Amazon To Hachette And Authors: Here, Let Us Explain Basic Price Elasticity To You

from the lower-price,-make-more-money-dimwits dept

Apparently Amazon's efforts earlier this month to make it abundantly clear that it's fight with Hachette is about helping, not harming authors still didn't quite make it through to authors who seem to reflexively hate Amazon (often for reasons that don't make much sense). So now Amazon has tried to be even more explicit, by taking the time to explain what price elasticity means, and how Amazon's plan would actually make authors more money. They lay it out pretty clearly, especially for those authors who maybe didn't do so well in economics classes:
A key objective is lower e-book prices. Many e-books are being released at $14.99 and even $19.99. That is unjustifiably high for an e-book. With an e-book, there's no printing, no over-printing, no need to forecast, no returns, no lost sales due to out-of-stock, no warehousing costs, no transportation costs, and there is no secondary market -- e-books cannot be resold as used books. E-books can be and should be less expensive.

It's also important to understand that e-books are highly price-elastic. This means that when the price goes up, customers buy much less. We've quantified the price elasticity of e-books from repeated measurements across many titles. For every copy an e-book would sell at $14.99, it would sell 1.74 copies if priced at $9.99. So, for example, if customers would buy 100,000 copies of a particular e-book at $14.99, then customers would buy 174,000 copies of that same e-book at $9.99. Total revenue at $14.99 would be $1,499,000. Total revenue at $9.99 is $1,738,000.

The important thing to note here is that at the lower price, total revenue increases 16%. This is good for all the parties involved:
  • The customer is paying 33% less.
  • The author is getting a royalty check 16% larger and being read by an audience that's 74% larger. And that 74% increase in copies sold makes it much more likely that the title will make it onto the national bestseller lists. (Any author who's trying to get on one of the national bestseller lists should insist to their publisher that their e-book be priced at $9.99 or lower.)
  • Likewise, the higher total revenue generated at $9.99 is also good for the publisher and the retailer. At $9.99, even though the customer is paying less, the total pie is bigger and there is more to share amongst the parties.
Keep in mind that books don't just compete against books. Books compete against mobile games, television, movies, Facebook, blogs, free news sites and more. If we want a healthy reading culture, we have to work hard to be sure books actually are competitive against these other media types, and a big part of that is working hard to make books less expensive.

So, at $9.99, the total pie is bigger - how does Amazon propose to share that revenue pie? We believe 35% should go to the author, 35% to the publisher and 30% to Amazon. Is 30% reasonable? Yes. In fact, the 30% share of total revenue is what Hachette forced us to take in 2010 when they illegally colluded with their competitors to raise e-book prices. We had no problem with the 30% -- we did have a big problem with the price increases.
Amazon then goes one step further, driving a real wedge between Hachette and authors with the following paragraph:
One more note on our proposal for how the total revenue should be shared. While we believe 35% should go to the author and 35% to Hachette, the way this would actually work is that we would send 70% of the total revenue to Hachette, and they would decide how much to share with the author. We believe Hachette is sharing too small a portion with the author today, but ultimately that is not our call.
Are there legitimate concerns that some may have about Amazon's position in the marketplace? Absolutely. But it's fight with Hachette does not seem to be about that, but rather about setting up a deal that actually does make everyone better off. It appears that Hachette has been fighting that, in this ridiculous belief that ebooks have to be priced higher -- and that it should get to keep more and more of the money.

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  1.  
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    Ninja (profile), Jul 30th, 2014 @ 4:09am

    Somebody has to teach the authors that aren't dumb to self-publish. The faster the traditional publishers die the better. The ones that ENABLE easy publishing will still be sought by the smart authors.

     

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    That One Guy (profile), Jul 30th, 2014 @ 4:14am

    Some extra numbers regarding lower price points

    While Amazon notes that the increase in sales between 14.99 and 9.99 is significant, and actually earns the author more when priced lower, a year or so ago Smashwords, another ebook seller, did their own study, and found that the real sweet spot is in the 3-3.99 range, which, according to their data, sells at a rate of 4.3 times more than a book priced at $10(funnily enough the 2-2.99 range only sells at 4.1x comparatively).

    Assuming that figure holds up in both indie, and 'professional' ebook markets, if the authors really wanted to rake in the cash, and increase their audience size, they'd be pushing the publishers to slash their (currently insane) prices even lower.

    Source:
    http://blog.smashwords.com/2013/05/new-smashwords-survey-helps-authors.html

     

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    PaulT (profile), Jul 30th, 2014 @ 5:47am

    "With an e-book, there's no printing, no over-printing, no need to forecast, no returns, no lost sales due to out-of-stock, no warehousing costs, no transportation costs, and there is no secondary market -- e-books cannot be resold as used books. E-books can be and should be less expensive."

    B..b..b...but whenever I say exactly the same thing the trolls tell me the costs are justified because someone has to reformat the first copy!

    Glad to see that someone with direct experience in the industry outside of simply being a consumer (like myself) is able to validate what I have always presumed.

    "In fact, the 30% share of total revenue is what Hachette forced us to take in 2010 when they illegally colluded with their competitors to raise e-book prices."

    Nice dig. It's obvious that someone at Amazon is getting annoyed, hopefully this will end well.

     

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    PaulT (profile), Jul 30th, 2014 @ 5:48am

    Re:

    "Somebody has to teach the authors that aren't dumb to self-publish."

    Did you mean *not* to self-publish? I assume so from the content of the rest of your comment.

     

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  5.  
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    vegetaman (profile), Jul 30th, 2014 @ 5:49am

    Re: Some extra numbers regarding lower price points

    I can believe the $3 to $3.99 number. I never even bought an e-book until I found one in that price range, and I have only bought ones in that range or lower ever since.

     

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    Jeff Green (profile), Jul 30th, 2014 @ 5:54am

    Re: Re:

    someone has to teach the authors to self publish is what he said. The "that aren't dumb" means there's no point trying to teach the dumb ones!

     

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  7.  
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    That One Guy (profile), Jul 30th, 2014 @ 6:05am

    Re: Re: Some extra numbers regarding lower price points

    I've picked up some ebooks priced higher, though they have to really stand out for me to consider it, whereas 3.99 and lower I'm much more willing to take a risk on, and hence have picked up a lot more than I otherwise might have, because even if it turns out not to be that great, at worst I'm out a few bucks.

     

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    TheResidentSkeptic (profile), Jul 30th, 2014 @ 6:09am

    Still missing data here..

    need to know what the numbers from the paper-copy side are... somehow, I suspect that the reality is that it is bookstore 30%, publisher 69.5%, author .5% (after recoup of advance, of course...)

    So, this new deal would be totally unacceptable to the publishers. Which is why they are fighting it so hard.

     

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  9.  
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    Anonymous Coward, Jul 30th, 2014 @ 6:13am

    I think it might help a lot if Amazon would send each author a statement of how many books were sold each month and how much was sent to Hachette each month for their book sales.
    Each author would then be pounding at their publisher's door for their check, or at least reading the fine print more carefully next time.
    Accompany that with a chart that shows what the revenue change was for similar books that changed prices, both up and down.
    Information in the right hands can be a powerful weapon.

     

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  10.  
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    That One Guy (profile), Jul 30th, 2014 @ 6:13am

    Re:

    and there is no secondary market -- e-books cannot be resold as used books. E-books can be and should be less expensive."

    That section really needs to get more attention, as if an ebook seller is going to demand that you cannot resell an ebook once you no longer want it, then automatically the value of it drops, as it's impossible to recoup any money from it, and as such it's only fair that the price drops to reflect this.

    Nice dig. It's obvious that someone at Amazon is getting annoyed, hopefully this will end well.

    Yeah, that was a pretty blatant attack there, pointing out that Hachette has been caught being dodgy before, so they might not be as pristine as they're undoubtedly trying to paint themselves as.

    Assuming Hachette is still giving Amazon the silent treatment, in the hopes that Amazon will crack first, I can totally understand why Amazon might be losing patience, so it's had to blame them for that.

     

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    Sheogorath (profile), Jul 30th, 2014 @ 6:15am

    Re:

    B..b..b...but whenever I say exactly the same thing the trolls tell me the costs are justified because someone has to reformat the first copy!

    After scanning and OCR, someone has to sit and go through the book to correct any errors introduced during the OCR process. That can take up to a week. Of course, the way books are published now, that's something someone has to do anyway for the print edition. Basically, once those wages have been paid through the sale of the print edition, everything that comes in is pure profit.
    BTW, I'm saying this to you because you're not as annoying as a troll.

     

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  12.  
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    Anon, Jul 30th, 2014 @ 6:17am

    The problem is that many bestseller lists do not combine paper and ebook sales. That's why you often see ebook released some time after the paper release.

    Another problem is that retail chains often demand that ebooks are sold at the same price as paper or they'll refuse to stock the book which scares publishers. Ebooks sold at 50% price of paper are after all a serious threat to retail store revenue.

    Both of these problems are caused by legacy players; not the artists themselves. In the following link fantasy author Brandon Sanderson explains why he decided to give away ebook copies of one of his novels.
    http://brandonsanderson.com/books/warbreaker/warbreaker/

     

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    Anonymous Coward, Jul 30th, 2014 @ 6:29am

    Re: Re:

    you assume the book needs to be scanned to begin with. What exactly is the source format for mass printing? PDF is the answer in almost all cases...

     

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    Ninja (profile), Jul 30th, 2014 @ 6:33am

    Re: Re: Re:

    Bingo! Bad English probably. I wrote thinking how those guys standing against Amazon in this case are too dumb to understand the concept.

     

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    Anonymous Coward, Jul 30th, 2014 @ 6:35am

    Re: Re:

    After scanning and OCR, someone has to sit and go through the book to correct any errors introduced during the OCR process.

    Why, would they need to scan, OCR and correct any book published in the last several decades, the publisher will have it in a digital format, either as provided by the author or or as supplied to the printer.

     

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  16.  
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    Ninja (profile), Jul 30th, 2014 @ 6:35am

    Re: Some extra numbers regarding lower price points

    I would totally buy shitloads of e-books for that price. I'd still pirate the books I already have the physical version though.

     

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  17.  
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    Donglebert The Needlessly Unready, Jul 30th, 2014 @ 6:35am

    Re: Re:

    "After scanning and OCR"...

    presuming the original text wasn't typed on a computer. :)

     

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    Anonymous Coward, Jul 30th, 2014 @ 6:36am

    Re: Re:

    "After scanning and OCR.."

    How many authors do not type their books on a PC these days? I would say an extreme minority.

     

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  19.  
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    Andrew Norton (profile), Jul 30th, 2014 @ 6:37am

    Re: Re:

    Heh, ah so 20-years ago.

    Wife used to work at a book pre-press company (she was the graphic artist) and they tend to use InDesign for making books these days. She did start off with film production and suchlike for both newspapers and magazines.

    Guess what makes handy dandy ebook files? InDesign.

     

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  20.  
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    Anonymous Coward, Jul 30th, 2014 @ 6:37am

    Re: Still missing data here..

    If you read the article you would see that Amazon in fact give the 70% to the publisher and the publisher is free to do what they will with it.

     

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  21.  
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    Ninja (profile), Jul 30th, 2014 @ 6:38am

    Re: Re:

    I wonder. Maybe that's the reason I find the 3-4 bucks a fair price. It seems like a rental or something because you don't have the "original" (the physical book) and you don't lose too much money if it's bad (worked like that for DVDs a while back, I'd rent some and eventually buy the best if I hadn't already seen on the cinemas).

    I downloaded 2 Game of Thrones books and bought the physical ones afterwards. Because I wanted to have the "originals".

     

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  22.  
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    Anonymous Coward, Jul 30th, 2014 @ 6:40am

    Re: Some extra numbers regarding lower price points

    Some do, but they don't have publishers, they're self pub'd on amazon. christopher g nuttall for example, he's been cranking out a ton of military sci fi the last few years, kindle editions are always 3 or 4 dollars. not unconnected, he's one of the few authors i don't hesitate to grab a new book for real dollars instead of the usual sources..

     

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    Whatever (profile), Jul 30th, 2014 @ 6:41am

    Great arguments

    I give Amazon credit, their arguments are good and solid on first glance, and the numbers look amazing.

