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Books Businesses Math The Almighty Buck

Amazon's eBook Math 306

Posted by Soulskill
from the there's-one-for-you-nineteen-for-me dept.
An anonymous reader writes: Amazon has waged a constant battle with publishers over the price of ebooks. They've now publicly laid out their argument and the business math behind it. "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." They argue that capping most ebooks at $9.99 would be better for everyone, with the money split out 35% to the author, 35% to the publisher, and 30% to Amazon.

Author John Scalzi says Amazon's reasoning and assumptions are a bit suspect. He disagrees that "books are interchangeable units of entertainment, each equally as salable as the next, and that pricing is the only thing consumers react to." Scalzi also points out that Amazon asserts itself as the only revenue stream for authors, which is not remotely true. "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. Killing off Amazon's competitors is good for Amazon; there's rather less of an argument that it's good for anyone else."
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Amazon's eBook Math

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  • I like it. (Score:3, Interesting)

    by Anonymous Coward on Wednesday July 30, 2014 @05:17PM (#47570425)

    It would be nice if some of the more expensive textbooks were priced at 9.99. They would probably end up growing the market and making more money.

    • by Mister Liberty (769145) on Wednesday July 30, 2014 @08:17PM (#47571427)

      Elsevier won't have it.

  • Disengenous (Score:5, Insightful)

    by Moof123 (1292134) on Wednesday July 30, 2014 @05:21PM (#47570445)

    When I read through Amazon's logic, they wanted to single-handedly re-write the relationship that already exists between the author and the publisher. It is a very thinly veiled move to try and cutout the publisher. While I abhor middlemen, it really struck me as not being Amazon's place to stick their nose into. I have less and less sympathy for Amazon. It is clear they want to be the 800 lb gorilla on too many fronts for my comfort.

    • Re: (Score:3, Interesting)

      by Anonymous Coward

      they wanted to single-handedly re-write the relationship that already exists between the author and the publisher.

      Otherwise known as "building a better mousetrap".

      You really want to keep the old system? Are you that worried that poor people will be seen reading your book?

      • by rmdingler (1955220) on Wednesday July 30, 2014 @05:46PM (#47570633)
        I, for one, admire Amazon's chutzpah.

        They're squeezing the entire book publishing industry, and asking authors and publishers what their problem is.

        Look, we've done the math for you asshat. Why aren't you grateful?

        • Re:Disengenous (Score:5, Informative)

          by LostMyBeaver (1226054) on Thursday July 31, 2014 @12:09AM (#47572209)
          While I feel your argument was probably not thought through well enough, I believe there is merit to it.<br><br>Here in Norway, we tend to suffer a great deal as consumers because of the publisher/distributor relationship. The pricing model of books is highly predatory and the book rights for Norwegian translations also allow the local publisher to own the rights to the original language within the country. This drives prices on the original language and the translation through the roof since the cost of translating is so high that unless it's a #1 best seller, all the profit has to be made on a few hundred... possibly thousand copies. What is worse is that Norway has a higher English literacy level than either the U.S. or the U.K. We don't need these translations. They are translating them for no apparent reason... and worse... as the availability of English books through Amazon or others increases, the Norwegian translation market shrinks and the quality of the translations shrink too.<br><br>Another major issue which I have is... I am willing to pay large amounts for Print-on-Demand if I need a paper book. In fact, I try to avoid purchasing books which were mass printed only to look good enough on display cases to attract sales.... then when the book cools down, they'll throw them away and recycle them. This practice is so fantastically stupid that I can't even imagine that the people who want to make this continue can even tie their shoe laces. I don't feel any personal need to help the printing business by printing documents which just don't need to be printed. Books should never be printed like that anymore. We have eBooks. I don't actually know anyone who prefers paper anymore... including wrinkle monsters.<br><br>I don't care what the eBooks cost, but here's a simple rule.... I under no circumstance am willing to pay for the printing of a book in my eBooks. Meaning if I assume the printing cost of one book to be $1 and that the idiot publisher is probably printing three copies of the book for each one he sells... so let's be fair (toss him a cookie) and say to cover his costs, he needs to pay $2.50 for the cost of printing. Then the eBook should never cost more than $2.50 less than what the printed book would cost on the shelf of a brick and mortar store which will discount the book immediately. So if the MSRP is $20, a store would discount that book 10-25% which is why we have MSRP (feels great to save that 25% right?), so $15... now, subtract $2.50 to cover printing costs... that's $12.50.<br><br>I'm willing to pay $12.50 for the eBook which is MSRP of $20.<br><br>You know what? I'm willing to pay $20 for the paper copy if it's printed on demand instead of just killing the planet for fun. Of course, I'm not going to demand that paper copy unless I need it for reference.
    • Re:Disengenous (Score:5, Insightful)

      by lgw (121541) on Wednesday July 30, 2014 @05:29PM (#47570511) Journal

      I have no problems at all with Amazon using their muscle to get me lower prices, middle-men be damned, but it's an interesting question whether this means more or less money for authors.

