Even More Evidence Of How Free Ebooks Can Increase Sales Of Physical Books

from the but-free-doesn't-work!!!! dept

We've noted in the past the various stories of individual authors like Paulo Coelho and David Pogue, who showed that free (non-DRM'd) versions of their ebooks helped increase physical book sales. Then, in February, we wrote about some actual research that showed that when unauthorized ebooks get out into the wild, there is a "significant jump in sales" of the physical book. And, now there's even more evidence to support this. A recent paper by a PhD. candidate noticed that free ebooks tend to increase sales of physical books. In this case, rather than looking at "unauthorized" ebooks, it looks like they focused on authorized free ebook versions. Not all of the books increased in sales, but you can see that there are lots of variables that impact this (how are the ebooks offered, how are the physical books offered, what types of books are they, etc.). Either way, though, it seems like there's increasing evidence that when done right free ebooks can certainly increase the sales of physical books -- despite claims from companies like Attributor that unauthorized ebooks are costing publishers money.

Filed Under: business models, ebooks, pricing, sales

Dear Macmillan, You Don't Embrace The New By Trying To Protect The Old

from the that's-not-how-it-works dept

Lots of people have been sending over the blog post by the CEO of book publisher Macmillian, John Sargent, trying to explain the company's ebook plans, following all the hubbub over its fight with Amazon. I was going to write up a long blog post about how backwards-facing Sargent's viewpoint is, but frankly, Mathew Ingram, over at GigaOm, already wrote up the post I would have written (eerily, almost word for word). Go read that post.

In addition to Mathew's points, however, I'd add that Sargent seems to think that pricing is done by producers, rather than the market -- and historically when companies in competitive markets think that way, they end up being in line for a very rude awakening. Economic forces don't work the way they do because someone wants them to work one way -- they work because that's how markets function. And if you price something too high, the market lets you know. But Sargent doesn't seem to get that. Instead, he's trying to set up totally artificial and made up pricing -- which becomes really evident in his idea that "hardcover" ebooks will get one price, while "paperback" ebooks will get another. It's not difficult to understand Sargent's thinking here. He's still thinking in terms of protecting the traditional windows and the traditional profit margins, and that means high-priced hardcover books for a year or so, then lower cost paperbacks later, in an attempt to segment the market. But with ebooks, that's going to lead to frustration and confusion. As someone named CM Harrington noted in a comment on Sargent's own blog post:

So how much more expensive is hardcover e-ink over paperback e-ink?

Your model is doomed.

One of the reasons why economic forces work the way that they do, and the reason why infinite goods with zero marginal cost get pushed in price towards zero, is that buyers implicitly understand the difference between scarce goods and abundant goods. They implicitly recognize the marginal cost of making another good, and they mentally price products accordingly. Pretending that consumers don't do that is assuming that consumers are stupid. And that's an even bigger mistake than looking backwards instead of forward.

Filed Under: ebooks, economics, john sargent, pricing, publishing
Companies: macmillan

Author Who Claimed $9.99 Not A Real Price For Books Admits Comments Were A Mistake

from the good-for-him dept

We recently wrote about how author Douglas Preston made the following comments in the NY Times about ebook pricing:

"The sense of entitlement of the American consumer is absolutely astonishing.... It's the Wal-Mart mentality, which in my view is very unhealthy for our country. It's this notion of not wanting to pay the real price of something.... It gives me pause when I get 50 e-mails saying 'I'm never buying one of your books ever again. I'm moving on, you greedy, greedy author.'"

We were among those who took offense at the comments, which suggested not an "entitlement" feeling from the American consumer, but from an author who didn't want to listen to what his fans and potential customers were telling him.

Of course, it looks like the backlash got even stronger following that quote in the NY Times. Robert Ring alerts us to io9's coverage, saying that after the NYT's piece came out, Preston's book started getting one-star reviews on Amazon, with many people mentioning the NY Times quote as a reason not to buy the book.

Preston and his co-author put out a note on their website trying to calm people down, and when he spoke to io9, basically admitted that his original comments were a mistake, saying that his readers have convinced him that ebooks should be cheap. However, given that, he still feels there should be release windows, that put out the more expensive physical book first:

I think my comments were pretty stupid, to be frank. They came after a long month of being attacked by Kindle owners who blamed me personally for the fact that my publisher delayed the Kindle release for four months. I was frustrated and said some things to the New York Times reporter that did not reflect my actual views on the subject. I have been hearing back from many readers, some supporting my comments, many more criticizing them.