    However, they do miss one issue, which is the question of potential market size. That is to say that for every book, there are only so many people who would be interested in it, a non-specific but certainly finite number of people who will part with money to purchase the product at all.

    So in their example of going from 100,000 to 174,000 sales, they are assuming that there exists a market that is 75% larger than the initial market. That may be true for some titles, but perhaps not for others. So not all authors would magically see 75% more sales.

    Also, they tend to forget that the cost related to the transaction remain generally the same. Cutting the price of the ebook changes the numbers all down the line when it comes to the ratio of expenses to income. If you are operating only on percentage, that is fine. But certain costs related to the transaction (accounting, tracking, and all those other back office things) are pretty much a constant. Lowering the price takes the biggest part of the profit right off the top, it rarely changes the costs.

    If those costs are high enough, they could make that potential 75% increase much less enjoyable - except for Amazon of course, who would have more transactions and more cash flow.

    e-books cannot be resold as used books

    Surprised that nobody has jumped all over this. Everything in the law right now points to the concept that E-books are likely to be subject to first sale rights, which means that yes, they will at some point be able to be resold.

    That will be an even bigger issue in the long run, because e-books have no wear and tear, they don't get dog eared, they don't get wet in a leaky backpack, they don't gather dust or dry out. An e-book is eternally fresh and it's resale value would remain a constant, and would certainly create negative pricing pressure in the marketplace. If a used e-book is exactly the same as a new one, there is no reason to buy a new one.

    So Amazon appears to be making sense, but they also appear to have their finger on the scale of logic a bit, tilting things their way and glossing over some of the more complex issues.

     

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  24.  
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    Ninja (profile), Jul 30th, 2014 @ 6:45am

    Re: Re:

    Hmmm.. It's been decades now since these things started to be edited in computers. Most likely the book has the digital version ready and revised, including with all the layout, fonts and stuff. And even if this is expensive labor (editing and reviewing) I'm fairly sure a months worth of those will be paid with a few thousand copies priced at the 3-4 range the rest being pure profit. If I were Amazon I'd provide a "grace period" in which 100% of the profits would go to the author to pay for these initial costs that are pretty much dependent on how many pages the book has. This could encourage authors to try to reach as many as possible. It could even be some incentive in the form of "you get 100% of the first x thousand dollars considering you sell for less than x amount".

    There's plenty of space to sell shitloads while being fair. Of course you may not have insane profit margins or you won't have super hyper star authors overnight but the pie grows exponentially.

     

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  25.  
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    Anonymous Coward, Jul 30th, 2014 @ 6:50am

    I agree with a lot of stuff techdirt write.
    But I believe you got it wrong with this book issue.

    It seem you forget that customer are as well workers.
    As such we should not always fight for the customer good when it goes heavily against workers well being.
    Just take a second .
    Think about this wonderful job that is librarian and how important they are for the book industry.
    Now compare it to an average amazon worker in warehouse ( plenty of information on working condition there ).

    Do you really think we get a better deal if we pay 30% less for our book at the cost of butchering an entire profession.
    Do you believe that creating more job in amazon(or competitor ) warehouse is beneficial for culture and literature.

     

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  26.  
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    That One Guy (profile), Jul 30th, 2014 @ 6:51am

    Re: Re: Some extra numbers regarding lower price points

    DRM free and offering samples on his own site for people to check and make sure they like his stuff before buying? Nice to see an author who gets it right, will most certainly give him a look.

     

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    Anonymous Coward, Jul 30th, 2014 @ 6:52am

    Re:

    What.

     

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  28.  
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    That One Guy (profile), Jul 30th, 2014 @ 6:56am

    Re:

    If it means more books read, and more books written as a result? Yes.

    'Butchering an entire profession' is just a titch overblown as well, libraries aren't going anywhere in the foreseeable future, as even with ebooks becoming more and more common, there are still plenty of people who prefer a solid paperback for their reading, for any number of reasons.

     

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  29.  
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    Ninja (profile), Jul 30th, 2014 @ 6:58am

    Re: Great arguments

    So not all authors would magically see 75% more sales.

    Too bad. Some authors don't write really good stuff. And if they are niche they can actually charge more for it. However we are talking about a Publisher forcing a price tag to all authors.

    Also, they tend to forget that the cost related to the transaction remain generally the same.... But certain costs related to the transaction (accounting, tracking, and all those other back office things) are pretty much a constant.

    Yeah, last time I checked with my friend that owns a shop Visa charged about 0.4% to 4% of the total transaction. As for the administrative costs that's where Amazon share kicks in. I'm inclined to think they can lower that number too. In fact the goddamn publisher can greatly lower their margin too depending on the strategy adopted (ie: marketing campaigns and stuff like that).

    Everything in the law right now points to the concept that E-books are likely to be subject to first sale rights, which means that yes, they will at some point be able to be resold.

    Right now they cannot be resold. So your point is simply invalid. And if it's clearly sold as a copy that cannot be distributed or resold but with reasonable price tags it seems all good. You don't resell phone apps generally. Or in-app transactions.

    An e-book is eternally fresh and it's resale value would remain a constant... If a used e-book is exactly the same as a new one, there is no reason to buy a new one.

    That's the main issue with file sharing. Why would you buy something that's available for free? Ease of access is one insanely determinant factor. The will to support the artist is another (I bought Minecraft just because I support Notch's attitude despite the fact I don't like the game).


    So Amazon appears to be making sense, but they also appear to have their finger on the scale of logic a bit, tilting things their way and glossing over some of the more complex issues.


    Actually you are the one doing it. Glossing things that are clear with some dark ink.

     

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  30.  
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    PaulT (profile), Jul 30th, 2014 @ 6:58am

    Re: Re:

    "After scanning and OCR"

    Aren't the original texts provided digitally nowadays? If not, wouldn't the editor need to have gone through this process already to proof and edit the text before submission to the printers? Don't printers use digital files? Why would there be an additional cost in preparing the ebook compared to the print version if the same master text is used apart from the formatting? If it's not the same, why not?

    These are the questions I ask constantly, and never get anything other than vague replies and people pretending I must be a pirate because I won't pay hardcover prices for an ebook.

    "Of course, the way books are published now, that's something someone has to do anyway for the print edition."

    So, from that, I assume you're suggesting that any work will need to be done equally regardless of whether the master copy is produced for print or ebook. Why, then, are the obvious savings as listed by Amazon not passed on to the consumer?

    "BTW, I'm saying this to you because you're not as annoying as a troll."

    I appreciate that. I don't troll - I think it';s a pathetic waste of time and look down on those who do it. I ask these questions honestly, as a technically-minded consumer. If there are justifications for any of the higher costs, I'm glad to hear them, but to my ears they usually sound like excuses not to pass on production and distribution savings to the end consumer.

     

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  31.  
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    Ninja (profile), Jul 30th, 2014 @ 7:01am

    Re: Re:

    And libraries are a quiet place where you can read, study etc along with being a source of material. I'd say that even if everything goes digital they'll still hold their thrones. It's just that the librarian will actually assist you in finding the electronic files you want that will be stored locally for ease of access and speed. And they'll shift towards providing a better service (the space) instead of just having the physical content.

     

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  32.  
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    Andrew Norton (profile), Jul 30th, 2014 @ 7:05am

    Re: Re: Re:

    Takes about a day for prepress checking and preflighting a book.

    When I did my book (Techdirt book club book for August 2012) it was my first attempt at doing an ebook and took me 2 days to create and format it into 6 different fileformats, which I didn't consider to be too bad for my first attempt. Professionals can do it a lot quicker.

     

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  33.  
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    PaulT (profile), Jul 30th, 2014 @ 7:08am

    Re: Great arguments

    Oh boy, here's the daily dose of faulty arguments, half-truth and pompous proclamations in the place of honest argument. Let's hear it, then.

    "That is to say that for every book, there are only so many people who would be interested in it, a non-specific but certainly finite number of people who will part with money to purchase the product at all."

    ...and a higher number of people who will pay for it at $5 or $10 compared to those who will pay $20. Funny, you didn't address that point, only argued sematics based on numbers you pulled from your nether regions again. What's the justification for the higher prices?

    "Also, they tend to forget that the cost related to the transaction remain generally the same."

    Citation needed. Which transaction costs are you referring to, considering that the lower production and distribution costs are already covered by Amazon's statement?

    "e-books cannot be resold as used books"

    "they will at some point be able to be resold. "

    So, you reject this point because in your imagination what's not possible now will be available in the future. Any evidence for this? Specifically of how they will succeed where attempts to do similar things for music are failing (http://www.nytimes.com/2013/04/02/business/media/redigi-loses-suit-over-reselling-of-digital-music. html?_r=0)

    "they also appear to have their finger on the scale of logic"

    Whereas you're still trying to work out where it is.

    "glossing over some of the more complex issues"

    Wow, the lack of self-awareness is strong. Do you want to address the actual issues this time, or are you going to whine because I might have called you a funny name while pointing out your fallacies and half-baked simplifications of the issues at hand like you did yesterday?

     

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  34.  
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    PaulT (profile), Jul 30th, 2014 @ 7:10am

    Re:

    I hope you're not a writer for a living.

    What do Amazon warehouse conditions have to do with the discussion of ebooks in the article? What do warehouses have to do with libraries?

     

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    That One Guy (profile), Jul 30th, 2014 @ 7:13am

    Re: Great arguments

    So in their example of going from 100,000 to 174,000 sales, they are assuming that there exists a market that is 75% larger than the initial market. That may be true for some titles, but perhaps not for others. So not all authors would magically see 75% more sales.

    It's called the market in general, and as Amazon's numbers show, it doesn't really matter what size is it, books priced lower sell more, significantly so, and are therefor more profitable for everyone involved.

    Lowering the price takes the biggest part of the profit right off the top, it rarely changes the costs.

    ... what? Whether they sell 10 or 100, the difference in 'transaction' costs, when it comes to ebooks is essentially the same, which is to say negligible. Typing out/copy-pasting one number, rather than another, in the accounting sheet takes the same amount of time, and the same amount of cost, whether that number is high or low, so I've no clue what point you're trying to make here.

    Surprised that nobody has jumped all over this. Everything in the law right now points to the concept that E-books are likely to be subject to first sale rights, which means that yes, they will at some point be able to be resold.

    It would, if it were treated as a sale, but the vast majority of digital 'sales'(of any kind) are generally treated as licenses(non-transferable at that), where you are 'sold' nothing more than access to the content, you don't actually own anything beyond that.

     

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  36.  
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    Anonymous Coward, Jul 30th, 2014 @ 7:16am

    Re: Re:

    After scanning and OCR, someone has to sit and go through the book to correct any errors introduced during the OCR process.

    Wait,this was a serious description about how digital books are published in 2014? This wasn't a joke?

     

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  37.  
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    Call me Al, Jul 30th, 2014 @ 7:16am

    Re: Re: Re:

    I kind of think of it that way too. I watch a lot and buy little. I watch on streaming and buy what I really like and want a copy of.

     

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  38.  
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    Anonymous Coward, Jul 30th, 2014 @ 7:27am

    Re: Re: Some extra numbers regarding lower price points

    Agreed. I have never, ever spent more than $3 on an e-book.

    The prices the publishers want aren't excessive, they're obscene.

     

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    Oleg, Jul 30th, 2014 @ 7:29am

    Re:

    "Think about this wonderful job that is librarian and how important they are for the book industry.
    Now compare it to an average amazon worker in warehouse ( plenty of information on working condition there )."


    I'm not sure if you are trying to be sarcastical or not.

    "Do you really think we get a better deal if we pay 30% less for our book at the cost of butchering an entire profession.
    Do you believe that creating more job in amazon(or competitor ) warehouse is beneficial for culture and literature."


    I guess you would've also tried to stop progress to save the silesian weavers. You really think we would've been better off with child labour, bad expensive clothing and without industrialization just to protect one profession that can't adopt to new circumstances?

    We lose professions all the time and we gain new ones instead. You mention Amazon Warehouse workers, well what about the Software Developers for those e-Book readers for example, you want that profession to disappear instead?