      What we've seen from Steam sales is that lower prices mean more revenue - often vastly more. Are books the same? I rather suspect so. Top-tier authors can demand the price they want, but there are only a handful of such in any genre. For the vast majority of e.g. SF authors, a SF book really is much like a $5 game: they aren't completely interchangeable, but I can find more that look good than I have time for.

      • Re:Disengenous (Score:5, Insightful)

        by rogoshen1 (2922505) on Wednesday July 30, 2014 @05:34PM (#47570549)

        I'd rather not live in a world where the only places to shop are walmart, amazon, and maybe costco. using size and supply chain efficiency to force smaller guys out of business is not a good thing in the long run.

        • by lgw (121541)

          Why? As long as there are 3 or more, why care about anything but price and selection? If you can find what you want, then it's just about price, no? At least, it is for me.

          For physical goods it's important that there are places that sell more expensive goods, too, because sometimes there's too much quality sacrificed in the cheap stuff, but there's always someone selling the high-margin stuff. The price may be unappealing there, but, hey, what do you expect?

          • Re:Disengenous (Score:4, Insightful)

            by Mister Liberty (769145) on Wednesday July 30, 2014 @08:29PM (#47571485)

            "If you can find what you want, then it's just about price, no?"
            Isn't the parent --implicitly, granted-- questioning the persistence, with 3 players, of that very thing, the 'finding what you want'? And here you turn it into a sort of an agreed upon premise.

        • There is an undisclosed cost to be paid for operating on the sole advantage of being the lowest bidder for my Dinar.

          If the customer is only loyal to price, she or he is only beholden to your retail outlet as long as you are the lowest. So to stay in business, that's what you'll always be...Shout Out to you Walmart.

          If on the other hand, you use your marginally-profitable market share to expand product and service lines in a successful bid for brand loyalty, well you're officially crafty. Props to Amazon.

        • Re: (Score:3, Insightful)

          by Jodka (520060)

          ...using size and supply chain efficiency to force smaller guys out of business is not a good thing in the long run.

          Why is it bad for efficient suppliers to replace inefficient suppliers? And why bad in the long run but not the short run?

          If efficient suppliers replaced inefficient suppliers, but then in the long run inefficient suppliers returned to dominate the market, than that would be a good outcome in your view.

          Can you explain your reasoning?

          • Re:Disengenous (Score:4, Insightful)

            by blackest_k (761565) on Wednesday July 30, 2014 @06:59PM (#47571019) Homepage Journal

            cheaper books , good for me, but i also like going out to book stores to find something interesting.
            in the long term, the book stores go out of business now its harder to find interesting books.

            long term the prices will tend to rise as competition has been eliminated to a large extent.

            Amazon is winning too much, it seems as if kindle is becoming synonomous with ebook reader. Thats not a good thing, no additional storage, no pdf support , no library support. Trouble is they do sell ebooks cheaper. I've jist picked up a sony their store has gone and the kobo book store app says i'm not living in a supported region. It runs a locked version of android, which could support the kindle app.
            Which might be better for sony and me.
             

            • by unrtst (777550)

              Amazon is winning too much, it seems as if kindle is becoming synonomous with ebook reader. Thats not a good thing, no additional storage, no pdf support , no library support.

              Are you talking about eInk e-reader, or their tablet?
              If eInk, good luck filling up the storage they give you with books. Pdf support is there (as far as I can tell), and you can borrow books from the library using overdrive (checkout is not built in, but it works).

              If you're referring to their tablet, just get a generic android tablet. You can install all the reader apps on it (Amazon Kindle, BN Nook, Kobo, FBReader, etc).

              I do wish their eink kindle allowed other "app stores", so to speak, but I think that'd

            • Re:Disengenous (Score:5, Insightful)

              by Dan East (318230) on Wednesday July 30, 2014 @08:48PM (#47571561) Homepage Journal

              cheaper books , good for me, but i also like going out to book stores to find something interesting.
              in the long term, the book stores go out of business now its harder to find interesting books.

              So in other words, you would prefer for everyone to subsidize the brick and mortar shopping environment that you personally enjoy, whereas the majority of other shoppers may not have such preferences and just want to purchase at the lowest possible price. That sound about right?

              I'm not trying to sound like a jerk, because I have very fond memories of going into bookstores as a youth (and adult of course) and just the smell alone is wonderful. However like so many other things (photography via chemical coated film that must be developed and printed, etc) its days are numbered.

