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  • Apr 30th, 2012 @ 9:56am

    So wrong in so many ways

    I'm a publisher. Have been for 30 years. Used to be in the music business too. There are so many bad assumptions in this story I barely know where to start. 1) Not all publishers are BIG NYC firms making huge salaries. There used to be thousands of small publishers. There also used to be tens of thousands of bookstores. 2) The record companies relinquished all of their GLOBAL manufacturing rights to Amazon and Apple for ZERO advance. They then allowed these "licensees" (which actually means "manufacturers") to set the retail price AND the royalty rate. This is why the music industry is in the toilet. They went from $14B in 2000 to less than $4B in 2010. No one seems to be able to explain how or why this is good for the OWNER of the music. Of course the internet is supposed to be the great equalizer so if the consumer is being well served by the notion that the theme tune from Gilligan's Island is "worth" the same as "Hey Jude" then knock yourself out. If a song is "just a song" and should be sold "by the pound" then you'll get what you pay for.
    As for books, well...before posting such badly uninformed articles as this perhaps Mr Masnick should try being in the publishing industry for a while. The average publisher used to get paid 50% of retail for books. This was the paradigm for more than a hundred years. The retailer made 50%. When the publisher was paid 50%, books were cheaper because both the publisher and the retailer were making a fair share. Since Amazon came on the scene as a "retailer" they took that 50% margin and slashed into their share by deep discounting to the consumer. They were able to do this because they had no stores and barely any overhead. They didn't inventory anything and only bought what they sold. Good for them. So instead of making 50%, like all their retail competitors, they figured they could make 10% or 5% and crush their competition. Since they didn't hold inventory they could sell at zero margin to put their competition under. So they did this very effectively. We've gone from 35,000 bookstores to less than 3,000 in the last five years. Part of this "wipe em out" strategy was to sell used books alongside the new books and simply play library. The publisher and author get nothing for the sale of a used book. So they assaulted their retail competition and both new and used vendors dropped like flies. Then they went after the distributors by demanding higher margins. The distributors responded by cutting into the publishers' (and therefore the authors') cut. Next Amazon said "sell to us directly". So they tried to kill the wholesalers and distributors. Which they are now doing very effectively. Next they said to the authors, "we'll be your publisher". Just upload your ebook here and we'll only take 70% of the money. At that point some publishers fought back because many of them OWNED the intellectual property (i.e. they BOUGHT and PAID for it)and so they went and cut a deal with Apple who said they'd provide the same service but only take 30%.

    Many publishers BOUGHT the IP from the authors. They paid good money for it. They OWN it. Do you OWN something Mr Masnick? Did you ever buy something? When was the last time someone told you that you have no right to sell what you OWN for the price you set? If you price it too high. No one buys it. But it's yours to do what you want with it. No one is entitled to tell you to sell your property for less than it is worth to you.
    Which brings us to ebooks. As a publisher my gross margins on my property have had 28% skimmed off the top by Amazon's predatory practices in the last five years. I used to get 45-50% of the retail price. That dropped to 36% and then just last week Amazon decided to TAKE another 3% of my share for "marketing". That's 3% off 36% which leaves me 33%. So on a $10 book I now get $3.30. Out of that I pay the author, the printer, the editor, layout person, accountant, fact checker, lawyer (yes you have to pay the lawyer unless you want contracts that are useless) sales person, photo rights, marketer, foreign rights agents, etc etc. Yeah I'm REALLY getting rich. (Notice that only ONE of those things listed here involves the actual paper book). If Mr Masnick can point to any of the jobs listed above and explain how a GOOD publisher is supposed to function without them I'd love to hear it. I'm sure GM could save money by not putting brakes on their cars too. Gotta get rid of that Bloat, you know...

    As if this isn't bad enough, Amazon having been bullied into matching Apple's more generous offer on ebooks, extremely reluctantly changed their share from 70% to 30% of the pie, but ONLY if you sell the book for less than $10. So if you spent 20 years writing down how you figured out the cure for cancer, tough. It's worth the same as a six page hamburger recipe.

    When are people like Mr Masnick going to realize that PUBLISHING is not PRINTING. Publishing is about expertise. Like any other industry it is about recognizing something worthwhile and investing in it. Any moron can string a sentence together but that doesn't mean people want to pay money for it. In the case of non-fiction, publishers, bookstore owners, teachers and librarians serve an indispensable function to sort out what is accurate and what isn't. What is new and unique and what isn't. What is plagiarized and what isn't. What is well written and what isn't. It's not just PAPER. The paper only accounts for maybe 10-15% of the cost. Forget the paper. That's like saying a person is just a sack of water and $10 of chemicals. Based on this argument a brand new car should be $2000 because "hey it's just metal and plastic." Or maybe the computer you wrote this lame article with should have only cost $20 because the processor is just melted sand. If you can't recognize the difference between the two meanings of the word VALUE, you have bigger problems than getting stuffed by ebook prices.

    Finally, Amazon recently started discounting ebooks. SO if you are an author and you go it alone and bypass the publisher and the distributor and the wholesaler and go for the big 70% from Amazon. Don't kid yourself into thinking you're getting $7. They have recently started dropping the price, without any consultation with the OWNER of the book, and paying 70% of that lower number. Some people who thought they were getting $7 are now getting paid $2. Amazon is now distributor, library, manufacturer, retailer, licensee and publisher. They are price fixing everything at the low end to drive ALL of their competition out of business. And when I say competition I mean everyone else in the book business except the authors. Meanwhile,they are telling the authors what the price will be on their property while simultaneously depriving them of other places to sell it. There are laws against this, but for some reason the Justice Dept went after the people who were trying to break Amazon's grip. Oh yeah and Amazon have also completely ignored requests to remove pirated ebooks from their site or pay anything to the owner of the text.

    If someone found an unpublished novel by Ernest Hemingway, paid $50K to authenticate it, paid the family $2M to publish it and then spent another $1M marketing it. Who should decide what it is worth? If your answer to this question is "Amazon" then you should walk into your local car dealership and offer them scrap metal price for a brand new Corvette and see how far you get.