    You can't protect whats not willing or able to adapt - and personally I think librarians aren't really in any danger here.

     

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    Michael Becker (profile), Jul 30th, 2014 @ 7:30am

    Re: Re:

    Whats interesting about this is how little editing is clearly done to most ebooks. Nearly every ebook I've bought over the years has quite a number of formatting errors, making it painfully obvious that they are skimping out on paying for that part of the editing process. So in theory I agree that someone has to be paid for that part of the process, in practice they aren't doing that part of the process anyway.

     

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    Anonymous Coward, Jul 30th, 2014 @ 7:30am

    Re:

    Did you even read the part in the story about how at lower prices authors make MORE money?

    Again, when I don't by an e-book because the prices are ridiculously high, the authors in question don't make a single cent!

     

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    Anonymous Coward, Jul 30th, 2014 @ 7:35am

    Re: Great arguments

    What would be far more relevant is the 30 % Amazon will take. That is a pretty steep transaction fee to take. 10-20 % sounds acceptable, but taking 30 % of the income just for letting it in your store is quite a high price.

    When that is said, the tracking should be 100 % automatic and the paperwork should also be pretty trivial to automate further than if you have to gather paper-data from stores etc. Your logic here seems even more shallow than the primary point you claim is so. It is not that these types of costs disappear, but they can also be reduced if you are clever enough to use electronic data treatment as opposed to paper! As for e-books vs. normal books, they are apples and oranges. Resale is a tricky subject on e-books and it depends on the device used and the DRM used if resale is possible not to mention legal.

     

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    Chris-Mouse (profile), Jul 30th, 2014 @ 7:39am

    Re: Great arguments

    However, they do miss one issue, which is the question of potential market size. That is to say that for every book, there are only so many people who would be interested in it, a non-specific but certainly finite number of people who will part with money to purchase the product at all.
    Amazon hasn't missed that at all. That portion of the population who wouldn't buy the book at any price are simply not part of the potential market, for any book, at any price, and in any format. The potential market is the rest of the population who might buy the book. Amazon has shown, with the facts to back it up, that the actual market varies with the price of the book, and has shown exactly where the point of maximum profit is.
    Lowering the price takes the biggest part of the profit right off the top, it rarely changes the costs.
    You're assuming that the fixed costs are set in part by the number of books sold. They're not. For ebooks, the cost of selling one book is the same as the cost for selling 100 books. If I can drop the price to 1/10th the original price, and sell 100 times as many books, I come out way ahead. The bottom line is that Amazon's pricing results in the book publisher getting MORE money for the same amount of work. There's absolutely no way that can result in less profit.
    Surprised that nobody has jumped all over this. Everything in the law right now points to the concept that E-books are likely to be subject to first sale rights, which means that yes, they will at some point be able to be resold.
    The courts have already said otherwise. See this story. Resale of an electronic document is a violation of copyright, no matter how careful you are to ensure that the original is destroyed after the sale.

     

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    lars626, Jul 30th, 2014 @ 7:43am

    the New Model

    It has been interesting to watch some of the publishers using the new business models. The two I am most familiar with are Baen Books and Tor. They both publish hardcover and paperback in addition to ebooks. The ebooks are priced at $10-$15 if they are available immediately. After first release the price comes down to $5-$8. Seems to be a reasonable plan, pay a bit more to have it quickly.

    Baen also has some of the old classics by Heinlein, Anderson, Zelanzy, and many others. Often at $4.

    The icing on the cake is NO DRM, even on the new stuff.
    Am I buying? Yes. I have also found several new authors that I would not have found otherwise.

     

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    lars626, Jul 30th, 2014 @ 7:48am

    Re: Re: Great arguments

    What percentage does Barnes and Noble get for selling a hardcopy? 10%? I doubt it.

     

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    Karl (profile), Jul 30th, 2014 @ 7:48am

    Re: Re: Some extra numbers regarding lower price points

    I never even bought an e-book until I found one in that price range, and I have only bought ones in that range or lower ever since.

    I have bought more expensive e-books, but they were all textbooks for college courses. Of course, given how much publishers can blackmail students for high prices, even a $50 e-book is a steal in those cases.

    (The real scam is "access code courses," where the publisher sets up coursework online, and students pay for semester-length access codes with the book. Of course, these are non-transferable, so bookstores never buy back these books - and the publishers also eliminate resale values and the used book market.)

     

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    marek, Jul 30th, 2014 @ 7:49am

    Don't assume authors are idiots

    This post effectively works on the premise that Amazon is naturally the author's friend. There is no reason to think that is true, though it may well be true that the interests of some authors align with Amazon some of the time. For the view of an actual thoughtful author, see this post by John Scalzi. You might or might not agree with him, but dismissing what he says as an example of reflexive hatred is just silly.

     

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    Anonymous Coward, Jul 30th, 2014 @ 7:51am

    Re: Re:

    Also what warehouses and poorly paid warehouse employees are needed to "store and ship" e-books?

     

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    Karl (profile), Jul 30th, 2014 @ 7:51am

    Re:

    I think it might help a lot if Amazon would send each author a statement of how many books were sold each month and how much was sent to Hachette each month for their book sales.

    In addition to the tons of additional work for Amazon, I'm betting they don't do this because they're contractually obligated not to do so.

     

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    That One Guy (profile), Jul 30th, 2014 @ 7:53am

    Re: Re: Re: Some extra numbers regarding lower price points

    If priced right that could be decent, though by 'right' I'd say 25-30% of book price at most.

     

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    Anonymous Coward, Jul 30th, 2014 @ 7:57am

    Re: Re:

    Librarians have to change. I know newly educated librarians have some very useful skills when it comes to databasing and finding material regardless of the medium and those skills are pretty universally useful.

    So far libraries here are becoming a meeting hall with cultural exchange and a place for teaching people how to use computers, as well as a place everyone can come and use a computer if their own doesn't work. They can also help you to use a search engine properly for finding specific material etc. No, Librarians will do fine in the information society. There may be less need for them at libraries but their skills should be pretty useful in several contexts in the future.

     

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    That One Guy (profile), Jul 30th, 2014 @ 7:59am

    Maybe take your own advice

    'For the view of an actual thoughtful author...'

    '...but dismissing what he says as an example of reflexive hatred is just silly.'


    ... did you really just dismiss one article out of hand, and then suggest another, followed by an admonition against being dismissive regarding something just because you disagree with the one who wrote it?

     

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    John Fenderson (profile), Jul 30th, 2014 @ 8:05am

    Re: Some extra numbers regarding lower price points

    This makes sense to me. At $3, I'll buy an eBook that I only suspect I would enjoy (if I don't, I'm not out that much money). At $15, I'll buy an eBook only when I'm sure I can't do without it.

     

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    Applesauce, Jul 30th, 2014 @ 8:08am

    Re:

    "...I think it might help a lot if Amazon would send each author a statement of how many books were sold each month and how much was sent to Hachette each month for their book sales."

    Except that Amazon's contract with Hachette almost certainly prohibits this.

     

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    Anonymous Coward, Jul 30th, 2014 @ 8:08am

    Re: Maybe take your own advice

    And the link appears to be just to this same article too.

     

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    John Fenderson (profile), Jul 30th, 2014 @ 8:09am

    Re: Still missing data here..

    Your numbers are in line with Amazon's numbers, so I'm not sure why publishers would have a problem. Also, out of the publisher's 69.5%, they have to pay manufacturing, shipping, and storage costs. With eBooks, they don't. The manufacturer could be getting a much smaller cut and still make more money than they did before on a per-book basis.

     

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    marek, Jul 30th, 2014 @ 8:10am

    Re: Maybe take your own advice

    The clue perhaps you overlooked is where I wrote, 'you might or might not agree with him' - I am not being dismissive of either perspective. The original post ascribed opposition to Amazon's position by authors as reflexive hatred. I am not dismissing support for Amazon as reflexive hatred or anything else. I am saying that there is a legitimate and thoughtful perspective not based on hatred which should be heard as part of the debate.

    So if you are interested in the debate, read the post I linked to as well as this one. If not, well then perhaps not.

     

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    Jack, Jul 30th, 2014 @ 8:11am

    PS - not PDF

    No - there is no scanning, no OCR, no editing, no nothing like that to create an E-Book. To print books (paperback and hard cover), they use *Post Script* files - regardless if they author wrote it by hand or on a computer using something like Word. When an E-Book is created, it is created using the SAME Post Script file as the physical printer. There is absolutely no formatting going on since the Post Script file already has the formatting. Releasing an E-Book requires absolutely no work at all.

     

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    marek, Jul 30th, 2014 @ 8:11am

    Re: Re: Maybe take your own advice

     

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    Anonymous Coward, Jul 30th, 2014 @ 8:13am

    Re: Re:

    What they could do however is simply display the number sold at the top of the reviews section of the page.

     

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    John Fenderson (profile), Jul 30th, 2014 @ 8:13am

    Re: Don't assume authors are idiots

    "This post effectively works on the premise that Amazon is naturally the author's friend"

    No it doesn't. Amazon's argument is not friendship, it's that their business model will make both Amazon and the authors more money. That's a purely business argument.

     

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    Ed Allen, Jul 30th, 2014 @ 8:15am

    Re:

    That appears to be the only way past the Publishers' willful refusal to accept reality.

    Sme thing with DRM, they refuse to acknowlege that DRM reduces value to customers and therefore means fewer sales at their offered price.

    A useful experiment would be one dollar with DRM versus $9.99 without.

    Short of authors knowing these economic realities don't expect any changes.

     

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    marek, Jul 30th, 2014 @ 8:17am

    Re: Re: Don't assume authors are idiots

    Fair point - perhaps it would be better to say that the premise is that Amazon's and authors' interests are strongly aligned. In the short to medium term, that is almost certainly true for some authors. It is less clear that that is the case for all authors or if Amazon becomes more of a monopsonist.

     

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    Whatever (profile), Jul 30th, 2014 @ 8:18am

    Re: Re: Great arguments

    Thank you for your personal attacks and insults. Always a pleasure to hear from you, but it would be easier to deal with if you refrained from insulting me. With that in mind, here are your answers, one time, no longer discussion.

    ..and a higher number of people who will pay for it at $5 or $10 compared to those who will pay $20. Funny, you didn't address that point, only argued sematics based on numbers you pulled from your nether regions again. What's the justification for the higher prices?

    The point (that you missed) is that the number of potential buyers is not infinite. We have seen in the past where super low prices can create sales that might not otherwise happen. Amazon's point is great, and certainly they have the experience to back it up, but you have to be a bit innocent to think that a simple price drop will sudden make the overall book market grow 75% out of thin air. It may be that books with lower prices get preferential sales over ones that are not (in similar titles) or they may be cannibalizing print copy sales when they reach a certain pricing point between e-books and hard copy books.

    Understanding that the market is not infinite, and that there is no indication that the total book consumption market grows by 75%, you have to wonder where the sales come from and what the knock on effects are.

    Citation needed. Which transaction costs are you referring to, considering that the lower production and distribution costs are already covered by Amazon's statement?

    I didn't say distribution or production costs, I said transaction costs. The costs to accept the credit card. The costs to process that payment. The costs to account for that payment. The costs to manage refunds, and all that goes with the back office costs of actually retailing something. Again, unless the increase in volume leads to lower costs per transaction, you have to deal with the transaction costs being the same in both.

    Simple number: If the transaction costs are $1 per item and constant per transaction, then the percentage of the transaction that is this cost is higher as you drop the price. Basic stuff really, I am sure you can grasp it.

    you reject this point because in your imagination what's not possible now will be available in the future.

    My point is that Techdirt is a place where there is plenty of discussion of first sale rights, and purchase versus license and those sorts of things. That e-books aren't specifically in a place to be re-sold now does not mean that they will not be in the future.

    For that matter, if you have a kindle with 100 books on it, what stops you from selling the kindle and the books on it today? Transfer the account, and you are off to the races. Bingo, you just sold e-books.

    Amazon's flat "it can't be done" flies in the face of the conventional wisdom around here.

    Whereas you're still trying to work out where it is.

    nice, another personal insult. Could add anything, just needed a dig?