            • by swillden (191260)

              in the long term, the book stores go out of business now its harder to find interesting books.

              Nonsense.

              Look at Baen's model... the first few chapters of all of their books are available for free, all on-line, all trivially easy for you to browse and sample, at no risk, wherever and whenever it's convenient to you. For that matter, they offer full novels from their top authors for free. So you can read the first book of a 15-novel series at no cost, hooking you for the other 14.

              How can book stores, with their limited shelf space and immobility, compete with that?

              Of course, that's Baen, not Amaz

              • by Pretzalzz (577309)

                Have you actually shopped at Amazon? Amazon offers the first couple chapters of all their books for free.

          • by Alrescha (50745)

            You're not the 'efficient seller' if you lose money at it. You're just burning cash to decimate the field.

            A.

            • by Jodka (520060)

              You're not the 'efficient seller' if you lose money at it.

              Though inefficiencies reduce profitability, the inference that negative profitability implies inefficiency is invalid.

              Let's unpack your own reasoning here: An inefficient business will be unprofitable. Amazon is unprofitable. Therefore, Amazon is inefficient. If A, then B. B, therefore A. The category of error you have made is termed "affirming the consequent [wikipedia.org]", colloquially known as Modus Morons.

              Profit is, to quote WP, "the difference between the purchase and the component costs of delivered goods an

        • Re:Disengenous (Score:4, Interesting)

          by ShanghaiBill (739463) on Wednesday July 30, 2014 @06:46PM (#47570953)

          I'd rather not live in a world where the only places to shop are walmart, amazon, and maybe costco. using size and supply chain efficiency to force smaller guys out of business is not a good thing in the long run.

          I disagree. Small bookstores were crap. They had the bestsellers, and a small random assortment of other books. Amazon has a better deal on the bestsellers, and has millions of other books. This is not only far better for customers, but better for niche authors as well. The small booksellers are gone, and good riddance. Now the publishers are getting squeezed. Good. The fewer middlemen between the customers and the authors, the better.

             

          • hopefully agreements with authors won't be exclusive... so authors can offer their books on amazon for a 30% cut of a 9.99 book, and still sell the same book for 9.99 on author's own website for the 100% of the revenue going to themselves.

        • by rtb61 (674572)

          Sorry, but I have to side with the planet. Dead trees, energy waste and pollution all point to ebooks being preferable to the printed variety. The authors earn less and many would only be able to indulge their hobby part time, whilst working at another career, is just a normal part of social change. I'll have to admit to not having read a book for quite a long time, much preferring the interactivity of the internet and even computer games. Something like slashdot makes for a better read than a passive book

        • by unrtst (777550)

          I'd rather not live in a world where the only places to shop are walmart, amazon, and maybe costco. using size and supply chain efficiency to force smaller guys out of business is not a good thing in the long run.

          While I agree, when it comes to ebooks, there's no reason someone else couldn't capture that market. The only thing they have going is that the Kindle is somewhat locked down, however, anyone can make an ebook that works on it (with or without DRM). Those 3 big companies are where they are due to the awesome distribution work they have in place + size (negotiation power) + software. Those things don't matter nearly as much for ebooks.

          I don't think Amazon should force a maximum price for ebooks, but I do thi

      • by alen (225700)

        the games on sale make up revenue and profits on the DLC that some people will buy later at full price

        there is no DLC for books, yet. and no IAP yet either

        • by lgw (121541)

          There's very little DLC going on on Steam (this isn't the app store article, that one's that way --->). This was straight-up market experimentation. Game devs found that dropping their price from $20 to $10 could generate 10x or more as many sales, and a drop from $10 to $5 could generate another 10x increase in sales.

          I'm sure part of that it getting below where some people are willing to pirate the game, but I suspect most of it is just getting to the impulse-buying threshold. $20 game I don't know m

      • Re:Disengenous (Score:5, Insightful)

        by _Sharp'r_ (649297) <sharper AT booksunderreview DOT com> on Wednesday July 30, 2014 @07:40PM (#47571235) Homepage Journal

        As an author, I can tell you that Amazon and their eBook pricing means more money (overall) for Authors. Maybe not for the "best seller"s who don't actually sell many books, but their publishing house prints lots of them and sends them out to stores, so while they end up on the bargain rack or destroyed, they still make the NY Times list based on the lay-down. Yeah, the authors people don't actually want to read will ultimately make less money, but the real authors that people like and want to buy from will make a lot more.

        There is currently a battle going on in the industry between the special favorites of the big 6 publishing houses and the midlisters and independents. There are very few authors who can get a reasonable deal out of one of the publishing houses. Everyone else is getting contracts which require them to sign away their works forever, sign away any future works in the same genre, sign away all electronic rights, etc... for a $5K advance on a one or two book contract.