I think most readers feel strongly that an ebook, which they can't pass along to friends, can't add to their library, and which comes with DRM attached, should be considerably cheaper than a real book. And I would have to agree. The real question is when this cheap ebook should be made available. Studios don't release cheap DVDs the day a feature film is released, publishers don't release the cheap paperback the day a hardcover comes out. I'm not sure why consumers should expect a cheap ebook on the day of publication either.

Kudos to Preston for admitting his mistake, though I'm sure plenty of his fans and potential customers won't like the windowing suggestion either. Hopefully they can convince him that holding back what your fans want is almost never a good business model and has a high likelihood of backfiring. If publishers want to sell more expensive hardcover books, they should focus on making sure that the scarce value people get for the physical book is that much greater than the ebook version. That is, rather than limiting how you can connect with fans, publishers should focus on creating positive reasons why fans would want to buy the physical book.

Filed Under: author, douglas preston, ebooks, fans

Book Publishers Circulating 'Talking Points' To Counter Arguments That Ebook Prices Need To Go Lower

from the fighting-basic-economics-is-never-a-good-idea dept

For a while now, we've been discussing how the pricing on ebooks doesn't make much sense, and almost certainly needs to fall. Like many industries, the book business could learn a lot from other businesses that have realized that drastically lowering the price on digital goods can massively increase sales, and better maximize profits. But, instead, book publishers seem to be pushing in the opposite direction, and trying to push the price of digital books up. We recently wrote about a NY Times article that suggested consumers might revolt if the publishers keep moving in this direction, which is actually supported by reports of how consumers are reacting to publishers' anti-consumer activities with regards to ebooks.

Given all that, I was amused when a friend "in the business" forwarded me an email message sent to a mailing list of book publishers in response to that NY Times article about consumers' potential revolt, that encourages publishers to get out there and fight back against such perceptions. The email contains a list of "myths and potential talking points." Some of which are amusing. It starts out by saying $9.99 doesn't need to be the price for ebooks, which is true, but they don't even seem to consider the notion that the price could be less (or even free), focusing only on examples of people paying more for ebooks. It then suggests that publishers start blaming the ebook device makers for "the implicit, false promise" that ebooks can be cheap. That's ridiculous. The idea isn't "false," it's just basic economics, and we've already seen it playing out in music. Why wouldn't the same economics play in the ebook space as well?

The talking points also tries to attack the claim that Amazon is losing money on every ebook sold by not actually responding to that (mostly accurate) claim, but instead directing your attention elsewhere, by pointing out that Amazon has a $50 billion market cap and can sell products like ebooks at a loss and still make massive profits. Yes, this is true. And it's true because Amazon seems to understand the basic economics of where the money is made: which is in scarce goods, not in infinite ones.

Among the other talking points is the claim that people who buy ebook readers for hundreds of dollars shouldn't bitch about ebook prices, because they're obviously rich enough to afford whatever publishers think the books should be priced at (again, ignoring basic economics). Also there's a claim that publishers are really lowering the prices on ebooks even as consumers see higher prices. While this is technically true in cases like Macmillan, where the company is lowering its wholesale price in order to get Amazon to raise its retail price, it misses the fact that this doesn't matter to consumers. Consumers don't care about the wholesale price. The talking points also included one about how publishers' deals with Apple might actually price books lower anyways -- and it seems like that particular talking point has been "anonymously" pushed into a NY Times article already.

The list goes on in this nature, but it's worrisome that publishers are thinking this way. Just as we were recently discussing, they're acting like the recording industry ten years ago: hunkering down for a "war" of words, rather than actually focusing on new business models or figuring out what consumers actually want. Instead, they're trying to dictate what consumers want and hoping for some sort of magic bullet in the form of ebook readers. This is a dangerous move by publishers that can only come back to haunt them. Instead of focusing on "countering" what consumers are saying, why not actually listen to them, and look for ways to provide what they want?

