits, before overheads, in order to subsidize the publication of unremunerative works. The answer is that, in the age of the internet, the authors of unremunerative works, instead of applying for what is, in effect, a kind of charity, simply go and publish their books for free on websites, and no longer enter into the publisher's calculations. The big commercial publisher stops receiving unsolicited manuscripts or queries, and only looks at those websites it thinks worth following up on. Therefore the publisher doesn't need a sizable acquisitions department. Commercial publication is a device for the collection of royalties, and is irrelevant unless the author expects, realistically, to make substantial royalties.

    As "CR" noted (Dec 8th, 2009 @ 9:46am), Amazon is trying too hard to pump up the Kindle market, deliberately running a loss in the hope of eventual market domination. However, that will not happen. Everyone and his dog is entering the E-book reader market, selling things at a loss. It's like game consoles.

    In the last analysis, one must never forget that the publishers' biggest source of revenue is textbooks-- and intellectually undistinguished textbooks at that, things like College Algebra and Freshman Spanish. The one time when I myself had a compelling case for something like a kindle was over thirty years ago, when I was carrying around twenty pounds of textbooks in my backpack, viz. Calculus, Physics w/ Lab, German, and a freshman history course, every single book for a full year of courses. The way the books were bound, and the way the classes were scheduled, I needed nearly every book every day, so I got a big camping pack, with an aluminum frame, to conveniently carry everything around. Ah, Youth! Of course, for that kind of thing, a laptop computer would make more sense nowadays, and for math and languages, interactive software probably makes more sense than textbooks.

    The most serious threat to the publishers is something they cannot do anything about, at least while continuing to be publishers.

     

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    Anonymous Coward, Dec 8th, 2009 @ 10:47am

    The neat thing about working with Publish America is that they're owned by Ingram which can get your book into B&N and other places.

     

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  40.  
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    Brian (profile), Dec 8th, 2009 @ 10:54am

    Well duh, this is what Amazon gets for trying to offer something the consumer wants. How dare they try and do that! The customer should be forced to read books the way publishers want not the other way around.

     

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  41.  
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    Dark Helmet (profile), Dec 8th, 2009 @ 10:55am

    Re: Re: Re: Amazon Self Publish

    "If this was true, then Publishers would find a way to partner with non-traditional outlets such as Google Books."

    Well, that's sure as hell what they SHOULD do, but they don't. Why? Well, it's just my opinion, but no media industry is so entrenched in their ways coupled with an overinflated opinion of themselves as the publishing industry. Even the news industries have been more flexible than publishers. They're just the ultimate example of East Coast, set in their ways businessmen that see themselves as "artists". In other words, it's a cacophany (sp?) of factors that equal oddness and nepotism.

    "The problem is that many publishers lack an online presence and ability for books to be searched and found. The problem is that the current system doesn't work. It needs to be fixed."

    Yes, but the publishers that focus SOLELY on eBooks aren't any better at it. I don't know why, but there is no popular repository of eBooks. There's no literary version of iTunes. And don't say Amazon, they're not even close in terms of being user friendly or popularity in terms of purchasing percentages for their art form. So the niche publishers can't do it either.

    "Then what's your solution?"

    A 3rd party innovative company cataloguing and selling eBooks at prices clearly set to subsidize their ridiculously powerful and satisfying eBook hardware, ala iTunes/iPod/Apple, at least at the beginning.

    "Not necessarily true. Many publishers negotiate for lifetime exclusivity."

    I said standard, and with a quick stipulation that most of my knowledge and experience comes in fiction publishing, I'll stand by that. 4-5 years is the norm/standard, and perpetual terms are incredibly rare.

    "If it's not a media they're good at, why sign that right away?"

    Because the good publishers don't negotiate that way, and even if they're not good at one particular form of media, they're good overall. Does Baen do a great job with audiobooks? Nah. Is that going to keep me from accepting a publishing contract with an advance of $10,000 when they require the rights for audiobooks to even consider me? Hell no! They're Baen, overall, they know what they're doing.