        The midlisters and indies are running to ebooks and small publishing houses as fast as they can. It's not a mystery why. Amazon will pay 70% on an ebook. A publisher will typically pay maybe 15% (on poorly documented bookscan sales numbers, even on eBooks, which should be exact!) Where they used to purcahse only limited publication rights, which expired after they took the book out of print, now they want contracts where the author will never get their book back, even if the publishing house isn't actually doing anything with it.

        If you are a well-known celebrity, or you sell millions of copies, then a big 6 publisher may work with you on somewhat fair terms. Otherwise, they won't edit you (it's gotten much worse over the last few years), they won't market you and they'll barely make sure your latest book stays on store shelves for a month.

        The big 6 publishers are not only an issue in terms of IP rights and author payments, but they are also a very bad gatekeeper. Ever wonder why so many old SF authors stopped publishing and much of what is out there now is crap? It's because they're being picked by a publishing house with a NY "editor" who probably doesn't even like SF. They literally drove popular authors (who wrote what people actually wanted to read) out of the business. If an author sold too much (i.e. more than the editor projected), did they reprint and push the book? No, they'd keep the same print run and just stop publishing it when it hit the number projected as the max, usually tiny. Baen was the only real exception of any size in the industry. Jim Baen also did eBooks right from the start (gave old ones away in order to promote newer books in the same series/by the same author). That's all just starting to turn around because of Amazon, on-demand publishing and eBooks. Old famous authors are even starting to put out the books their publishing house stopped selling, or that they couldn't get published in the first place because it wasn't the editor's latest fad.

        Also, the big 6 publishing houses have a massively left-leaning bias. They've spent decades now killing the sales numbers of entire genres because the authors were required to toe the line of the latest politically correct movement. You can date books in some genres by the issues and characters the editors required. Many books that adults like have been pushed into YA categories, just because if it it's not "edgy" enough, the NY editors don't want to buy it. Forget about what will sell, they buy what they'll want to tell their NY publishing friends about at the next cocktail party.

        Scalzi is the poster-child cheerleader for the big 6 publishing houses. He's on the "inside" of the publishing establishment and does everything he can to defend them. He could care less about SF authors, just about his publishing buddies.

        You want the real scoop on Amazon and Authors? Go look at Mad Genius Club [google.com], or According to Hoyt [google.com].

        • Everyone else is getting contracts which require them to sign away their works forever, sign away any future works in the same genre, sign away all electronic rights, etc... for a $5K advance on a one or two book contract.

          Exactly. Somehow, those predatory publisher contracts never come up in these threads about how evil Amazon is.

      • by mysidia (191772)

        What we've seen from Steam sales is that lower prices mean more revenue - often vastly more. Are books the same?

        Maybe some, but not all books are the same. Perhaps the average book is the same.

        There are many important books that will probably never sell very many copies.... such as the K&R book "The C Programming Language"

        The authors need to be free to price their books accordingly and not have all books given a dictated price based on what the market will bear for the average book, when t

        • by lgw (121541)

          Technical books are different, but anything that busts the current obscene textbook scam is a win for society, hands down.

      • What we've seen from Steam sales is that lower prices mean more revenue - often vastly more.

        By that logic, if it were free, I'd have an infinite amount of money!

        It doesnt quite work that way. We've also seen that if you raise music prices from 99 cents to $1.29, revenue increases as well. So in "mass-market," the trick is to find where that magic price point is. Am I more likely to buy a book that sells for $9.99 than I am to buy one that is $14.99? If I made it $8.99 instead of $9.99, would I sell more copies to make up for the price difference?

        It can also depend on what you're selling. If I

        • by lgw (121541)

          Nevertheless, the actual, non-hypothetical, vast increase in game sales on Steam as price points can down from $20 to $5 or so are well documented.

          If you're writing a detailed scholarly work, you quite likely have your scholarly day job as your primary source of revenue. Similarly for most technical books. The few "must have" technical reference manuals that cost a fortune just to typeset and will only sell a few copies don't need Amazon eBooks as a sales channel - the engineers who need them will buy the

    • by mspohr (589790)

      I'm sure Amazon has the data to back up their economic argument of the relative sales at 9.99 vs 14.99 for most books.
      They want to sell more books and generate more revenue. This helps them, the publishers and authors.
      I don't see anything evil here.

    • Precisely. There's also the question of how a lower price affects the sales curve in the long-term, since they never provided a time period over which that 1.74 number held true. For a publisher or author looking to maximize profits in the short-term, sure, lower prices are great, no doubt. But if you're trying to develop a sustainable business or career, saturating the market with a flood of cheap copies may not be a good thing, since it may mean that sales drop off faster. Or it may be a good thing, becau

    • by cob666 (656740)
      WHAT?