Filed Under: book publishers, ebooks, publishing, talking points

Author Claims $9.99 Is Not A 'Real Price' For Books

from the oh-really? dept

The NY Times is running an article about how publishers' recent attempts (mostly successful) to boost the retail price of ebooks may backfire really badly as consumers revolt. Most of it is not particularly new to regular readers here, but it does talk to one author whose book received bad reviews on Amazon after his publisher decided to hold off releasing an ebook, hoping that it would "protect" hardcover sales. The author, Douglas Preston, lashes out and attacks his fans, rather than being willing to admit that his customers are telling him something:

"The sense of entitlement of the American consumer is absolutely astonishing.... It's the Wal-Mart mentality, which in my view is very unhealthy for our country. It's this notion of not wanting to pay the real price of something.... It gives me pause when I get 50 e-mails saying 'I'm never buying one of your books ever again. I'm moving on, you greedy, greedy author.'"

So, what's a bigger sense of entitlement? The one where your customers tell you that you've priced something too high and that they're going to spend their money with others who are offering something at a price point they like? Or the one where you insist that books have to be priced high because you want them to be priced high? I'd argue it's the latter... Along those lines, $9.99 is a real price. Just because you don't like what the market decides a book is worth, doesn't mean that it's not a real price.

Filed Under: books, douglas preston, ebooks, entitlement, pricing

Former Music Exec Tells Book Publishers They're Acting Just Like The Recording Industry 10 Years Ago

from the don't-do-that.. dept

Sometimes I wonder if it's simply inevitable for industries facing disruptive change to react badly to it. We spend a lot of time here trying to discuss ways that various industries can avoid doing stupid, self-defeating things, and yet, inevitably, they do them anyway. Copycense points us to an article by Susan Piver, an author, who was formerly a recording industry exec, complaining that publishers are acting just like the record labels did ten years ago. However, it might not be in the way you'd expect. She's not talking about them just responding in anti-consumer ways, but in sitting back and hoping that someone else will find a magic bullet that "saves the industry" and that they can just copy:

The "somebody do something that works so we can copy it" mentality duplicates the kind of hoping-for-the-best attitude espoused by long-time executives in music who simply could not or would not question the viability of the professional cocoons they'd built for themselves. And who can blame them -- corporate mega structures are schooled in consolidation as the primary means of growth, not fleet-footed, shape-shifting responsiveness to change. But now we're in a world where getting bigger is not the answer, getting smaller is.

Piver makes a really good point, as well, that people are still looking at the music industry as if it was "killed" by unauthorized downloads -- but nothing is further from the truth:

Downloads did not kill the music business. Shortsightedness and turf-protection on the part of music business executives did. Piracy and changing distribution schema will not kill the publishing industry. Shortsighted infrastructure-protection on the part of publishing houses will.

Instead, Piver points out that, just as in the music industry, there's a ton of opportunity for those who embrace it, even as those who don't incorrectly will claim the industry is dying:

Without making friends with this beast, my guess is that in 2-5 years we'll see a publishing industry that looks like the music business does today: Super-downsized major companies selling a product line aimed at an older demographic or chopped into whatever the ring-tone equivalent will be in publishing, and a jillion new companies creating the next generation of publishers, retailers, and readers. Just like in the music business, some in publishing will be mourning the death of the business while others will be wildly excited because all they see is opportunity.

There's more good stuff in there as well, but it brings up some really good points. But, part of the problem is that the traditional (false) music industry narrative is still the predominant one. People still think that music industry is dying, even as it's thriving (it's just the recording industry segment that's struggled). And so as everyone tries to "avoid what happened to the music business" they're going to make huge mistakes if they focus on the false narratives.

Already, today, we're seeing that the publishing industry is just focusing on making ebooks available, but doing little to recognize how consumer behavior is changing in how they interact with media (which is as big a part of this market change as any new method of distribution). If the publishing industry is going to figure this out, it needs to not look for some silver bullet that brings things back to "the way it used to be," but to really spend time trying to understand what people are doing today with media -- and, actually, the music world is a good place to start, if they focus on the success stories of what's working, not the complaints from the parts of the industry that have held back.

Filed Under: books, ebooks, music, publishing, recording industry

Research Shows Unauthorized Digital Books Leads To 'Significant Jump In Sales'

from the well,-look-at-that dept

We've seen this before, with individual authors like Paulo Coelho and David Pogue, who both found that as more people were able to get unauthorized copies of their ebooks, their sales actually increased. So, this shouldn't come as a surprise, but some new research looking at the impact on sales of unauthorized files getting out found a "significant jump in sales" (found via Michael Scott):

Brian O'Leary discussed his firm's research on the effect on sales when a title finds its way into an unsanctioned online market. The findings -- a significant jump in sales -- have surprised many in the business.