    "Could this be why HP is getting into the book business?"

    If they did two things, HP would make a crazy amount of money.

    1. Get that pricing down to something reasonable, perhaps partnering with local digital shops.

    2. Exactly like you said, but streamline the processes of assigning an ISBN, but do more. Why isn't HP, the world's largest computer hardware manufacturer, making an eBook? Why isn't HP doing for eBooks what Apple did for eMusic. They're perfectly positioned to do it, and they could make money from hardware, eBook subscriptions, and/or authors that want to self-publish in both eBook and DT book works. I'm kind of shocked they haven't done this already....

     

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  42.  
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    Dark Helmet (profile), Dec 8th, 2009 @ 10:57am

    Re:

    "The neat thing about working with Publish America is that they're owned by Ingram which can get your book into B&N and other places."

    Rubbish. Publish America books are not sold in brick and mortar stores. Did you mean on B&N website? That's where they're sold, but PA does no mention-worthy marketing, and they do not discuss any sales figures whatsoever, which is something only done by shady publishers that make most of they're money not from selling books to readers, but by selling books to authors.

     

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  43.  
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    Anonymous Coward, Dec 8th, 2009 @ 11:00am

    Gaining customers is secondary. Maximum profit is the primary goal. If your profit margin drops to one quarter of what it was before, but you double your sales, you've lost.

     

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  44.  
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    Eileen (profile), Dec 8th, 2009 @ 11:01am

    Why doesn't amazon just go into the publishing business? Makes a heck of a lot more sense...

     

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  45.  
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    senshikaze (profile), Dec 8th, 2009 @ 11:01am

    what i find hilarious is that i can buy a real book at $6~$7 (for most of the paperbacks i buy), and do whatever the hell i want with it, including share with my friends.
    amazing how, to use a new technology, we have to give the rights we had with the old technology.
    When they make books drm free and cheap, i may switch. until then, i will be buying my books made from dead trees.

     

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  46.  
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    Brooks (profile), Dec 8th, 2009 @ 11:10am

    Re: Re: Hey, wait a minute

    Um. So, charge Amazon what they'll pay today, and if that changes, change your wholesale price?

    Do you really think the publishers should unilaterally lower their prices to $10, knowing that Amazon will buy the same quantity and sell at the same price to consumers?

    I mean, the "I'm thinking long term" handwave is nice and haughty and everything, but that's really not much of an argument for this particular case. Given the facts as presented (which, again, I'm skeptical of), this is smart business from publishers.

     

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  47.  
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    Nate (profile), Dec 8th, 2009 @ 11:18am

    Just crunching some numbers and thoughts

    Amazon Kindle cost: $259
    Production cost (est): $185
    Profit: $74
    Assumed hit: $2
    Number of books before going negative: 37

    Okay, so I know this doesn't hold up very well (if at all) in the real world but I think you get my point. Hardware sales can minimize this hit quite a bit, especially if people like me buy Kindles as opposed to reading on a computer or other alternatives. I mean, I can't say I've ever read 37 real books in my 20 years of breathing. And then there will be new versions of Kindles with larger storage capacities, etc. like we see with iPods, which will (try to) entice people to buy a new Kindle after 2 years.

    I'm not sure how I feel about ebook readers to begin with. I haven't used one but the thought of it reminds me of digital picture frames. I guess given a few more years I'll warm up to both ideas more and by then maybe pricing for ebooks will adjust, which reminds me that people pay a premium for new tech. Ebooks = new tech => high prices at time=0? *shrug*

     

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  48.  
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    C. Gall, Dec 8th, 2009 @ 11:23am

    Re: ---

    I take it you mean 'too weird', because that looks weird too.

     

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  49.  
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    Nate (profile), Dec 8th, 2009 @ 11:29am

    Re: Both Amazon and the Publisher are Unrealistic.