    Wow, the lack of self-awareness is strong. Do you want to address the actual issues this time, or are you going to whine because I might have called you a funny name while pointing out your fallacies and half-baked simplifications of the issues at hand like you did yesterday?

    It's why I generally don't have discussions with you anymore. Personal insults, the inability to move from topic to topic, and most importantly, the inability to grasp an alternate opinion. Look, I am stubborn and opinionated, but I learn and I do accept other points of view. Perhaps if you turned down the personal attacks and started to consider alternate points of view, you might get along better with people.

    As always with your comments, I am done. So you can answer me back and call me a liar and all sorts of names, and I honestly won't care, because you will be talking to yourself.

     

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    Anonymous Coward, Jul 30th, 2014 @ 8:34am

    Re: Re: Re:

    Actually, at least for the publisher I work with, the typesetter can send source text directly from the typeset text so ebook text == pbook text. I'm not sure how much effort it takes to properly format a typesetter-generated RTF file into ePub and mobi and avoid problems with things like small caps and italics disappearing because of font-related problems, but it's a one-time cost.

     

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    jupiterkansas (profile), Jul 30th, 2014 @ 8:41am

    Re: Some extra numbers regarding lower price points

    I'm sure Amazon realizes this, but they know they'll never convince authors and big publishers that $3 is the way to go. They'd just scoff at those "paperback prices" and think everything they publish is better than that.

     

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    John Fenderson (profile), Jul 30th, 2014 @ 8:42am

    Re: Re: Re: Don't assume authors are idiots

    Well, their interests are aligned in the long term as well -- Amazon wants to maximize their revenue selling books, and so do authors. I don't see that changing anytime soon.

    But you do have a point about business arrangements being temporary things. However, that's true of all business arrangements regardless of who they're with, so it's not really a meaningful point in terms of talking about Amazon specifically.

     

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    jupiterkansas (profile), Jul 30th, 2014 @ 8:43am

    Re: Re: Re: Re:

    and that's the opposite of what Hollywood wants you to do.

     

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    Whatever (profile), Jul 30th, 2014 @ 8:45am

    Re: Re: Great arguments

    what? Whether they sell 10 or 100, the difference in 'transaction' costs, when it comes to ebooks is essentially the same, which is to say negligible. Typing out/copy-pasting one number, rather than another, in the accounting sheet takes the same amount of time, and the same amount of cost, whether that number is high or low, so I've no clue what point you're trying to make here.

    If you have $1 of admin costs per transaction, at $10 you have a gross of $9, and at $14 you have a gross of $13. The $1 doesn't change, so it's 10% of the cost in one example, and 7% of the other.

    More importantly, if the e-book transaction at $10 is profitable by $5, the same transaction at $14 is profitable by $9. The costs remain the same, period. The 75% increase in sales would actually mean a similar amount of profits overall:

    100,000 transactions at $9 profit: $900,000
    175,000 transactions at $5 profit: $875,000

    (before Paul flips out, the numbers are out of the air, I am only trying to show relative things. It would be worse if the break even cost was $8 (then you would have $2 and $6, making the higher price significantly more profitable even with the increase in volume) and the advantage would tip towards the lower price if the break even price was somewhat lower (a $3 cost would give you $7 and $11, or 1.1 million at the high price and 1.225 million at the lower price). The actual profit of the situation (not the gross but the net) has much more to do with the break even point on each sale, and not just the volume of sales.

    It would, if it were treated as a sale, but the vast majority of digital 'sales'(of any kind) are generally treated as licenses(non-transferable at that), where you are 'sold' nothing more than access to the content, you don't actually own anything beyond that.

    The funny part is that generally this is my point of view. However, I am wise enough to see that there are legal issues in play here which could change. Shifting the entire business model of e-books to a lower price point today because the books cannot current be resold doesn't mean that the situation could not change tomorrow.

    The right to resell the license is one that will probably be a while back and forth, in the court and in the legislative branch around the world for a while to come. As we move away from print books and shiny plastic disc for digital data and move into e-whatever, consumers will push to obtain more rights to control what they pay for. It's pretty logical to think that there will be pressure to allow for resale of e-goods. Amazon is correct today, but their statement isn't forward looking, and seems even to ignore a potential reality in the not too distant future. At some point, there will be a discussion as to if this stuff is a purchase or a rental.

     

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    Michael, Jul 30th, 2014 @ 8:45am

    Re: Great arguments

    However, they do miss one issue, which is the question of potential market size. That is to say that for every book, there are only so many people who would be interested in it, a non-specific but certainly finite number of people who will part with money to purchase the product at all.

    They took their numbers from a huge dataset of sales and presented averages. So, on average, that is what they could expect to see for an increase in sales. True that it is possible that they are going to run into some market forces outside of the price impacting the market size, but publishers in particular should find these numbers compelling because they are involved in enough books that they are extremely likely to average out.

    As far as the authors - yup, some will do worse, but some will do better. It is unfortunate that the authors have no say in what their publisher is going to charge because they are the ones with the most interest in setting price based on other factors (like a niche market), but that is the reality when you use a publisher.

     

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    Anonymous Coward, Jul 30th, 2014 @ 8:49am

    Re: Re: Re: Great arguments

    "It may be that books with lower prices get preferential sales over ones that are not (in similar titles) or they may be cannibalizing print copy sales when they reach a certain pricing point between e-books and hard copy books."

    So people who buy books will likely buy more books than they would have before and so what if they are cannibalizing hard copy sales? Hard copy sales contribute to a reseller market that they do not profit from and have a higher production and distribution cost.

    "I didn't say distribution or production costs, I said transaction costs. The costs to accept the credit card. The costs to process that payment. The costs to account for that payment. The costs to manage refunds, and all that goes with the back office costs of actually retailing something. Again, unless the increase in volume leads to lower costs per transaction, you have to deal with the transaction costs being the same in both.

    Simple number: If the transaction costs are $1 per item and constant per transaction, then the percentage of the transaction that is this cost is higher as you drop the price. Basic stuff really, I am sure you can grasp it."

    You don't understand how merchant accounts work do you? Merchant accounts generally charge a flat fee plus a percentage per transaction. The fee and percentage are based on a range of total expected volume for the seller. This is a cost Amazon negotiates for doing all of their business not just e-book sales and with the volume that the do in transactions, the cost of each individual transaction is likely laughably small to the point that it isn't even a factor to consider in the equation.

     

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    Manabi (profile), Jul 30th, 2014 @ 8:51am

    Re: Re: Re:

    Wait,this was a serious description about how digital books are published in 2014? This wasn't a joke?
    I'm pretty sure it's the truth. I see OCR-type errors in eBooks I've bought regularly. One I was reading this week had a line with an I as 1. This applies even to books first published in the last couple of years.

    Then again, eBook formatting/editing is regularly atrocious. I have yet to understand how the publishers can claim it costs them so much money to copy-edit them when, as a reader, it appears no one even spell-checked the damn thing.

     

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    Manabi (profile), Jul 30th, 2014 @ 8:55am

    Re: Re:

    I don't think that'd give you a fair result. If it was a book I was interested in I'd go for it at $1 with DRM, and just strip the DRM off it. I'd pass at $9.99 though, I see too many (nearly all) poorly edited/typeset eBooks and won't pay that much for one. I figure if they can't be bothered to put in the effort to make it a quality eBook, I can't be bothered to spend like it is one either.

     

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    marek, Jul 30th, 2014 @ 9:00am

    Re: Re: Re: Re: Don't assume authors are idiots

    Not exactly - Amazon wants to maximise Amazon's revenue, authors want to maximise authors' revenue. Over time, Amazon also wants to maximise its bargaining power as do authors theirs. None of that is wrong - finding ways of aligning interests is what business is all about. But that's not necessarily the same as saying that their interests are the same.

     

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    Anonymous Coward, Jul 30th, 2014 @ 9:05am

    Bury the Hatchette

    So, is Amazon trying to bury the Hatchette with the authors?

     

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    John Fenderson (profile), Jul 30th, 2014 @ 9:05am

    Re: Re: Re: Re: Re: Don't assume authors are idiots

    Well, yes, I was speaking more in the specific case of book sales. Both want to maximize revenue, so their interests are aligned. Their interests are likely not aligned in other specific areas (even those tangentially related to book sales).

     

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    Anonymous Coward, Jul 30th, 2014 @ 9:13am

    Re: Re: Maybe take your own advice

    His point about cost of production fails to take into account that the goods he's comparing it to are overall very cheap to begin with. When people pay $2 for a drink that costs $.20 to produce, you are arguing over a negligible amount of money even at an extremely high margin.

     

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    PaulT (profile), Jul 30th, 2014 @ 9:14am

    Re: Re: Re: Great arguments

    "Thank you for your personal attacks and insults. "

    No problem. You earn them every time.

    "The point (that you missed) is that the number of potential buyers is not infinite."

    No shit. The number is also smaller when you apply artificially prohibitive prices that's more than most potential customers wish to pay. There's also a large number of people who will never pay, no matter how low the price. However, there's a point where more customers are attracted by lower prices, and where the economies of scale and relative lack of marginal costs actually bring more profit in for everyone.

    That was Amazon's point, but you rejected that outright without discussion while trying to substitute your own made-up scenario for which you provide zero citations or figures. Back up your own arguments, else you will get called out.

    "Again, unless the increase in volume leads to lower costs per transaction, you have to deal with the transaction costs being the same in both."

    But, every other cost, from duplication to distribution is lower. Not only that, but it's AMAZON who have to deal with that cost, not the author or publisher. Thus, it's down to them to deal with - authors and publishers just collect the increase portion that goes to their royalties while Amazon swallow the transaction cost. Is that too hard for you to grasp?

    "My point is that Techdirt is a place where there is plenty of discussion of first sale rights, and purchase versus license and those sorts of things."

    You noticed. So, why do you ignore everything that's discussed in those threads, and substitute something that's been proven wrong in the real world?

    "because you will be talking to yourself"

    Until the next thread, where if you lie and act like a disingenuous asshole, I will note it.

    Sorry, your proclamations don't mean anything to me. Either stop your idiotic behaviour and take part in honest discussion, or face the consequences of what happens when you lie in a public forum.

     

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    Anonymous Coward, Jul 30th, 2014 @ 9:15am

    Re: Re: Maybe take your own advice

    Also ultimately it doesn't really matter if Amazon, Hatchette or the authors even think that the production cost matters, it's whether the consumer thinks the production cost matters that affects the price point that is optimum.

     

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  80.  
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    Anonymous Coward, Jul 30th, 2014 @ 9:17am

    Re: Re: Re: Re: Re: Don't assume authors are idiots

    I have reread your comments a few times and each time, all I can pull from them is that essentially you don't trust Amazon.
    Which I also don't understand.

    From what I read from Amazon, the comments are consistent, factual and not founded in emotional responses. In fact, countering your comments to Amazon, I am inclined to trust Amazon would teat me more consistently and from a solid business perspective.

    I would think that any author would find significant comfort in knowing exactly how their business partner is going to behave, time after time.

     

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  81.  
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    PaulT (profile), Jul 30th, 2014 @ 9:18am

    Re: Re: Re: Great arguments

    "I am wise"

    lol

    The logical knots you're tying yourself into in order to try and have a point are quite funny, though. Maybe if you understood the points raised before trying to poke holes in arguments you haven't even started to grasp, there's be less friction here.

    But - why do you think anyone but Amazon has to pay the transaction fees? If not, why do you have a problem with them running their retail business the way they wish?

    "It's pretty logical to think that there will be pressure to allow for resale of e-goods. "

    Did you look at the provided links as to why that's failed for other media types yet?

    "At some point, there will be a discussion as to if this stuff is a purchase or a rental."

    May I direct you to the last decade of discussions on the subject on the very website?

     

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  82.  
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    Karl (profile), Jul 30th, 2014 @ 9:24am

    Re: Don't assume authors are idiots

    Your link is to this article. But, I did a search for John Scalzi (who I hadn't heard of before), and found this post on his "Whatever" blog:

    Amazon’s Latest Volley

    Having read it, I can certainly dismiss it - because his arguments are wrong. Let's take a look:

    If you entertain the notion that Amazon is just 30% of the market and that publishers have other retailers to consider — and that authors have other income streams than Amazon — then the math falls apart. Amazon’s assumptions don’t include, for example, that publishers and authors might have a legitimate reason for not wanting the gulf between eBook and physical hardcover pricing to be so large that brick and mortar retailers suffer, narrowing the number of venues into which books can sell.

