Amazon/McMillan pricing question

[guessingo]

Amazon buys the books from McMillan for $14.
Sells them for $9.99

How can mcmillan force amazon to sell the books for more. Once amazon buys the books from amazon, can't they price them? Or there some special contract where publishers retain pricing rights?

When walmart purchases from vendors, or any store for that matter, the vendor cannot tell them what to price their items at?

[Peter Ahlstrom]

Macmillan is moving to a different model. This is possible because unlike they do for print books, Amazon does not buy individual electronic books from Macmillan one by one and then sell them. Amazon gets only ONE copy of each electronic book, and Macmillan controls the right to make additional copies of that one file (which must be done in order to sell copies to customers). Amazon has been selling new books too cheaply and old books too expensively (to make up the cheap cost of the new books). Macmillan thinks this is a bad idea and is now exercising its rights to control the circumstances under which copies are made.

[ErikHolmes]

I think the whole thing is about Amazon trying to push their Kindels on everyone. Its the same crap iTunes pulled. They want to sell all ebooks cheaply at 9.99 just like iTunes wanted to sell music for 99 cents each.

Macmillan didn't want to get screwed like the record companies did, so they aren't letting Amazon do it. Amazon acted like a big baby and pulled all of Macmillan's titles from their site, royally screwing good people like L.E. Modesitt.

Now I'm the biggest ebook user you'll ever meet. When a new book came out if I had the option of buying the hardcover or getting the ebook I'd just grab the ebook. Right now I've been buying the hardcovers. Most books I've wanted just aren't on the ebook train yet.

If a lot of people like me are just buying the ebook when a new book comes out for 9.99 instead of getting the twenty dollar hardcover that's a big loss in sales.

[Patriotic Kaz]

I'm hearing only one side of this argument and frankly getting annoyed with it. What's Amazon spin, b/c honestly McMillan is in the same game as Amazon, making money, and if they are in the wrong they would create a smear campaign against Amazon (like what's currently occurring), but if they are indeed in the right they would do the same thing. I bet both are in contract violation and being spoiled little brats, who are legends in their own minds. Compensation anyone?

[ryos]

My understanding is that it's Amazon wanting to set the price at which it buys eBooks from McMillan (where by "buys eBooks", I mean "agrees to pay for each digital copy sold"; honestly in my view the distinction is obvious and irrelevant to the discussion). It's not that McMillan wants to dictate selling prices to Amazon; that would be stupid. It's that McMillan wants to start charging Amazon more for new books and less for old, and Amazon wants to use its market dominance to say, "Nuh-uh. We pay this much or not at all."

I don't have insider knowledge on this; nothing I've read has bothered to hash it out. My guess is that just doesn't occur to people to bring it up, because it's obvious to them. I mean, nothing else makes any sense to me.

[Silk]

I'm not sure there's any contract violation happening on either side of the Amazon/Macmillan debate actually.

Some people think that Amazon is trying to use the low price to solidify/extend its hold on the ebook market, and some people think that it's trying to use the low ebook price to move Kindles.

Did that answer your question? I don't know if I quite understood what you were asking.

[Lord Terrisman]

My understanding is that it's Amazon wanting to set the price at which it buys ebooks from McMillan (where by "buys ebooks", I mean "agrees to pay for each digital copy sold"; honestly in my view the distinction is obvious and irrelevant to the discussion). It's not that McMillan wants to dictate selling prices to Amazon; that would be stupid. It's that McMillan wants to start charging Amazon more for new books and less for old, and Amazon wants to use its market dominance to say, "Nuh-uh. We pay this much or not at all."

I don't have insider knowledge on this; nothing I've read has bothered to hash it out. My guess is that just doesn't occur to people to bring it up, because it's obvious to them. I mean, nothing else makes any sense to me.

Personally I don't see the big deal with charging more for new books and less for old books (I would much rather pay $14.99 for a new eBook than $29.99 for a new hardback).  I believe that Amazon might have some valid points (I've not heard of any thus far but they might actually have a method to their madness) though right now I just think they're abusing their power on the eBook market.  I mean everyone wants to make money so if McMillian wants to charge more for the digital copy of new books and less for the old books it would still even out to the same amount as if they sold all their books for the same price.