    I would kill to ditch my textbook load. My school required that students by convertible tablet PCs. One of the best benefits so far is the lack of binders. One professor sold his own textbook online for $27! DRM was horrible though and it was still a loss of money because the textbook wasn't necessary other than homework. Why don't they support homework books?... And supplement info with Wiki? (lol...)

     

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  50.  
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    Hephaestus (profile), Dec 8th, 2009 @ 11:37am

    Re: but-we'll-make-it-up-in-volume

    "Amazon should have stayed out of the "hardware" business. "

    Agreed. What they seem to be doing is trying to be the Apple of e-book publishing. With all the better more open e-readers out there its not going to happen.

     

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  51.  
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    ChrisB (profile), Dec 8th, 2009 @ 11:44am

    Re: Never work

    Um, have you ever been to a library? They charge a yearly fee for all you can eat, and they seem to be doing fine.

     

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  52.  
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    Smedrick, Dec 8th, 2009 @ 11:47am

    Re: Just crunching some numbers and thoughts

    Really? I usually cover 40 books in less than a year, and I don't even read that much. It seems anyone purchasing an ebook reader is into reading enough that they could easily run Amazon into a loss by the end of the first year.

     

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  53.  
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    Dark Helmet (profile), Dec 8th, 2009 @ 11:49am

    Re: Re: but-we'll-make-it-up-in-volume

    "Agreed. What they seem to be doing is trying to be the Apple of e-book publishing."

    Right, and they're the wrong company to be trying that. HP is the right company. Amazone is neither content publisher nor a company whose business is hardware manufacturer. The iTunes/iPod thing worked because Apple made a great piece of hardware. No hardware provider has yet done the same thing with eBook readers (don't even try to tell me about Sony)...

     

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  54.  
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    Anonymous Coward, Dec 8th, 2009 @ 11:57am

    Re: Re:

    Very painful for all involved. Especially the lowly consumer. Poor consumer. Always getting screwed. What's that? You will occasionally screw them back? How so? Piracy! No! That's against the law!

    Poor consumer.

     

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  55.  
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    Hephaestus (profile), Dec 8th, 2009 @ 12:01pm

    "In any event, in order for the e-reader market to thrive publishers must lower their wholesale prices so that distributors can turn a reasonable profit. We believe that if the price is lowered enough publishers may earn less per unit, but could ultimately earn more in overall revenue and profit through a greater number of sales. This, of course, benefits the e-book distributors as well."

    As we have seen from the recording industry, the newspaper business, and the movie industry, they run their businesses on a quarterly basis. The goal is profit now, not how can we create a sustainable model for the future. The book publishers will follow the same route. Afraid to take the leap until its to late, afraid to lower prices, afraid to sell e-books without DRM. All of this will cause them to have reduced profits short term and long term other solutions will become available, causing them to fail.

     

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  56.  
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    Freedom is Freeloading, Dec 8th, 2009 @ 12:01pm

    Re: Re: Never work

    Thanks to the parasites who "borrow" the works in question. Libraries wouldn't exist if it wasn't for the freeloaders.

     

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  57.  
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    hegemon13, Dec 8th, 2009 @ 12:02pm

    Re: Never work

    "Nope, sorry, will never work for books. You might get away with this for music, tv, or movies, but never for books. People dont read entire books frequently enough to justify a monthly expense. They read a book, then put it away and maybe read it again later, like 1-2 years later."

    Huh? That's precisely the reason that it DOES make sense. If you read regularly at all, $5 a month is worth it. You're not paying to "keep" a certain book. That's paper book thinking. You're paying for instant, unlimited access to a huge library of books. If you read at least one book per month, it's well worth it. Even a single paperback costs more than that.

    I would absolutely pay $5 a month for unlimited ebooks. So, there goes your "no one, and I mean NO ONE" claim. Think before you spout.

     

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  58.  
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    Brooks (profile), Dec 8th, 2009 @ 12:03pm

    Re: Just crunching some numbers and thoughts

    I'd be surprised if Amazon's cost on Kindles was less than the sale price. This is not a "profit on hardware, loss on software" model; in fact, I expect it's similar to game consoles, where they take a loss on hardware with the expectation of making it up in software.