    The plain fact is that most people are moving towards e-books no matter what. Physical sales are going down, because the demand is going down, regardless of e-book prices. On the other hand, those who buy physical copies will likely pay more for them anyway - they're already paying more than they would for an e-book, even if prices remain exactly the same as they are now.

    In other words, the gulf in prices is not what would drive down sales of paper copies. So the only question is how much money authors want to make from the dominant format, meaning e-books. And by Amazon's own data (which is backed up by basic economic principles widely known for many decades), lower prices will result in higher profits.

    Incidentally, Amazon may be only 30% of the book market, but e-books in general have a far, far higher market share than that. In nearly all book categories (and all fiction categories other than graphic novels), e-books have a much larger share of book sales than paper copies. (See e.g. BISG Report – A Few More Ebook Stats.) If Amazon doesn't lower their prices, then Kobo, Sony, Apple, and Barnes & Noble eventually will, for exactly the reasons that Amazon said.

    Amazon’s math of "you will sell 1.74 times as many books at $9.99 than at $14.99" is also suspect, because it appears to come with the ground assumption that books are interchangable units of entertainment, each equally as salable as the next, and that pricing is the only thing consumers react to.

    Except Amazon is not making that assumption. In fact, they say exactly the opposite: "So, for example, if customers would buy 100,000 copies of a particular e-book at $14.99, then customers would buy 174,000 copies of that same e-book at $9.99."

    This is how basic price elasticity works, and basic economics predicts that goods that are less necessities will be more elastic. This has been shown to be true for many, many years. It is in total agreement with data collected across other artistic industries, such as the video game industry.

    This is where many people decide to opine that the cost of eBooks should reflect the cost of production in some way that allows them to say that whatever price point they prefer is the naturally correct one. This is where I say: You know what, if you’ve ever paid more than twenty cents for a soda at a fast food restaurant, or have ever bought bottled water at a store, then I feel perfectly justified in considering your cost of production position vis a vis publishing as entirely hypocritical.

    Ironically, this goes against his point. The production costs associated with the fountain sodas or bottled water are much higher than they are for e-books. The costs of the products themselves are much higher - both for fixed costs (factories, land, bottling machinery) and per-unit costs (shipping, labor, packaging, etc). And people pay for these things because they are convenience; and unlike convenience on the Internet (which is essentially free), that convenience also has higher costs (store rents, labor costs, etc). Yet people pay far, far less for a soda at a fast food restaurant, or for bottled water at a store.

    Unless he's ever paid $14.99 for a soda at a fast food restaurant, or more than $9.99 for a bottle of water at a store, then I feel perfectly justified in considering his cost of production position vis a vis publishing as entirely hypocritical.

    I’ve said this before and I’ll say it again: I think it’s very likely that if $9.99 becomes the upper bound for pricing on eBooks, then you are going to find $9.99 becomes the standard price for eBooks, period, because publishers who lose money up at the top of the pricing scale will need to recoup that money somewhere else, and the bottom of the pricing scale is a fine place to do it.

    First: if he'd have paid attention, he would have noticed that publishers would make money "up at the top of the pricing scale." So his whole assumption is invalid.

    Second: publishers that price books at "the bottom of the pricing scale" are doing so precisely because the bottom is where they make the most money regardless. If publishers could make more money by raising prices at "the bottom," they would have done so already. So that argument is also invalid.

    Third: Amazon explicitly said that they don't think $9.99 should be the upper bound. From their forum announcement: "Is it Amazon's position that all e-books should be $9.99 or less? No, we accept that there will be legitimate reasons for a small number of specialized titles to be above $9.99."

    I think Amazon taking a moment to opine that authors should get 35% of net revenues from publishers for their eBooks is a nice bit of trying to rally authors to their point of view by drawing their attention away from Amazon’s attempt to standardize all eBook pricing at a price point that benefits Amazon’s business goals first and authors secondarily, if at all.

    Or, it could be Amazon drawing attention to the fact that authors blame Amazon for low payouts, while the actual reason is that the publishers keep the money that Amazon gives them. (This is essentially how it works in the music biz.)

    And it's really hard to argue that higher sales don't benefit Amazon and authors equally, if both make their money as a share of the income (which is the case). If you earn 35% of a hundred thousand in e-book sales, then it makes no difference if you get a hundred thousand from 10,000 sales at $10, or from 100,000 sales at $1. So, if the price elasticity benefits Amazon, it benefits authors as well.

    The other type of revenue sharing is a flat per-book fee, like the royalty rates in streaming music. But if that's the case, then authors would benefit from price elasticity more than Amazon itself would.

    Either way, higher sales due to price elasticity benefit authors at least as much as it benefits Amazon.

    I will grant you this: his position certainly isn't "an example of reflexive hatred." In his other posts, he's made it clear that he works with Amazon, and doesn't dislike them in particular. It's simply an example of being ignorant of basic economics, which unfortunately seems to be endemic to a lot of artists.

     

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    Ed Allen, Jul 30th, 2014 @ 9:26am

    Re: Re: Great arguments

    "That's the main issue with file sharing. Why would you buy something that's available for free?"

    That can be answered with, "Why would you go to a restaurant when you can cook at home for almost free ?"

    Willingness to pay comes when the price asked is less than the percieved value.

    Getting somebody to percieve your goods favorably is a skill that those depending on Copyright as a crutch
    seem to have forgotten, be they author or publisher.

     

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    Groaker (profile), Jul 30th, 2014 @ 9:28am

    Re: Re:

    Seems a similar argument was once made with regard to "still" plenty of people who prefer a solid [HARDCOVER] for their reading.

    I never thought I would like an ebook, but when it came down to either buying one or making a new bookcase, I made the jump. My wife called me a traitor to books, but she now too has an ebook reader.

    Being able to have thousands of books and documents at my fingers, not having to search for titles that I can't remember where I left, being able to buy a new book at 3am from bed because I can't sleep, and having automatic updates for technical books are only some of the advantages.

     

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  85.  
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    Anonymous Coward, Jul 30th, 2014 @ 9:49am

    Re: Re: Re: Great arguments

    I will destroy the entire premise of your argument thusly:
    Those were real world numbers amazon used, not pulled from a hat.

    That revenue and profit calculation? Real.

    Yours? Made up.

    For every copy an e-book would sell at $14.99, it would sell 1.74 copies if priced at $9.99. So, for example, if customers would buy 100,000 copies of a particular e-book at $14.99, then customers would buy 174,000 copies of that same e-book at $9.99. Total revenue at $14.99 would be $1,499,000. Total revenue at $9.99 is $1,738,000.

    So, *higher total revenue*, which results in 16% bigger take for the author.

    See their numbers? Revenue at 9.99 is $1.7m. Revenue at $14.99 is $1.4m. Those numbers aren't made up. Yours are.

    1.7m in revenue, how amazon slices it (not how you think they slice it) results in higher payouts to the publisher than 1.4m in revenue. You simply do not have a leg to stand on in this argument. Using amazons numbers (which aren't made up) its clear that at lower prices, the author and publisher MAKE MORE.

    End of story.

     

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  86.  
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    Anonymous Coward, Jul 30th, 2014 @ 9:49am

    Re: Re: Re: Great arguments

    If you have $1 of admin costs per transaction, at $10 you have a gross of $9, and at $14 you have a gross of $13. The $1 doesn't change, so it's 10% of the cost in one example, and 7% of the other.

    You are trying to apply an argument that applies to very few books to books where that argument does not apply.

    It can be assumed that Amazon know their own transaction costs when suggesting a price level, and can make a healthy profit on he margin that they propose. As the publisher will be dealing with probably monthly payments from amazon, their transaction costs are fixed regardless of the volume of sales. Therefore the proposal makes sense, especially as Amazon is discussing books aimed at the mass market.

    On the very rare occasion when someone tries to sell a book with a very limited market via Amazon they can still sell at a much higher price.

     

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    wec, Jul 30th, 2014 @ 9:54am

    As to

    100,000 transactions at $9 profit: $900,000
    175,000 transactions at $5 profit: $875,000

    your example is NOT profit it is gross income.
    For it to be profit you have figure distribution, sellers cut, printing costs, etc.

     

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    Ben (profile), Jul 30th, 2014 @ 10:03am

    Re: Re: Don't assume authors are idiots

    No it doesn't. Amazon's argument is not friendship, it's that their business model will make both Amazon and the authors more money.
    Almost. It says that the business model at $9.99 books generates 1.74 times as much total revenue than $14.99 books. After Amazon's take, how much of that gets to authors is up to the publishers, in this case Hachette. The step of the money getting to the authors is much less transparent than one would hope. Hachette could, for example, say that at $14.99 the authors will get paid at one rate, but at $9.99 they'd get paid at a different rate.

     

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    marek, Jul 30th, 2014 @ 10:14am

    Re: Re: Re: Re: Re: Re: Don't assume authors are idiots

    I don't disagree with that: I don't think they are being emotional or irrational, and haven't suggested otherwise. I trust Amazon on lots of things and have been a steady customer for more than fifteen years. But that doesn't have a lot to do with whether what they want to do is intrinsically and necessarily in the interests of authors.

    They are doing exactly what you would expect from a solid business perspective, which is to act in their own interest. To some extent that's bound to align with authors' interests: Amazon needs there to be products in order to sell them. But I don't expect - and can't think of any reason to expect - Amazon to act in the interests of authors beyond that, and do expect that over time Amazon will try to arrange things to maximise its own share of revenue at the expense of authors and publishers.

    Amazon could, to take a different example, run its warehouses, with better paid staff and more stable employment conditions. Not doing so is good for Amazon, less good for the employees concerned. Amazon has the bargaining power, low-wage workers don't. They pay as little as they can, consistent with the effective operation of the warehouses.

    What reason is there to suppose that, over time, they won't want to pay authors as little as they can, consistent with the continued supply of new books? Some - or perhaps many - authors will accept that bargain, but Amazon will still be in the business of extracting as much of the value as they can. Why wouldn't they be?

    And again, since it seems to be confusing people, that's not a moral or emotional judgement, that's just how capitalism works. The emotional reaction is to assume that for some reason Amazon is in business for the good of authors. They have never claimed to be that, and there is no reason to expect them to be (though of course it is true that they have created a distribution channel for authors which has value for them).

     

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    Ben (profile), Jul 30th, 2014 @ 10:16am

    Re:

    Basic economics:

    Fixed costs>: if you make one copy or 100,000 what remains fixed? In the case of "books" in general, that's editing, formatting, artwork, etc.

    Marginal costs: how much does it cost to make (and deliver) one more? For a physical book, the cost of paper, ink, physically printing, and then distribution. For ebooks? $0 (or close enough not to matter).

    Your example would imply a fixed cost of $500,000 for producing the book. Good luck in that universe because it isn't this one.

     

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  91.  
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    Anonymous Coward, Jul 30th, 2014 @ 10:21am

    Re:

    We are discussing eBooks here, and Amazon pays its transaction costs out of its 30%. The publisher transaction costs are the same, dealing with a regular payment from Amazon where their costs are the same regardless of the amount, and producing a regular statement for their Authors, which costs the same regardless of sales. The rest of the publisher and Authors costs are already sunk, and are non recurring, so do not factor into the calculation of increased incom from a lower price. (Hint with eBooks they do not have to produce new copies and transport them to Amazon). 70% of a higher total is an increase in income and profit for the publisher, and the Author.

     

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  92.  
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    Michael, Jul 30th, 2014 @ 10:28am

    Re: Re: Re: Re:

    For quite some time, I worked out of the offices of a publisher that was part of a media company I used to work for. There was no OCR process happening. Anything written in the last couple of decades was digital already.

    I can, however, attest to the lack of ability to press the spell check though. That never made any sense to me.