      So, authors don't want to have a large price gap between a real book and an ebook? Do they NOT realize that with the real book you get an actual real book. With the ebook you get a limited, revocable license to read the book but only in the format you purchased your license for.

      I'm still wondering why the price gap isn't larger.
    • Re:Disengenous (Score:4, Interesting)

      by NoKaOi (1415755) on Wednesday July 30, 2014 @06:22PM (#47570837)

      When I read through Amazon's logic, they wanted to single-handedly re-write the relationship that already exists between the author and the publisher. It is a very thinly veiled move to try and cutout the publisher.

      So what? Publishers have a similar role to record companies. Somebody else creates the product, they edit the product, but mostly they are just the marketing firm. Why should they be getting a bulk of the profits? When people suggest this sort of thing with music, you hear chants of hell ya, stick it to the record companies who are getting a lot more money than they deserve for what they do. Yet when it comes to book publishers, you're saying the opposite. Times, they are a changin'. No longer must an author rely solely on a publisher to create physical copies of their books and get them into book stores. E-Books can be sold on Amazon in a similar manner to how music can be sold on iTunes, at which point publishers are just the marketers. Obviously book publishers are going to fight to keep their massive piece of the pie, just as record companies do.

      Did online music purchasing destroy music? Did they destroy record companies? Hell no, record company profits are up because people purchase more music. They have had a pretty big impact on physical retailers though.

      Will selling e-books at an appropriate price on Amazon (and B&N etc) destroy book publishers? Why would it be any different from the record companies? They are already having an impact on physical retailers though, and that impact will likely only increase.

    • Typical example of the soaring bald eagle having become a creepy bold vulture.

  • A distribution of the expected returns would be more useful than the mean expected return, which can be dominated by a handful of best-selling titles.

    • This is an artful example of writing for your audience. You are not their audience, and people who know about such things are not their audience.

      They are writing directly to the Hachette fans, and indirectly to the Hachette authors. People who prefer to write for a living, or even read for a living in many cases. Not for the quants in the bookkeeping department of Hachette.

      So no, it would not be more useful to have a distribution. It would confuse the audience. More meaningful certainly, I only take is

  • Come on. Nobody buys reading material from shops any more. The only bookshops which remain in my city sell junk. But I don't like the idea of buying everything through Amazon either.

  • Maybe the agreement should be 70% (seems low anyway, BT is free!) for the Author and Publisher and 30% for Amazon (so when it's inevitably decided publishers aren't vital in Ebooks we don't have to go through this again!).
    • by tlhIngan (30335) <.slashdot. .at. .worf.net.> on Wednesday July 30, 2014 @05:56PM (#47570691)

      Maybe the agreement should be 70% (seems low anyway, BT is free!) for the Author and Publisher and 30% for Amazon (so when it's inevitably decided publishers aren't vital in Ebooks we don't have to go through this again!).

      That was the agreement - 30% to Amazon, and right now, 35%-35% split for authors/publishers.

      And no, publishers do a lot - the author's main job is to deliver a manuscript. Just a block of text.

      it's the publishers job to take that block of text, add the necessary front and back matter (Tables of Contents, Indices, cover art, author bio, etc), then also format that block of text for print and electronic publishing (not as easy as it seems - authors can often have their own interpretations of how to format text), and also link in images and such. Oh yeah, and market it - because otherwise your book is just one amongst the thousands appearing daily. And maybe do a bit of editing on the side.

      It's very rare that a self-published book is actually any good - most are just crap (because the author kept getting rejected), and spelling mistakes galore. You really wonder if the author is even literate at all.

      Sure there are a few good examples and there are publishers that do get out of the way and let you do it all (and some very good examples), but those are the exception, not the rule.

      Hell, you could even consider a publisher's job to help wade through the millions of crap manuscripts submitted daily to find the good works and reduce it down to thousands that have a chance of making money.

      • by 0123456 (636235)

        That was the agreement - 30% to Amazon, and right now, 35%-35% split for authors/publishers.

        Ha-ha. You actually think that publishers split their royalties 50:50 with authors?

        For Stephen King, perhaps. For Joe Newbie, it's typically 75% to the publisher, and 25% to the guy who actually wrote the damn book, who then has to pay 15% of that 25% to his agent.

        Most writers would earn a lot more with a part-time job flipping burgers than from writing a book.

      • by geekd (14774)

        There a plenty of great self published author on Amazon.

        Laurence Dahners
        Nathan Lowell
        Elliott Kay
        Christopher Nuttall

        that's just off the top of my head.

  • by Sycraft-fu (314770) on Wednesday July 30, 2014 @05:32PM (#47570537)

    No dude, your books are not so incredible that people will buy them no matter what the price. There may be a few people who are like that, but most aren't. Price matters in entertainment. Turns out, when you make something cheap enough so that people don't need to think about spending the money and even more so they feel like they are getting a "Great deal" they'll spend very freely.