    To the extent that Amazon loses money on actual ebooks (which I'm very skeptical of), it's going to be because they see it as buying market share and establishing the company as the preeminent ebook retailer, and they figure that the long term profits will offset short term losses (perfectly reasonably business).

    However, I really doubt the accuracy of this report, or at least the implication that it's the average across all ebooks. *Maybe* some high profile publishers/books represent a loss for Amazon, since they have a lot of leverage. I'd be shocked if that were the case across the board.

     

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  59.  
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    Hephaestus (profile), Dec 8th, 2009 @ 12:07pm

    Re: Re: Re: Re: Amazon Self Publish

    Thanks DH, you gave me another addition to my little business plan ...

    "A 3rd party innovative company cataloguing and selling eBooks at prices clearly set to subsidize their ridiculously powerful and satisfying eBook hardware, ala iTunes/iPod/Apple, at least at the beginning."

    287 note/entry) Add the required accounting, catalog, and web services for e-book sales

     

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  60.  
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    hegemon13, Dec 8th, 2009 @ 12:09pm

    Re: Just crunching some numbers and thoughts

    The primary audience for ebooks is heavy readers who want to carry a library with them. I don't read a fraction of what I used to, and I still hit around 15-20 books a year. There was a time that I would blow through 1-2 novels a week. Amazon would be losing money very quickly on me.

     

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  61.  
    identicon
    Anonymous Coward, Dec 8th, 2009 @ 12:11pm

    Re: Re: Re: Re: Amazon Self Publish

    >> "If this was true, then Publishers would find a way to
    >> partner with non-traditional outlets such as Google Books."

    >Well, that's sure as hell what they SHOULD do, but they
    >don't. Why? Well, it's just my opinion, but no media
    >industry is so entrenched in their ways coupled with an
    >overinflated opinion of themselves as the publishing
    >industry.

    No, actually, it's that the media industry along with many industries have people that they need to keep. Unlike many big technology companies, which often reorganize on a yearly basis, media has not had the experience of a full-out reorg. Reorgs are good. They keep people on their toes and new ideas are able to be built, new connections are made. The running joke at one company was that reorgs were based on astrological signs. The Media industry as a whole hasn't been privvy to full-on reorgs. I've worked for three Fortune 500 companies that have yearly reorgs. The companies that do yearly or bi-yearly reorgs were tops in their field. Reorgs, by their nature keep politics from becoming the modis operandi. Those with ideas are promoted, not stifled.

    >They're just the ultimate example of East Coast, set
    >in their ways businessmen that see themselves as
    >"artists". In other words, it's a cacophany (sp?) of
    >factors that equal oddness and nepotism.

    This can be addressed with regular ReOrgs.

    >>"The problem is that many publishers lack an online
    >>presence and ability for books to be searched and found.
    >>The problem is that the current system doesn't work. It
    >>needs to be fixed."

    >Yes, but the publishers that focus SOLELY on eBooks aren't
    >any better at it. I don't know why, but there is no
    >popular repository of eBooks. There's no literary version
    >of iTunes. And don't say Amazon, they're not even close in
    >terms of being user friendly or popularity in terms of
    >purchasing percentages for their art form. So the niche
    >publishers can't do it either.

    They exist. Recently, Amazon acquired a company called LexCycle which has a product called Stanza. You should look into them. I'm sure they're not complete with their integration. This probably won't be done until Ol' Jeff B yanks the purse strings and moves and consolidates the LexCycle business from Austin and Portland to Seattle.

    Additionally, B&N has a reader app on the iPhone/iPod Touch platforms. If the FTC wouldn't have said B&N couldn't buy Ingram in 1999, I imagine they'd have more titles from independent authors to feature via Ingram's Publish America business.

    >I said standard, and with a quick stipulation that most of
    >my knowledge and experience comes in fiction publishing,
    >I'll stand by that. 4-5 years is the norm/standard, and
    >perpetual terms are incredibly rare.