[Patriotic Kaz]

Here's one point e-books have zero cost. Another, with limited storage you don't keep all that you buy, and there's no need for a used e-book store. (and Silk my point was I want to see both sides arguments completely flushed out before deciding one is write, I'm pissed off that McMillan would dare play a pity me victim card, one of my pet peeves, I think everyone jumping to conclusions based on it is absurd, but then again i'm a lawyers son and hate being blind to one side of any argument)

[ErikHolmes]

Here's one point e-books have zero cost. Another, with limited storage you don't keep all that you buy, and there's no need for a used e-book store. (and Silk my point was I want to see both sides arguments completely flushed out before deciding one is write, I'm pissed off that McMillan would dare play a pity me victim card, one of my pet peeves, I think everyone jumping to conclusions based on it is absurd, but then again i'm a lawyers son and hate being blind to one side of any argument)

Ebooks have zero cost? Sorry man, but that's not the case. The author still has to be paid, so do the editors, marketing, etc. etc. etc.  The fact that they don't even need to store inventory somewhere is just another win for amazon.

Right now ebooks are just like free cash for people like Amazon. They throw a button on their website to allow people to download the ebooks and just rake in the cash. Not only do they make money from the ebooks, but by selling them at their cheap set price it pushes people to buy their kindles too.

If people like Brandon are making 15% of sales on ebooks. Then he's making a lot less selling ebooks for 9.99 then he would be selling a hardcover for $25.

Also, people aren't talking about this because we all feel bad for poor Mcmillan. We're talking about it because a lot of the authors that we admire got screwed. For the authors that released books that week its like Amazon took them into a back room, strapped them to a barrel with a ball-gag in their mouth and treated them like Marsellus Wallace.

First week sales are huge. If you normally sell 10,000 copies of your book opening week, and amazon counts for 25% of that. Then you just had a 7,500 opening week instead of 10,000. So guess what? Now to the booksellers its going to look like your popularity is in decline. When you release your next book you'll be making less than before.

[Silk]

Actually, e-books don't have zero cost.

Now, I'm not an industry insider, but these are the numbers I've seen thrown about by people who are: The costs associated with the phyiscal book--printing and warehousing costs, etcetera--apparently account for about 10% of the book's actual cost for the big trade publishers. (For independent publishers, this number is probably higher. I've one blog, somewhere--Jay Lake's blog, or Scott Westerfeld's, maybe? that suggested that this number for indie publishers might be closer to 20-30%).

The other costs: There's various levels of editorial, there's typesetting, there's publicity and marketing, there's the cover art, and of course the author.

Even though some of these costs have already been dealt with in the making of the print book, the publisher still has to be able to recoup that initial investment if it wants to continue, well, publishing. (Conversion processes might be a factor too, though I have no idea what that takes.)

Besides, it makes me sad that there's such an apparent devaluing of content, especially since content is basically what one's paying for with an e-book (rather than format), yes?

Edit: Slight correction to what Erik said: Up until now, Amazon has actually been selling those 9.99 e-books at a loss. Macmillan has been getting the hardcover prices for each copy sold. Macmillan wanted to re-negotiate pricing schemes with Amazon because they were concerned that this price wouldn't be sustainable in the long run. Aside from the fear that the cheaper e-books would undercut revenue from new hardcovers (publishing's biggest moneymaker), I suspect that there was some worry that Amazon would turn around and demand a deeper discount for those 9.99 e-books. To which Macmillan would have been free to tell Amazon to take a hike (hopefully a little more politely than Amazon did Macmillan), but even so, that situation probably wouldn't have ended well for anyone. Which isn't to say that this one did.

I really do think that Macmillan is taking steps in the right direction here. If nothing else, they should be allowed to experiment and see what prices the market will bear.

[ryos]

if McMillian wants to charge more for the digital copy of new books and less for the old books it would still even out to the same amount as if they sold all their books for the same price.

That would only be true if they sold the same number of copies at every price, but that's not the way it works.