    Steam has figured this out with videogames and siphons tons of money out of people's pockets, and has people thank them for doing it. People get drawn in by the "savings" of the sales and spend tons. I should know, I'm one of them. Not only do I have games I haven't played, I have games I haven't installed. I see something that I'm interested in that is a good price and I say "Oh man, I should get that," and I do. If they are more expensive, I think about it more, I wait until I really want a new game, I go and replay something I already enjoy.

    Cheaper books will lead to bibliophiles just collecting the things. I know my mom would. You get them cheap enough and she'll drop hundreds a month on stuff she'll never read, just because she wants to have it.

    Authors/publishers/developers/etc need to get over this idea of their digital goods being "worth" a certain amount. No, you need to figure out what you need to do to maximize your profits since there is zero per unit cost. Usually, that is going to mean selling cheap, but selling lots.

    • by hey! (33014)

      No dude, your books are not so incredible that people will buy them no matter what the price.

      Nobody's book is so incredible that people would buy them no matter what the price. If my only way to get Shakespeare was to pay a ten thousand dollar license fee I'd find a way to do without.

      Authors/publishers/developers/etc need to get over this idea of their digital goods being "worth" a certain amount. No, you need to figure out what you need to do to maximize your profits since there is zero per unit cost. Usually, that is going to mean selling cheap, but selling lots.

      You really shouldn't assume that anyone who disagrees with you does so because they're stupid. Publishers know their marginal and fixed costs and certainly have a pretty good idea of the price elasticity of their books. The situation is more complicated than you know.

      You can't compare Hachette to Valve, because Val

  • Amazon is right (Score:5, Interesting)

    by vanyel (28049) on Wednesday July 30, 2014 @05:33PM (#47570541) Journal

    In particular, I won't pay more for an ebook than the price of a paperback, but I also generally have $10 as the cutoff point - if it's more than that, I'll read something else until the price comes down. I really think ebooks ought to be $5 but that ship has sailed.

    • Re:Amazon is right (Score:4, Interesting)

      by Daemonik (171801) on Wednesday July 30, 2014 @05:47PM (#47570637) Homepage

      I also refuse to pay $9.99 for an eBook copy of a book that has been out of print for 30 years. There are numerous scifi & fantasy books being re-released lately at this absurd price scale and it's ridiculous.

    • by McKing (1017)

      That's Amazon's whole point. They have the data that shows that $9.99 is pretty much the sweet spot for "major label" authors, and 5.99-7.99 for all other authors. Publishers would make a lot more money if they priced the ebook at $9.99, but they have to protect their print sales so they generally price the ebook at $14.99 so that the $12.99 paperback looks attractive.

      The other forgotten point in this discussion is that traditional publishing houses "cannabalize" their back catalogs and stop printing olde

  • They argue that capping most ebooks at $9.99 would be better for everyone, with the money split out 35% to the author, 35% to the publisher, and 30% to Amazon.

    That couldn't possibly be true. Authors never get a 50:50 split with a publisher.

    • by Z34107 (925136)

      It's almost like Amazon is aware of that:

      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.

    • by ohieaux (2860669)
      Seems like Amazon might be fishing for authors to self publish and take the 70% of the $9.99. I'm sure Amazon would be glad to take a few extra percent to proof, layout and market the ebook for an author.
      • by McKing (1017)

        Amazon works very well for self-published authors. A lot of them went the traditional route and went self-published and made a crap-ton more money as self-published as they ever did, plus they retain the ownership of their own works. http://www.hughhowey.com/ [hughhowey.com]

  • Equally suspect (Score:5, Informative)

    by Z34107 (925136) on Wednesday July 30, 2014 @05:42PM (#47570601)

    Even if you don't have a background in economics, nothing in Amazon's statement should be particularly controversial. Price elasticity [wikipedia.org] isn't something they pulled out of their ass, and the idea that lowering prices could make you more money (by selling even more units) is something the thinking slashdotter should be able to intuit form first principles. "Books aren't perfectly interchangeable units of entertainment" is a nice straw man, but it doesn't change the fact that entertainment spending is highly discretionary, or that his $20 e-book has an entire universe of competing alternatives vying for your attention.

    Yes, publishers and middlemen have all kinds of rationalizations for trying to kill e-books, but calling any of them "legitimate" is shilling so hard you could pence a crown.

    • by Jodka (520060)

      ...the idea that lowering prices could make you more money (by selling even more units) is something the thinking slashdotter should be able to intuit form first principles.

      Or from ever having posted an eBay auction with a large reserve price which then closed with no bids.