    Good. Many authors are not lawyers and don't understand the idea of perpetual terms. They see "Exclusive" and through the magic of today's advertising, may believe they're getting an "Exclusive deal", not knowing the legal definition.

    >>"Then what's your solution?"
    >A 3rd party innovative company cataloguing and selling
    >eBooks at prices clearly set to subsidize their
    >ridiculously powerful and satisfying eBook hardware, ala
    >iTunes/iPod/Apple, at least at the beginning.

    Surely you looked up Lexcycle as I pointed out above. They're already in that space.

    >>"If it's not a media they're good at, why sign that
    >>right away?"
    >Because the good publishers don't negotiate that way, and
    >even if they're not good at one particular form of media,
    >they're good overall. Does Baen do a great job with
    >audiobooks? Nah. Is that going to keep me from accepting a
    >publishing contract with an advance of $10,000 when they
    >require the rights for audiobooks to even consider me?
    >Hell no! They're Baen, overall, they know what they're
    >doing.

    Exactly. Copyright is the right of the holder to say "NO". When you sign that right away, or have a publisher file copyright on your behalf, you loose the ability to say no.

    Let's say the publisher is the best in the business at printing books but as part of your deal, they agree to file the copyright on the author's behalf. What's wrong with limiting their use? Copyright allows the holder to say NO.

    If I want to make an audiobook, I want the best damned company to make my audiobook.

    If I want to sell an eBook, I'm going to seek out the best damed eBook company to sell my eBook.

    If I want to sell a print book, I will take it to the best printer I can find.

    Problem is, many people don't understand that owning exclusive copyright keeps the author from pursuing these routes. This is a fundamental problem with copyright: no one understands what they gave up until it's too late.



    >>"Could this be why HP is getting into the book business?"
    >If they did two things, HP would make a crazy amount of
    >money.
    >
    >1. Get that pricing down to something reasonable, perhaps
    >partnering with local digital shops.

    Precisely. If companies could outsource their printing operations to HP, we'd all be better.

    >2. Exactly like you said, but streamline the processes of
    >assigning an ISBN, but do more.

    No. The process of book publishing is still very hands-on and requires soft skills as the manuscript moves through the publication process. Any publisher worth their salt can get an ISBN. This should be a part of their overall capability as a publisher. Publishers need to become Agents and literary agents need to become writers, just as John Hodgeman did.

    >Why isn't HP, the world'slargest computer hardware
    >manufacturer, making an eBook?

    They are. It was shelved.
    http://gizmodo.com/260744/hp-e+book-reader-design-fakes-turning-pages

     

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  62.  
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    Anonymous Coward, Dec 8th, 2009 @ 12:21pm

    where's "moral outrage" guy?

     

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  63.  
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    Dark Helmet (profile), Dec 8th, 2009 @ 12:29pm

    Re: Re: Re: Re: Re: Amazon Self Publish

    "Thanks DH, you gave me another addition to my little business plan ..."

    No problem, just consider calling your eBook reader "The Helmet"...

     

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  64.  
    identicon
    Anonymous Coward, Dec 8th, 2009 @ 12:32pm

    I read mostly science fiction/fantasy books and still have not read all the free books Tor and Baen have given out over the last year or so. Baen still has several dozen books in their free Ebook library:
    http://www.baen.com/library/defaultTitles.htm

    I'll buy the paperback of a book I want to read and then download the txt version of that book for my reader (almost any Chinese PMP will read text books with bookmarks). No publisher will be getting $10-$12 from me for an ebook. I don't have to worry about them deleting my books off their overly priced readers either.

     

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  65.  
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    Dark Helmet (profile), Dec 8th, 2009 @ 12:35pm

    Re: Re: Re: Re: Re: Amazon Self Publish

    Okay, I'll check out the Lexcycle, but have you really dug into the history of Publish America, both as a company and the legal history of their executives? They're a bad, bad company.