     

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  93.  
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    Anonymous Coward, Jul 30th, 2014 @ 10:35am

    I have to assume that your argument is hidden somewhere under the catch-all "etc". Why? Because this discussion is about E-BOOKs sold by AMAZON. So the printing costs come to a grand total of 0 (choose any currency you wish, the number will be the same). Distribution is electronic so the cost (including the cost of duplication) is very low, likely a fraction of a cent. Again, these are E-BOOKS. Printing cost? Once more 0. What was your argument again? I seem to have lost it somewhere...

    Even more damning, as several others have pointed out, Amazon is making the sale and proposing giving the publisher 70% of the gross (or at least the pre-tax gross), so Amazon will be absorbing all unit costs. And your argument was... what, again???

     

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  94.  
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    John Fenderson (profile), Jul 30th, 2014 @ 10:40am

    Re: Re: Re: Don't assume authors are idiots

    True, but I was leaving that bit out because it's orthogonal to the point. It's not in Amazon's control that authors have shackled themselves to publishers and are subject to their whims, and not all authors have done so. Unfortunately, there is no blanket term that covers both such arrangements (working through a publisher and not), so I just went with "authors". That some authors split their revenue with publishers is a bit of a different issue.

     

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  95.  
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    Arie, Jul 30th, 2014 @ 10:59am

    Re: Re:

    "Can take up a week"
    Total nonsense for at least 95% of all books, which only contain text and a few images.

    Try this plugin for MS Word: http://toxaris.nl/?page_id=96
    and you're done in 2 hours max.
    What does the plugin do: http://www.toxaris.nl/helpen/

    OCR a book, or use a PDF file and convert it to a MS Word document en run the plugin.

     

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  96.  
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    Anonymous Coward, Jul 30th, 2014 @ 11:05am

    Re: Re: Great arguments

    The courts have already said otherwise. See this story. Resale of an electronic document is a violation of copyright, no matter how careful you are to ensure that the original is destroyed after the sale.


    This is not true everywhere. See this story.

     

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  97.  
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    Anonymous Coward, Jul 30th, 2014 @ 11:22am

    Re: Re: Don't assume authors are idiots

    The plain fact is that most people are moving towards e-books no matter what. ... So the only question is how much money authors want to make from the dominant format, meaning e-books.

    ... "therefore it doesn't matter if you work against print books" seems to be your argument. By the same logic, I should kill you personally "because you're going to die eventually anyway, and you're no particular use to *me* anyway."

    My personal anecdote is that a bookstore is a "not-bad" place to look for new titles, and that a web page is very poor for the same task.

    The production costs associated with the fountain sodas or bottled water are much higher than they are for e-books.

    And the development costs are amortized in individual sales, same as they are in books. Guess what? The development costs of books are proportionally higher, and the volume of sales lower. (How many cokes do you buy? How many copies of "50 shades of gray"?)

    Scalzi: I think it’s very likely that if $9.99 becomes the upper bound for pricing on eBooks, then you are going to find $9.99 becomes the standard price for eBooks, period.

    Karl: ... he would have noticed that publishers would make money "up at the top of the pricing scale."


    If (Volume of books sold) * (price per unit) < (development cost), it's a loss for the publisher, period. And while lower prices often lead to higher volumes, not only is that not guaranteed, there's an upper limit to the number of customers. You do a lot of hand waving saying "it'll be all right" but I'm not seeing citations to numbers drawn from experience.

    "Is it Amazon's position that all e-books should be $9.99 or less? No, we accept that there will be legitimate reasons for a small number of specialized titles to be above $9.99."

    Yes, they are saying that "as a general rule, the upper bound will be $9.99".

    Or, it could be Amazon drawing attention to the fact that authors blame Amazon for low payouts, while the actual reason is that the publishers keep the money that Amazon gives them.

    Interesting that you make this argument along with arguing that lower prices will increase volume. If they're complaining, you'd think it was that they were getting less money, in an absolute sense.


    You call out ignorance of basic economics. But what I see you arguing is theoretical economics, rather than practical applied economics based on existing sales data. Please feel free to disabuse me by citing sales data to the contrary.

    I recall a comment by an author (I thought Lois Bujold, but I can't find the quote now) saying that e-book sales and promotion seemed to work for some people (specifically mentioning Cory Doctorow), but not as well for most authors.

     

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  98.  
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    Anonymous Coward, Jul 30th, 2014 @ 11:24am

    Re: Re:

    Oh, and imagine they etched it in stone in cuneiform script first!

    Do you have any more useless conversion ideas?

     

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    Anonymous Coward, Jul 30th, 2014 @ 11:54am

    Re: Some extra numbers regarding lower price points

    If this factor of 4.3 for $3.99 is valid then an author would earn 99.15% more when compared to a $14.99.

    100,000 units @ $14.99.
    174,000 units @ $9.99.
    748,200 units @ $3.99 (4.3 × 174,000 units sold @ $9.99)

    Turnover -/- Amazon 30% = earnings for publisher and/or author
    @ $14.99: $1,499,000 -/- $499,700 = $1,049,300
    @ $9.99: $1,738,260 -/- $521,478 = $1,216,782
    @ $3.99: $2,985,318 -/- $895,595 = $2,089,723

    Traditional publishing
    Author receives 17.5% royalty (sales price);
    @ $14.99 $262,325 (100%)
    @ $9.99 $304,196 (116%) > increase 15.96%
    @ $3.00 $522,431 (199%) > increase 99.15%

    Publishing company earns (keeps) the rest: 70% -/- royalties payed to author
    @ $14.99 $1,049,300 -/- $262,325 = $ 786,975
    @ $9.99 $1,216,782 -/- $304,196 = $ 912,587
    @ $3.99 $2,089,723 -/- $522,431 = $ 1,567,292

    A traditional publisher receives 3 times more than an author.

     

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  100.  
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    Arie, Jul 30th, 2014 @ 11:56am

    Re: Re: Some extra numbers regarding lower price points

    Note: I wrote the anonymous post above. Pressed the submit button by accident.

     

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  101.  
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    s7, Jul 30th, 2014 @ 11:58am

    Depends on where you live.

    Online Store Can Sell ‘Used’ Ebooks, Court Rules
    http://torrentfreak.com/online-store-can-sell-used-ebooks-court-rules-140723/

    A Dutch marketplace for second hand eBooks is being allowed to continue operating after the Amsterdam Court dismissed complaints from book publishers. The Court ruled that "Tom Kabinet" operates in a legal gray area which requires further investigation. Meanwhile the used eBook business is booming.


    For the time being. :-\

     

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  102.  
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    Nevian Caernarvon, Jul 30th, 2014 @ 12:00pm

    Re:

    You bring up a good point, but it was already discussed in the article. The high prices that we choose to pay for expensive eBooks to to the publisher, not the author.

    In exchange for more (or less!) expensive eBooks, the authors that you care about make... the exact same amount.

    The Librarians that you also mention make... the exact same amount.

    This is one of the rare cases where everyone (with the possible exception of a few Publisher employees) has a better outcome.

     

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  103.  
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    Anonymous Coward, Jul 30th, 2014 @ 12:04pm

    Re: Re: Re: Re: Re: Re: Don't assume authors are idiots

    Their interests are not aligned. You're forgetting that the revenue has to be split between author, publisher, and retailer. All of those parties are in conflict with one another. The author wants to fuck over the publisher and retailer and take 100% of the pie, the publisher wants to fuck over the author and the retailer and take 100% of the pie, and the retailer wants to fuck over the author and publisher and take 100% of the pie. All are parties are in total conflict, complete and total conflict.

     

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    Whatever (profile), Jul 30th, 2014 @ 12:05pm

    Re: Re: Some extra numbers regarding lower price points

    You of course are making the assumption that there is 7.5 times more people out there to buy, which isn't a given fact.

     

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    Whatever (profile), Jul 30th, 2014 @ 12:14pm

    Re: Re: Re: Re: Great arguments

    You don't understand how merchant accounts work do you?

    I have set up merchant accounts for a major retail company. Got it figured out. However, the credit card fees, especially in a larger company like Amazon, are a small part of the deal, and yes, they are a percentage. However, actual accounting, tracking, processing of the orders, and allowance to handle exceptions, refunds, and so on is a pretty constant thing when you look over a larger group of transactions. As a result, there is a pretty consistent cost per transaction on average, and that doesn't vary much with price. Effectively, like it or not, it costs Amazon X per transaction overall, and that doesn't go away.

    It's actually one of the reasons why it has been very hard to start up online payment processing for small payments. It's not the credit card merchant fees that get you, it's all the tracking, accounting, and handling required to make micro payments really work out. It's why most micropayment systems require that users make a single larger pre-payment charge and then go from there, just so that the transaction costs don't wipe them out.

     

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    jdc (profile), Jul 30th, 2014 @ 12:22pm

    Re: Re:

    With modern books, there's no reason at all for OCR and editing of OCR errors. After all, the book is created with a word processor.
    Looking at some publishers.
    Baen Books: "Electronic submissions are strongly preferred."

    Tor Books: They want submissions via email as "should be in something approximating standard manuscript format and be sent as *.doc (not docx), *.rtf, or plain-text attachments."

    Pan MacMillan India: They want book proposals to be emailed. If you don't use email, the following quote applies "Hard copy proposals are not preferred and will not be returned, so please retain a copy."

    Seems to me that electronic copies are the preferred media for new book submissions. After all, it's rather easy to change formats and layouts. And electronic typesetting is the current standard. OCR is just for handling older books that are being republished in the electronic age.

     

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    John Fenderson (profile), Jul 30th, 2014 @ 12:22pm

    Re: Re: Re: Some extra numbers regarding lower price points

    Not a fact, but not a completely unreasonable hypothesis, either.

     

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    MadAsASnake (profile), Jul 30th, 2014 @ 12:29pm

    Re: Re: Re: Great arguments

    The transaction costs are so close to zero, that the word negligible applies (aside from the financials, it's effectively zero). You might be wise to have a look at marginal costing - the best price in these circumstances is quite literally that with the biggest income. All the significant costs are in writing, editing and formatting the book, and there is no additional primary cost whatsoever for each additional copy. Break Even point is a nonsense, every sale is contribution to profits (less a couple of cents for the bank). If maximising income does not break even with near zero marginal cost, you weren't ever going to break even.

     

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    Groaker (profile), Jul 30th, 2014 @ 12:48pm

    One issue that I have not seen mentioned is ego. Many artists, and I include authors in that group, are more driven by ego that actual realized profit. Even if they could make more money selling at a lower price, some will reject the lesser unit compensation because they find it insulting. Having seen the business behavior of a number of artists, I know this to be true.

     

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  110.  
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    Whatever (profile), Jul 30th, 2014 @ 12:48pm

    Re: Re: Re: Re: Great arguments

    I will destroy the entire premise of your argument thusly:
    Those were real world numbers amazon used, not pulled from a hat.

    That revenue and profit calculation? Real.


    Yes, and contrary to what you might think, I AGREE WITH THEM. Straight up, when the ratio of sales increase is higher than the reduction is price, the gross income will increase. DUH!

    That isn't the point.

    The point is twofold: 1, are there in fact that many more consumers for all e-books on a consistent basis, and 2, once you remove the (close to) fixed transaction costs, is the bottom line profit bigger for all parties?

    Amazon answers neither question. If Amazon keeps the 70-30% split, they need to increase sales by the percentage decrease in price just to remain in the same spot (plus e

    Their claim is basic: lower your price, and suddenly 75% more people show up to buy. But where do those people come from? Are readers suddenly buying 75% more books? Or are they buying more of these e-books, and less of other e-books? Did market overall expand 75% as a result of price reductions, or is this just a shift of sales from other titles or other media?

    1.7m in revenue, how amazon slices it (not how you think they slice it) results in higher payouts to the publisher than 1.4m in revenue

    If in fact the sales increase that much. If all e-books move to a lower price point, will that 75% trend continue? Remember, they need a 40% increase in sales just to stay in place. Their 75% number sounds great, but without considering the real causes, it can be very misleading.

    My opinion (and I say this so people like Paul can't get all cranky) is that Amazon has figured that not having to warehouse all these physical books is a godsend to their bottom line, that they can take space currently used for books in their warehouses and use it for other, higher margin / higher ticket items. Moving it all digital would be a true boost for their bottom line - which is currently hurting! So if a price drop in e-books erodes print further, it's very likely much better for Amazon than anyone else.