      • by Z34107 (925136)

        Exactly! Or from seeing Valve's success with their Steam sales, or Apple's success with lower iTunes prices, or from any other number of things obvious to you and I and everyone but John Scalzi.

        • [...] Apple's success with lower iTunes prices [...]

          When iTunes first came out, of course, their prices were cheaper. You could usually get the whole CD for $9.99.

          The interesting thing is that when Apple allowed the music companies to set the price to $1.29, the companies that did so made more money. While some people were not going to pay $1.29 for a song, there were plenty of others who said, "Yeah, okay."

          Again, the whole, "lower prices mean more money" is not always true. By that logic, selling something for $0.00 would give you an infinite amount of m

    • but calling any of them "legitimate" is shilling so hard you could pence a crown.

      I'm trying to figure out the source of the expression "pence a crown" (old British money, obviously, but I'm missing something), and wondering whether the use of "shilling" earlier in the sentence was an intentional or unintentional play on words re:"pence a crown"....

      • by Z34107 (925136)

        Unlike price elasticity, autorectogenesis is entirely responsible for that tortured non-expression and the verbification of "pence." Idea was that there hasn't been that much shilling since before decimalization.

    • by taustin (171655)

      Scalzi is right that (entertainment) books are not necessarily interchangeable. If one wants the latest Stephen King novel, and it is too expensive, one may very well not be willing to substitute another author.

      HIs error is in thinking (or at least implying, I think he knows this) that no other form of entertainment will substitute equally well for a book. If I can't afford the latest King novel, maybe I'll watch TV instead, and spend the $9.99 on some beer.

      People who have enough of a passion for books to b

    • by tompaulco (629533)
      Yup. Someone at Amazon went to Econ 101. I'm kind of surprised that everyone is treating this as some sort of business epiphany.
    • by hey! (33014)

      Yes, publishers and middlemen have all kinds of rationalizations for trying to kill e-books, but calling any of them "legitimate" is shilling so hard you could pence a crown.

      All the arguments based on classical economic theory only work if the assumptions of classical economics hold, particularly the assumption that there is a free market.

      Amazon is arguing for its freedom to set prices it charges in its ebook store; that would be no concern of the publishers if we lived in a world where ebook users could simply buy books in non-proprietary formats from any Internet storefront they wanted. But we don't live in such a world. We live in a world where most ebook readers are contro

  • by Daemonik (171801) on Wednesday July 30, 2014 @05:43PM (#47570609) Homepage
    Why is Scalzi only bringing up hardcover prices when at $9.99 the ebook is HIGHER than the paperback release, which will sell more copies than the hardcover as well. How can he argue that there is "a legitimate reason for not wanting the gulf between eBook and physical hardcover pricing to be so large that brick and mortar retailers suffer" when paperbacks sell for $6.99-$7.99?? If brick and mortar retailers can survive cheap paperbacks, why can't they survive eBooks priced $2-$3 higher? For that matter, I have never heard anyone in the publishing industry who can explain why eBooks should be priced higher than paperbacks.
    • by taustin (171655)

      The most profitable part of a book release is the hardcover phase for a new book. The profit margin on hardcovers is higher than on paperbacks, mass market or trade. If you undercut your own prices on the hardcovers with your ebooks, you lose the more profitable sales.

      It's an outdated business model, and one that doesn't work with ebooks very well at all, but it's the one that has run the publishing industry for a century and more, and it's not going down without a fight.

      • by tompaulco (629533)
        So in other words, better not to sell the book at all than sell the edition of the book which has a lower profit margin?
  • Amazon is OK (Score:4, Interesting)

    by Jodka (520060) on Wednesday July 30, 2014 @05:48PM (#47570645)

    Even if Amazon's argument is flawed, their attempt to persuade by using reason and presenting facts is nonetheless admirable. As opposed to the feces hurling which accompanies most public disputes these days.

    It builds a solid foundation for a researched and reasoned response in opposition. As opposed to picking up the monkey dung and throwing back.

       

  • Brick and mortar bookstore doesn't sell books with DRM so you can sell it or donate it at your pleasure?
    • Brick and mortar bookstore doesn't sell books with DRM so you can sell it or donate it at your pleasure?

      You forget, comrade, that paper books are much harder to alter after publication than electronic ones. How will we control history if we let the literate middle class continue to hold us accountable for the past? We must encourage the elimination of paper as quickly as possible. Then the people will be free from the burdensome moral responsibility of keeping track of their rulers and histories, and therefore, happier.

      • Paper eliminates itself over time but I would agree that content from Amazon is not immune to fiddling in the back end.