     

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  66.  
    identicon
    Anonymous Coward, Dec 8th, 2009 @ 1:01pm

    Re: They all deserve to go away

    It takes a spectacularly screwed up world to create a situation where entire industries based on selling non-scarce goods can even exist.

     

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  67.  
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    TooLazyToRegister, Dec 8th, 2009 @ 1:14pm

    Re: ---

    Not to nitpick (and I'm generally not a grammar nazi) but it's really funny to see someone make a language related comment, and then use the wrong "too".

     

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  68.  
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    CastorTroy-Libertarian, Dec 8th, 2009 @ 1:16pm

    Re: Re: Re: Re: Re: Re: Amazon Self Publish

    Hey Dark

    Long time, we have had this discussion before, and i think most of the points you bring out have merit...

    I do have an idea i am thinking about pushing forward on this format and would love to get your reading on it, but im not sure how to best go about shooting an email to or from you...

    I could hit you up on your blog if you wish...

    later,

     

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  69.  
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    TooLazyToRegister, Dec 8th, 2009 @ 1:16pm

    Re: Re: ---

    And today I learned that Techdirt's default "flattened" comment submission style makes it so you don't see other replies saying the exact same thing until AFTER you reply, which then switches it to "threaded" mode for some reason.

     

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  70.  
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    Anonymous Coward, Dec 8th, 2009 @ 1:18pm

    Re: Re: Re: Re: Re: Re: Amazon Self Publish

    I am not interested in their legal history or of their executives. They have physical distribution capabilities.

    If they were bought by B&N, things probably would have been different.

    If they have problems working with publishers, maybe they should all get together and file a class action lawsuit against them.

     

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  71.  
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    Dark Helmet (profile), Dec 8th, 2009 @ 1:19pm

    Re: Re: Re: Re: Re: Re: Re: Amazon Self Publish

    Absolutely, hit me up there if you like. It ain't much of a blog, but I'd be happy to get you my contact info there. Or you can send a request to Mike and he'll pass my email address along...

     

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  72.  
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    Corey, Dec 8th, 2009 @ 2:12pm

    Re:

    If your book is good enough, you are much better off having it published by a real publisher that will promote it properly. The vast majority of authors that use Publish America will sell books to family and a few friends and that is all.

     

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  73.  
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    Corey, Dec 8th, 2009 @ 2:18pm

    Re:

    Not true. As an author I must say that publishers are very, very important, especially for first time authors. There are many, many self-published books out there that no one will ever hear of. Publishers have the money and resources to publish books that most authors do not.

    The only authors you will find that will call self-publishing a better option for most authors are those whose books are not good enough for a traditional publisher.

     

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  74.  
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    Corey, Dec 8th, 2009 @ 2:22pm

    Re: Amazon Self Publish

    Sorry AC, when you say "Most publishers make their money on the front end when the author ponies up 10-30k to publish a book" you have no idea what you are talking about. The publisher, not the author (unless they are self-publishing) pays for everything. This is also why the publisher does and should have the rights to sell the book in all of it's forms. The publisher pays for editing, cover design, and promotion. Do you really expect them to pay for all of this then let someone else reap the benefits by selling the ebook or audio book?

     

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  75.  
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    Jeremy (profile), Dec 8th, 2009 @ 2:31pm

    Why would I pay over $250 for a device that makes me pay more for an e-book than I would a paperback?

     

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  76.  
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    Griff (profile), Dec 8th, 2009 @ 2:55pm

    Re: Re: Re: Hey, wait a minute

    Surely it is also possible that Amazon have pegged their max acceptable loss per book at $2. In which case if the publishers drop their price, Amazon might drop theirs to sell more ?

     

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  77.  
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    Jim D (profile), Dec 8th, 2009 @ 3:22pm

    I don't believe it. I saw this a few days ago and couldn't find any source for their information or corroboration. In the publishing world, Amazon is notorious for pushing down the margins to a very thin line on, and considering some of the analytical errors that Tim O'reilly himself points out in the comments, I'm not inclined to take this on faith.