    Out of curiosity, does anyone have a breakdown on how amazon handles physical books and distribution of revenue? Is Amazon buying for a price (like a normal retailer) and then selling on for a profit? Or are the doing a percentage margin thing?

     

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    PaulT (profile), Jul 30th, 2014 @ 1:03pm

    Re: Re: Don't assume authors are idiots

    "But, I did a search for John Scalzi (who I hadn't heard of before), and found this post on his "Whatever" blog:"

    Hmmm... I hope that isn't the guy I've been arguing with. I have his Old Man's War series and while I haven't read it yet, I'd dread to think that someone so obviously obtuse was responsible for what's apparently a very good sci-fi series.

     

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    PaulT (profile), Jul 30th, 2014 @ 1:07pm

    Re: Re: Re: Re: Re: Great arguments

    "Effectively, like it or not, it costs Amazon X per transaction overall, and that doesn't go away.":

    Per *transaction*. Which isn't per book, it's per purchase. Which, if someone buys multiple items at a time (usually the case, to my knowledge), it's a lot less per item than the particular item you choose to sell. Quite apart from the fact that this only applies to Amazon in these examples, it's amazing that someone with the self-claimed experience you have doesn't know that the processing fee applies to a purchase and not each individual item.

    Another smug proclamation that actually falls apart when you start applying facts and logic.

     

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    PaulT (profile), Jul 30th, 2014 @ 1:12pm

    Re: Re: Re: Re: Re: Great arguments

    "But where do those people come from? "

    The customer base who will pay a reasonable price but not the ass-raping the publisher wishes? Passing traffic attracted by Amazon's deals and other venues that have nothing to do with the author and the publisher?

    "My opinion (and I say this so people like Paul can't get all cranky) is that Amazon has figured that not having to warehouse all these physical books is a godsend to their bottom line,"

    We're talking about ebooks, aren't we? Do you need to drag irrelevant crap into a discussion to make a point every time? Again, want me to stop calling you out on talking a load of guano? Stop talking guano.

    "Is Amazon buying for a price (like a normal retailer) and then selling on for a profit?"

    Why do you believe the digital market needs to work like this, when Amazon can make infinite sales from one copy in inventory, unlike physical sales?

    "Or are the doing a percentage margin thing?"

    If you'd bothered reading the article before pulling shit out of your rear end and smearing it all over your screen, you'd understand the focus of the discussion.

     

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    CK20XX (profile), Jul 30th, 2014 @ 1:22pm

    Re: Great arguments

    Eh... assuming that there's a market cap before you know what it is is just REALLY bad reasoning. You're throwing details into the conversation that aren't relevant. Besides, a market is something you grow and cultivate. It's not like a water tank that has a maximum capacity and cannot possibly hold anymore than that.

    As for e-book resale... that just sounds really impractical and not very relevant to the conversation either. And actually, if ebook reselling does take off, why would you trust a fresh new copy from the publisher less than one that may have been tampered with by some creative individual? I've had enough experience with viruses and malware that I don't think I'd be interested in an ebook resale market unless I'm looking for something that's been discontinued by the publisher.

     

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    nasch (profile), Jul 30th, 2014 @ 1:23pm

    Re: Re: Re: Re: Re: Re: Re: Don't assume authors are idiots

    the retailer wants to fuck over the author and publisher and take 100% of the pie.

    What is Amazon doing to try to increase their percentage of the pie?

     

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    Arie, Jul 30th, 2014 @ 2:13pm

    Re: Re: Re: Some extra numbers regarding lower price points

    Just made a calculation based on the numbers of post 2 from That One Guy.
    Your right on one thing a book with a MSRP $14.99 can not be sold for $3.99 by Amazon or they will make huge losses on every book sold. Lower price points are only possible if the publishers set a lower initial MSRP.

    I'm sure authors are better of with a lower price point for their books than the suggested $14.99 by the big 6 Publishers.
    IMHO, a modest increase between 20-30% for the author should be possible.

     

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    Anonymous Coward, Jul 30th, 2014 @ 2:13pm

    Re: Re: Re: Don't assume authors are idiots

    Amazon has already "cited sales data to the contrary" of every argument you are making.

     

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    Arie, Jul 30th, 2014 @ 2:26pm

    Re: Depends on where you live.

    Yes, the can resell ebooks for now, until a European court ruling.
    Note, they are allowed to resell books to which the publisher added a watermark. And Toms Kabinet adds a second watermark to state that the book has be "tranfered" to another individual.


    This site does not have their checks and balances in order. The also sell a lot of books that are either scans or books with the DRM-removed (Adobe ADEPT).

    I would not be suprised if this site will be shut down because of this illegal bookselling.

     

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    John Fenderson (profile), Jul 30th, 2014 @ 2:27pm

    Re: Re: Re: Re: Re: Re: Re: Don't assume authors are idiots

    You have a very interesting, and very distorted, view of how business works. Outside of a relative few bad actors, businesses aren't actually out to "fuck over" their suppliers, distributors, or retailers at all. They need each other.

     

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    Karl (profile), Jul 30th, 2014 @ 2:29pm

    Re: Re: Re: Don't assume authors are idiots

    ... "therefore it doesn't matter if you work against print books" seems to be your argument. By the same logic, I should kill you personally "because you're going to die eventually anyway, and you're no particular use to *me* anyway."

    Yeah, because choosing to buy an e-book rather than a print book is exactly like murder.

    Idiot.

    The plain fact is that customers - who have every right to choose what to buy and what not to buy - are moving towards e-books, and those that aren't are staying with paper books for reasons other than price. I'm not saying that it doesn't matter if you work against print books; I'm saying that consumers are choosing e-books, and either you accept that they're your market, or you don't deserve to stay in business.

    My personal anecdote is that a bookstore is a "not-bad" place to look for new titles, and that a web page is very poor for the same task.

    Well, then, it doesn't matter how e-books are priced, does it? You're going to the "not-bad" place to look for new titles either way.

    Other consumers may have different tastes, and maybe not enough find having a "not-bad" place to look for new titles doesn't trump the lower market value for e-books. Tough. Your tastes can't dictate the market.

    And the development costs are amortized in individual sales, same as they are in books. Guess what? The development costs of books are proportionally higher, and the volume of sales lower.

    Of course they'll be "proportionately" higher if you price e-books high enough. There will be less demand at that price, therefore a lower volume of sales. That's how price elasticity has always worked.

    If (Volume of books sold) * (price per unit) < (development cost), it's a loss for the publisher, period.

    Right, but if you lower the price, you'll increase the volume, so you'll end up making more money. Again: that's price elasticity. Selling 175,000 e-books at $9.99 each will make you more money than if you sell 100,000 e-books at $14.99.

    If $9.99 is the "high end," it just means that they'll sell many more books at the "high end" than they're selling right now.

    And while lower prices often lead to higher volumes, not only is that not guaranteed, there's an upper limit to the number of customers. You do a lot of hand waving saying "it'll be all right" but I'm not seeing citations to numbers drawn from experience.

    If there weren't an upper limit to the number of customers, then prices would be infinitely elastic. There isn't, so of course there's always going to be a "sweet spot" that maximizes revenue.

    The numbers that Amazon quoted are taken from their own sales records, so those would be "numbers drawn from experience." On the other hand, I've never seen anyone who actually quoted numbers when claiming book prices should be higher. The best they can come up with is "lower prices = less profits," which is simply not true, and never has been in any industry.

    Yes, they are saying that "as a general rule, the upper bound will be $9.99".

    You do know what "upper bound" means, right? It means "maximum." It does not mean "as a general rule." That would be "average" (more precisely, "weighted average" or "expected value").

    Interesting that you make this argument along with arguing that lower prices will increase volume. If they're complaining, you'd think it was that they were getting less money, in an absolute sense.

    It was just a guess. Authors may be getting less money in an absolute sense, but not because of Amazon. (For example, some publishers pay lower royalty rates for e-books than they do for paper books.)

    It could also be that authors are complaining because they buy into the publishers' claims that lowering e-book prices will cannibalize paper-book sales. Well, guess what? Sales of paper books are already being cannibalized, and there's no way to prevent that.

    Or it could be that authors are making the same mistakes you are. They look only at income per copy, see that they're making less per copy on digital sales, and think that they're being ripped off somehow.

    You call out ignorance of basic economics. But what I see you arguing is theoretical economics, rather than practical applied economics based on existing sales data.

    There is no such thing as "theoretical economics," really. It's an applied science, and economic theories are based on empirical sales data. If you want examples, open up any economic textbook and read about them.

    In the e-book space, Amazon has already given its numbers based on their own sales figures: "We've quantified the price elasticity of e-books from repeated measurements across many titles. For every copy an e-book would sell at $14.99, it would sell 1.74 copies if priced at $9.99. So, for example, if customers would buy 100,000 copies of a particular e-book at $14.99, then customers would buy 174,000 copies of that same e-book at $9.99. Total revenue at $14.99 would be $1,499,000. Total revenue at $9.99 is $1,738,000."

    O’Reilly had a similar experience when they released a $25 book as a $5 iPhone app: How E-Books Make (A Lot Of) Cents. There are probably more case studies, if you're not too lazy to Google.

     

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    Anonymous Coward, Jul 30th, 2014 @ 2:38pm

    Re: Re:

    Yea, I'm wondering which warehouse he stores his ebooks in?

     

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    JP Jones (profile), Jul 30th, 2014 @ 2:39pm

    Re:

    One issue that I have not seen mentioned is ego.

    THIS. Very much this. Artists put a lot of their personality and ego into their work (in general). To see that work "devalued", even if it ends up making them more money, makes them feel like their work isn't as valuable.

    People don't really create true art for money. It's the big fallacy in the entire copyright debate; if you took away every monetary incentive to create art it would not stop art from being created. It probably wouldn't affect it all that much, really, you'd just have less people doing it exclusively.

    This is what publishers feed off of. They boost the artists egos, make them feel like their stuff is important, sell it at insane prices beyond what it's worth, and give them a pittance in return. The trick is that they promote the artist's creations, which makes the artist feel like their stuff is worth more. It's like when you make something awesome in Minecraft...nobody is going to pay you for it, but it feels good if someone looks at it and says "Wow, that's neat!"

    From an economic standpoint artists are losing out on publisher deals. But the publishers make them feel like their stuff is valuable (even as they basically steal it). Thus artists keep promoting the publishers and ignore the economics.

    The publishers are a business. They know the same thing as Amazon, and know that they could make higher profits by lowering prices. They also know that will hurt the artists' egos and possibly reveal the ultimate truth...that the publishers aren't necessary. They're playing a long game against another business (Amazon) at the expense of the same people they've been exploiting for years (artists).

    Shockingly, they're still good at exploiting them. This should come as no surprise to anyone, especially not Amazon. Amazon is playing it's own long game...if artists figure out they can drop the publishers and earn way more money by dealing directly with Amazon then Amazon could potentially get a bigger piece of the pie, or at least make themselves extremely attractive to authors who now get the full 70% profit rather than the mysterious X% profits they get now (probably like 10% or less).

    It'll be interesting to see where it goes.

     

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  123.  
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    Anonymous Coward, Jul 30th, 2014 @ 3:34pm

    Re: Re: Re: Re:

    Not only is it a one-time cost, but it's often a one-time cost for an entire set of books that use a specific stylesheet; not only that, but ePub actually supports small caps and italics in the markup, and can embed fonts if that is desired. Ao basically, for the majority of the books, the investment in the source -> ePub can actually be looked at as a byproduct of generating the typesetter's original file; if the typesetter publishes to ePub first, most of the rest of their work is already done for them.

    The only issue I can see here is for books where presentation really matters (image layout, gutter size, block grouping) -- because then you need to generate separate ePub documents for each display size you're publishing to, and get the author's sign-off that the information is still presented in an appropriate way for that size.

    As far as paperback fiction goes, this shouldn't even be an issue.