The point of varying the price of a good over time is price discrimination. Some people are willing to pay more for books than others, and the publishers want to take advantage of that. Conveniently, the people willing to pay more are also those more likely to buy a book immediately after its release. By charging more money at first and less over time, you maximize your revenue.

Amazon doesn't care about McMillan's revenue. They want to shape the market for eBooks, making less (or no) money in the short term so that they're in a better position to make money in the long term. This helps only Amazon, so I can understand why people would get upset at them for acting like a bully.

[guessingo]

What is copyediting?

It doesn't cost more money to sell the next ebook. So there is an up front fixed cost with ebooks, but it does not cost any more to sell copy 11 or 12.

How much work,time, cost does it take to convert a regular hardcover release to an ebook?

Michael Stackpole has a good blog on this. He says they should be priced about 20% below print editions.

http://www.michaelastackpole.com/?p=1057

He also sites an example where self publishing is good for him. He had a book that sold 50,000 copies. He was dropped by his publisher. He cannot sell a sequel to another publisher since this will drive sales on his first book and money won't go to them. So he wants to self publish an ebook for the next book in the series. Either that or the book never gets published.

[Silk]

Likewise Macmillan is taking a short-term loss with the switchover to the agency model--getting a higher cut for the $14.99 cover price, but not the hardcover price that Amazon was paying them before--and hoping that the result will be a pricing system for e-books that's actually sustainable (which, no, I don't believe Amazon's $9.99 model is). Hopefully this will contribute to the health of the market as a whole, though I've no doubt that Macmillan is putting Macmillan first. There's nothing wrong with that, of course.

There's nothing wrong with that when Amazon does that either. And actually, I don't think decrying Amazon as a bully had much so to do with their predatory pricing (which people were unhappy with, sure) as it did with Amazon's decision to remove all Macmillan titles from its store as (seemingly) a strong-arm tactic. Where Amazon has crossed the line as far as many people (that I've read) are concerned was removing all print titles in a Kindle-related dispute. It was unnecessary and hurt a lot of innocent people, the authors.

For other people, Amazon crossed the line into "bullying" tactics when it also removed Macmillan titles from customer wish lists and downloaded sample content from Kindles. Amazon hurt readers with this one too; suddenly 1/6 of books are unavailable on that e-reader that they've paid a lot of cash for.

guessingo: Copy editing is stuff like grammar, punctuation, line editing, as well as things like minor fact checking.

There is a fixed cost to selling e-books, yes, but for a trade publisher that cost is probably the smallest cost of selling an e-book, and they still have the right to recoup those costs.

As for self-publishing: It's definitely a valid route for some, but not necessarily for everybody. It migth work better for Stackpole than for your average Joe because he has an established audience already.

[Patriotic Kaz]

What I meant is zero cost of production, I guess I didn't articulate that well. And yes i know the labor from the author editor etc.  is a "cost" but the e-book itself cost nothing to produce.

[Sigyn]

Publishers put out a certain amount of money to get a book and put it into a readable format, all of which contribute to an ebook's cost.  Someone has to sit down and take the text and make it so that it can be read on the kindle or another ereader. This has some cost, even outside of copy-editing and such. Jo Walton said that she had a friend that she sent an electronic copy of her book to, but he wasn't able to read it at all on his ereader because the formatting was so ugly. And you wouldn't want to read a book without any copy editing.  I hate typos in the books I read, which make me wish that publishers would spend more on copy editing. 

When publishers buy and publish a book, they spend a lot of money with the hope that they will make a certain amount back in their sales.  If they are not making that much back because they don't earn enough because of ebooks, then they likely won't publish that author or series again.  This will make new authors a bigger risk and therefore less likely to get published.  This will in turn shrink the book market, which I don't think is anyone's idea of a good thing.

Oh, and as for who is coming out the badguy in this, I don't think that has anything to do with MacMillan playing the pity card. The only comment I've seen from MacMillan was extremely businesslike. It's the comments from people (who are presumably readers and authors) that have taken sides.

And here's an interesting survey on book-buying behavior: http://www.versoadvertising.com/survey/index.html