    It's also the case that the Kindle, for the most popular brand of a consumer electronic in its 2.5 generation, is fairly expensive. As such, if Amazon is in fact paying above sale price for its eBooks, I don't doubt that they are curtailing their loses somewhat on what they charge for the hardware.

     

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  78.  
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    Mike Masnick (profile), Dec 8th, 2009 @ 4:36pm

    Re: Good Policy Wonk, But Bad Economist

    Talk to a publisher before you spout off on things outside your sphere of knowledge. Recruitment, editing, formatting, copy-editing, and marketing don't happen for free. Self publishing is a great way to go if you don't mind missing out on all of these - or do them yourself.

    Indeed, but those are fixed costs, not marginal costs. They don't change for physical books or printed books. But the marginal costs of the digital books are significantly less, and as any good economist will tell you, it's the marginal costs that matter.

     

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  79.  
    identicon
    Anonymous Coward, Dec 8th, 2009 @ 4:43pm

    Re: Re: They all deserve to go away

    It takes a spectacularly screwed up world to create a situation where entire industries based on selling non-scarce goods can even exist.

    It takes government help to make it happen.

     

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  80.  
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    spaceman spiff, Dec 8th, 2009 @ 5:23pm

    Amazing!

    $12 wholesale for an ebook - it's highway robbery! Baen Publishing, via their Webscriptions.net web-outlet, sell eBooks for $6 per book ($15 for advance reader copies - books that have not been officially published yet) and seem to make real $$ on the deal! After all, as mentioned, there are no printing costs or distribution costs outside of some internet bandwidth. I've been buying a lot of my SciFi books from them for a couple of years now, and I have absolutely zero complaints. They even have a "Free Library" where a lot of books showcasing their authors are available for, wait for it... free! What a concept! Giving away product in order to attract people to purchase more! Cudos to Baen and Webscriptions.net!

     

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  81.  
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    Anonymous Coward, Dec 8th, 2009 @ 8:52pm

    In some way somehow they are gaining something or Amazon would just have stopped already(unless they are being youtubish).

    I can think a way this is good business.

    Supermarkets often sell certain items below cost to attract eye balls to other things(it works great), when you are shopping online do you buy only one item? or do you look at the adds in the page and recommendations? I don't know the answer to that but Amazon may have glimpsed and is leveraging that, maybe.

     

    reply to this | link to this | view in thread ]

  82.  
    identicon
    Anonymous Coward, Dec 8th, 2009 @ 10:49pm

    It is really loosing money?

    There is other way to offer something below cost and that supermakets already take advantage off.

    They buy something and pay latter then they invest the money and that can cover if not all most of the projected losses.

    It works so well for supermakets that they even make a profit out of it.

     

    reply to this | link to this | view in thread ]

  83.  
    identicon
    Anonymous Coward, Dec 9th, 2009 @ 5:47am

    This is why I haven't bought a Kindle or any other book reader. I will not buy one until the publishers wake up and offer ebooks at a reasonable price.

     

    reply to this | link to this | view in thread ]

  84.  
    icon
    nasch (profile), Dec 9th, 2009 @ 8:38am

    Re: What are the real costs?

    I understood that e-books are not as cheap to produce as it appears that they should be due to the multitude of formats that they needed to be converted into.

    That's a fixed cost. Perhaps they're just as expensive as paper books in fixed costs, but in a competitive market that doesn't apply to the sale price. That is to say, the price will tend toward the marginal cost of production. And the cost of producing one additional copy of an eBook is zero.

     

    reply to this | link to this | view in thread ]

  85.  
    identicon
    Anonymous Coward, Dec 20th, 2009 @ 7:04am

    cost of e-books

    Too many hands out between the author and the buyer..the path from writer to e-books needs to be shorter...a lot of the revenue is siphoned off by persons who do nothing for the author or the buyer except to get a paycheck..they have a title and that's all..

     

    reply to this | link to this | view in thread ]


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