    One other thing: a few years back, I talked to a number of authors using a number of publishers; in every single case, the author was required to do their edits and layout themselves prior to submitting for publishing, and to submit in X-PDF. If it wasn't laid out exactly how the typesetter wanted it, it would be rejected and the author would have to do the work of fixing the issues. This was a shocker to me at the time, because I had always thought of the publishers as being the ones with the expertise to take the manuscripts, edit them, prepare them for typesetting, and then sending them back to the author for sign-off. But apparently it hasn't worked that way in almost 30 years, despite the publishers still taking the same cut of the profits as they did when they actually did all that work.

     

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    Editor-In-Chief, Jul 30th, 2014 @ 6:35pm

    Re: Re: Re: Re: Re:

    I am currently do a favour for a friend of converting his books from word processing to LaTeX so that he can do self publishing. Editing the works is a part of this process. One of the reasons we have gone to LaTeX is that there are a number of available formats that allow us to choose A4 and A5 as final output sizes and the books will still appear okay. As he has a number of Arabic books as well, these are also undergoing the process.

    Another friend of mine is currently having a legal spat with a publisher over what was supposed to be done by the publisher and what they have actually supplied in their services. At least he has all the documentation to sink the publisher's accusations.

    I have been asked to write a book on a particular subject. I intend to self publish as well after seeing the problems with alternative means.

    David Oliver Graeme Samuel Offenbach

     

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  125.  
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    Editor-In-Chief, Jul 30th, 2014 @ 6:51pm

    Re: Re: Re:

    Our library service is now advertising that it is not a place where you will get "SSSShh". They have children's storytime on Saturday mornings. Setting up the next generation to read.

    Ebooks and videos are available from them. Hard cover and paperbacks, newspapers and magazines are all part of the service. Inter-library loans across the state and even interstate are available.

    They even take suggestions as to what books to buy. The staff are a pleasant lot, trying to be helpful, even on their off days.

    David Oliver Graeme Samuel Offenbach

     

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    That One Guy (profile), Jul 30th, 2014 @ 7:07pm

    Re: Re: Re: Re:

    'Storytime'? Public readings? I hope they've paid out for that, that's a public performance, and requires money to change hands to be legal!

    (I really wish I was joking here, but this actually has been argued in the past by greed driven parasites)

     

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    Editor-In-Chief, Jul 30th, 2014 @ 7:35pm

    Re: Re: Re: Re: Re:

    I don't even think it has even occurred to them. They on occasions have had the actual authors come by and read the book as well.

    As an aside, they also provide and internet access service for free.

    David Oliver Graeme Samuel Offenbach

     

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    That One Guy (profile), Jul 30th, 2014 @ 8:11pm

    Re: Re: Re: Re: Re: Re:

    Understandable, for the vast majority of people, the idea of going after libraries and public storytimes they hold, in an attempt to either shake them down for money, or shut them down, would be completely inconceivable.

    It takes a truly warped and/or money-centric mind for something like that to even begin to sound sane and reasonable.

     

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    MrTroy (profile), Jul 30th, 2014 @ 8:26pm

    Re: Re: Some extra numbers regarding lower price points

    Same here. Most of my first reads of an author are free samples up to $3-4. If I know I like an author I'll spend $7-8 for more, though surprisingly I don't see much priced higher than this that isn't also more than $10.

    My problem now is that my to-be-read list is dozens long, so new books from authors I haven't read have to look like a steal to get my attention at the moment. Which is a pity, because I love supporting starting authors.

     

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    Whatever (profile), Jul 30th, 2014 @ 10:50pm

    Re: Re: Re: Re: Re: Re: Great arguments

    Paul, I agree with you, except again you are incorrectly focusing on individual transactions and not considering the system overall.

    If there is a cost per transaction now, the SAME cost per transaction exists after. Unless the consumer suddenly buys more per transaction (no proof, you fail), then the cost per transaction remains the same.

    Perhaps rather than trying to insult me and call me names, next time you could take a moment to think about things and realize just how much of a fool you are being.

    I will leave it at that, you have proven yourself completely here.

     

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    MrTroy (profile), Jul 30th, 2014 @ 11:00pm

    Re: Re: Re: Don't assume authors are idiots

    Hmmm... I hope that isn't the guy I've been arguing with. I have his Old Man's War series and while I haven't read it yet, I'd dread to think that someone so obviously obtuse was responsible for what's apparently a very good sci-fi series.

    Good authors don't necessarily make good logicians. By all accounts I've seen, Douglas Preston and Richard Russo are quite good authors.

     

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  132.  
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    Anonymous Coward, Jul 30th, 2014 @ 11:38pm

    Re: Re:

    maybe he is a writer, a fantasy writer...

     

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    PaulT (profile), Jul 30th, 2014 @ 11:57pm

    Re: Re: Re: Re: Re: Re: Re: Re: Don't assume authors are idiots

    Daring to do something other than that decreed by the middleman in charge of the copyright, of course.

     

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    PaulT (profile), Jul 31st, 2014 @ 12:07am

    Re:

    "Even if they could make more money selling at a lower price, some will reject the lesser unit compensation because they find it insulting."

    Yeah, I had an argument on here with a self-procalimed author a few years back. He couldn't accept the argument that lowering price could make more money by lowering the price. His argument was along the lines of "my work is worth more than $1.99!". The obvious response of "no, it's worth $1.99 x the number of people paying for it at that price, which may make more money than the $15 price point you want does" was totally lost on him.

    In a way it's understandable - nobody wants to work hard only to find their resulting product in a bargain bin. But, that's probably why many successful authors have agents and managers to help them of the business side of the equation.

     

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    PaulT (profile), Jul 31st, 2014 @ 12:24am

    Re: Re: Re: Re: Re: Re: Re: Great arguments

    "If there is a cost per transaction now, the SAME cost per transaction exists after."

    Christ, you really are deliberately ignoring the points raised, aren't you? Yes, those transaction costs exist, but:

    1. They are costs borne solely by Amazon and Amazon alone. Are we to believe that Amazon have somehow managed to miss one of their major overhead costs, or are we to believe someone who's proven himself to be incapable of honest logical argument time and time again and depends on figures even he admits are made up?

    2. The transaction costs - again these are per *transaction*. Do you honestly think that every customer on Amazon is only buying one item per transaction? Bear in mind that even with 1 click, Amazon usually group separate purchases into a single transaction later on it the day. To save costs, you know the successful business model they've been running for 2 decades but you think you know more about their basic overheads than they do? I could probably find proof if you really need it, but common sense dictates that you're wrong here, and you've proven that you ignore citations if they're not convenient to you, time and time again, so I won't waste time looking unless I really have to.

    3. A company the size of Amazon can not only negotiate lower transaction costs due to their volume of transactions, but can also swallow the overheads completely if they stand to make more money in the long term. Look up things like loss leaders - standard retail practices for decades.

    Of course, none of this explains why Amazon is wrong in any of the points they made. You haven't even bothered addressing them except to acknowledge that they're probably right. Even if Amazon spent 100% of their potential profits on the fees you're obsessed with, that's down to how they run their business, and has nothing to do with the point of the story (Amazon's argument that they can make more money for publishers and authors alike if they were permitted). But, you cannot bring yourself to take part in a debate, let alone an honest one.

    See you in the next thread, where I'll tear apart your idiotic arguments with facts and logic yet again. But, you'll just pretend you're right, and ignore any points because I note how stupid your argument is, right?

     

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    Groaker (profile), Jul 31st, 2014 @ 2:20am

    Re: Re:

    $1.99 is only a bargain bin if others are selling similar material for significantly higher prices. If everybody is selling for $1.99, then that is just the going rate.

    Inflation in the prices of paperbacks has far exceeded the general CPI. In the early '60s, paperbacks went for $0.25, and "Bantam Giants" were $0.35. A paperback is now about $10, which is 40 times the cost while the CPI is up around 10. College text books have startling absolute price increases over that period, but their increases are much more in line with the CPI.

     

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    PaulT (profile), Jul 31st, 2014 @ 2:57am

    Re: Re: Re:

    True, but in this guy's mind he was devaluing his book by selling for anything less than about $15 IIRC, so at least in his mind he didn't see it like that.

    I agree that prices of paperbacks have increase massively, but not knowing the ins and outs of how that's broken down, I can't simply blame the publishers. They're heavy items in bulk, using a lot of raw materials that have to be paid for somehow, as does shipping, etc. They may not be the full cause of the rise in prices, but they're also not paying 60s prices for paper and printing.

    Which, of course, is why publishers can't simply try to apply those same prices to digital media - people aren't stupid enough to believe that the same costs are involved, and expect at least some of the savings to be passed on to them.

     

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    Sheogorath (profile), Jul 31st, 2014 @ 9:00am

    Re: Re: Re:

    Most traditional publishers like authors to send hard copy manuscripts, which then have to be scanned and OCRed.

     

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    Sheogorath (profile), Jul 31st, 2014 @ 9:03am

    Re: Re: Re:

    Or was typed on a computer and subsequently printed out as a hard copy manuscript.

     

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    Sheogorath (profile), Jul 31st, 2014 @ 9:07am

    Re: Re: Re:

    Why, then, are the obvious savings as listed by Amazon not passed on to the consumer?

    Don't ask me, ask the Big Six. They're the ones who colluded to keep ebook prices artificially high.

     

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  141.  
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    Tim McDonald, Jul 31st, 2014 @ 9:16am

    Re: reread the original article

    Amazon is not assuming the sales will change, they did market tests and projected the size of the change. And the other costs you reference are not a constant per sale, they are a cost that will vary only slightly upward as sales increase.

     

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    John Fenderson (profile), Jul 31st, 2014 @ 9:28am

    Re: Re: Re: Re:

    I don't think that's been true for a very long time now. Most guidelines I've seen from traditional publishers stress that they strongly prefer electronic submissions.

     

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  143.  
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    Anonymous Coward, Jul 31st, 2014 @ 12:50pm

    Re:

    but then your books will look and read like shit. and good authors won't get advances to work on projects of meaning as opposed to mainstream fiction. And you won't have good text books let alone text books at all.

     

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    Gaming_Geek (profile), Jul 31st, 2014 @ 4:54pm

    EBook prices

    I personally don't buy as many books as I used to. I take time I used to spend on reading books and use it for other things such as Facebook, movies, music, etc. When I look at books and such now, I tend to look very hard at prices. I tend to buy ebooks only in the 4.99 or less range, because, to me, they should be cheaper. Yes, there is an editing cost (even though most ebooks, even ones from big name authors, have horrible editing jobs) to put the book into the ebook format to use.

    I expect a hardcover to be more expensive as it is a hardcover book. I expect paperbacks to be 5-10 bucks because they are usually 2nd or 3rd prints of the book and cost less to make than a hardcover does.

    Since the ebook only needs to be edited and then copied as needed from a digital source, I see no reason to pay for printing costs and such that don't exist in that format. Thus why I tend to not buy ebooks priced over 5 dollars.

    I know alot of other people who feel the same.

    If the perception people have is wrong, then the big publishing houses need to explain why its wrong.

     

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

  145.  
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    PaulT (profile), Aug 1st, 2014 @ 12:00am

    Re: Re: Re: Re:

    I can understand the desire for a hard copy. I just can't understand why they'd then bother to OCR the document and do the work of manually correcting it when they could have the original data file from the author. Perhaps that's just another indication of how horrifically out of date some of these people are in their mindset.

     

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

  146.  
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    PaulT (profile), Aug 1st, 2014 @ 12:01am

    Re: Re: Re: Re:

    Well, that's the crux of it. As long as they realise that it's the collusion and high prices that lower their sales rather than trying to scapegoat someone/something else, that's their choice. I just don't like the outright lies when they try to deflect blame.

     

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

  147.  
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    PaulT (profile), Aug 1st, 2014 @ 12:15am

    Re: Re:

    Because nobody can possibly do quality work alone, or hire a proofreader and editor privately but then self-publish! It's all or nothing and if someone not hired by a legacy corporation does it, it's going to be bad!

    Yeah, yeah, heard it all before.

     

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

  148.  
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    techflaws (profile), Aug 3rd, 2014 @ 10:24pm

    Re: Re: Re: Re: Great arguments

    THIS!

     

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


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