To be fair, he does go on to say this doesn't mean just "don't worry about" unauthorized access. Instead, he says it's important to figure out what kind of unauthorized access helps sales and what kind hurts -- and that still needs to be studied. But, the early results certainly suggest that the stuff that helps quite often outweighs the stuff that hurts (sometimes by quite a bit).

Filed Under: books, ebooks, sales, unauthorized

Book Publishing Industry Just Now Realizing That Change Is Turbulent?

from the really? dept

As the latest episode of "the ebook wars" continues, there's still lots of chatter about last weekend's Macmillan/Amazon fight. Apparently a lot of authors are angry at Amazon for this. While I can understand how the fight might hurt some authors -- and they're justifiably worried about Amazon's dominance in the ebook market today, I think they need to take a larger view of things. The reason why Amazon tried (though, failed) to stand up to Macmillan was to avoid Macmillan making some really stupid decisions about ebook pricing and distribution windows. That Macmillan won may have helped some authors in the short run (avoiding them being cut off by Amazon), but could hurt in the long run by fighting against the economic tide.

Perhaps the best summary of this situation was written by Steven Pearlstein at the Washington Post, who recognizes that this is a technological transformation, and while it may be messy in the interim, the end results should be quite positive:

While markets have their flaws, over the long run they are good at executing these technological transformations.... Reports of the death of book publishing, like those of music publishing and newspaper publishing, are greatly exaggerated. Business models will change, companies will come and go, and people will lose their jobs. But at the end of the process, there will be fewer people who will be paid higher incomes to produce a wider array of products at lower prices. There's a word for that -- progress -- and it's exciting to see it unfold right in front of us.

If only those going through that transformation could recognize it in those terms...

Filed Under: books, change, ebooks, progress, publishing

Amazon, Macmillan Fight Over Ebook Prices; After Amazon Removes Macmillan Titles, It Caves To Higher Prices

from the too-bad dept

On Friday, there was a sudden realization that Amazon had removed books published by publishing giant Macmillan, apparently over a dispute concerning ebook pricing. Of course, Amazon wasn't just removing Macmillan ebooks, but the physical books as well. After a bit of back and forth over the weekend, Amazon caved in and accepted the way Macmillan wants to price books, which means that Macmillan sets the retail price, and Amazon gets a cut. Previously, Amazon had paid a wholesale price and then got to set the retail prices itself.

I had been under the impression that when manufacturers tell retailers what the end user price is, it's a form of price fixing, but apparently not...

Of course, what may seem odd about this is that it appears Macmillan will make less per ebook under this model. That's because with its old wholesale pricing, Amazon was actually losing money on every ebook sold. As the NY Times notes:

In the model that Amazon prefers, publishers typically collect $12.50 to $17.50 for new e-books. Under the new agency model, publishers will typically make $9 to $10.50 on new digital editions.

So why are publishers specifically trying to limit their own profits from ebooks? Because they're afraid of ebooks cannibalizing hardcover book sales, which is why they're also looking to delay ebook releases. In fact, in this case, Amazon was given the choice of either increasing the retail price for consumers on Macmillan ebooks, or getting them many months later. All in all, this looks like publishers hurting themselves, yet again, by going against what consumers want in a misguided effort to preserve the way things used to be. Yet, in an age when users are punishing authors and publishers who don't treat them right, this could backfire in a big way.

Filed Under: ebooks, pricing
Companies: amazon, macmillan

Publishers Beginning To Recognize The Value Of Free... Even As They Fight $10 eBooks

from the different-worlds dept

We've seen how various book publishers have freaked out about the growing popularity of ebooks, often with a price capped at $10 -- arguing that it's cannibalizing the higher margins found on hardcover books. And yet, at the same time, some of those very same publishers are perfectly happy to offer up free ebooks as promotional items. While some publishers are complaining that this is "devaluing" ebooks, others are recognizing that free can be quite useful in helping an author get past the obscurity barrier. We've already seen how many "top selling" Kindle books are actually free, and it's good to see publishers looking to take advantage of that, even if they haven't quite figured out that similar economic logic can apply to cheap ebooks as well. However, given the success of free ebooks, it seems likely that those publishers who are fighting against the tide will eventually come around to recognize the benefits of such things.

Filed Under: ebooks, free, marketing, publishers