  • by oic0 (1864384) on Wednesday July 30, 2014 @05:57PM (#47570709)
    Its likely best to start a book at 15 and slowly drop it down, just like like every other entertainment medium.... and like they already do by releasing hard backs first. The price thing is true though. I read a lot, I probably buy 2 or 3 books a week and when I am digging for books to buy I give a lot more consideration to cheap books. More expensive books are given much lower priority when I am considering what to buy. I wouldnt even consider a $15 book and a $10 is barely within consideration. $3 is more like it and $6 being a stretch.
    • by tompaulco (629533) on Wednesday July 30, 2014 @07:13PM (#47571107) Homepage Journal
      Yes, when I see a new hardcover book, I make a mental note to check back in 6 months when it has gone to paperback. I just don't need to spend 50% more for the same content just because it is hardbound. In my experience, paperback books last at least as long as hardbound. Which is to say, I have yet to have a paperback book fail on me, and I have some that are over 50 years old. I've had a few hardbound ones fail, because they are generally heavier and less likely to be able to stand up to their own weight.
  • by Guspaz (556486) on Wednesday July 30, 2014 @06:00PM (#47570729)

    I'm sick of paying $16 for eBooks when the hardcover version sells for $12... I'm with Amazon on this one.

  • Pots and kettles (Score:2, Insightful)

    by taustin (171655)

    Scalzi whines (and he's a very good whiner) that Amazon is acting out of pure self interest, with any benefit to anyone else being coincidence, but I note that Scalzi, by his own accounting, makes a six figure income from the traditional publishing industry, so by his own logic, every single word out of his mouth (or keyboard) must necessarily be assumed to be for his own pure self interest, with any benefit to anyone else, including us, the readers, being coincidence.

    The bottom line is that the entire publ

    • by tompaulco (629533)
      If a business does not act in its own interest, who is going to act in their best interest for them. In fact, everyone acts in their own best interest. When people act in others best interest, it is because they believe it is in their best interest to do so.
      • by Rockoon (1252108)

        In fact, everyone acts in their own best interest.

        True on average I suppose, but not in general. Morality and/or integrity frequently trumps self-interest... at least this is true for people with morals and/or integrity.

    • Both sides are huge, publicly traded companies required by law to care more about profits than anything else, both sides are doing whatever they can to protect their shareholder's interests and CEO's egos.

      A little off-topic, but I sometimes get a big grumpy about the whole, "Publicly traded companies are required by law to care more about profits than anything else." You get it right in the second sentence fragment, though.

      Publicly traded companies are required by law to protect their shareholders' interests.

      If their shareholders care about immediate profit and stock price more than anything else, then you're right. If their shareholders care more about not damaging the environment more than anything else,

  • by Jodka (520060) on Wednesday July 30, 2014 @07:01PM (#47571025)

    Amazon's pricing argument is one instance of the same general phenomenon that gross expenditures, under some conditions, increase in response to price decreases. The effect has different names in different contexts:

    With taxation, people sometimes refer to the Laffer Curve [wikipedia.org], which for levels of taxation to the right of the peak of the curve, reducing tax rates increases tax revenues.

    For technology, Jevons Paradox [wikipedia.org] explains why, as the efficiency of home appliances increases, so does energy consumption.

    My grandfather, an economist, had an amusing story about a toll bridge authority attempting to taper down revenues as the bond which funded the bridge was paid off. They lowered the toll price to reduce revenues and revenues shot up as customers responded to the lower toll price by crossing the bridge more frequently. So they lowered the toll price again and revenues shot up further. As I recall the story goes that it worked the third time.

         

    • by Kiwikwi (2734467)

      Amazon's pricing argument is one instance of the same general phenomenon that gross expenditures, under some conditions, increase in response to price decreases. The effect has different names in different contexts:

      With taxation, people sometimes refer to the Laffer Curve [wikipedia.org], which for levels of taxation to the right of the peak of the curve, reducing tax rates increases tax revenues.

      For technology, Jevons Paradox [wikipedia.org] explains why, as the efficiency of home appliances increases, so does energy consumption.

      This is off-topic, but you brought up the Laffer curve and Jevons paradox, so here comes the rant.

      Both make for some nice economic theory, and like much economic theory, it's mostly speculation.

      The Laffer curve, for instance, is a nice "sciency" sounding name for the idea that at a 100% tax rate, there will be no tax income, since nobody will be doing any work if they have to pay all their income in taxes (thus the "optimal" tax rate must be somewhere between 0 and 100%, both excluded). Not only does the en

    • Agreed. By the logic of some people, if I gave the product away, I'd have an infinite amount of money. Obviously it doesn't work that way.

      For example, consider this $14.99 book. If I reduced the price to $13.99, would I make more money than if it was $14.99? I might actually make less money because the price different isn't enough to make me buy it. But at $9.99, I've crossed a psychological barrier--under $10--and I might see more sales and more revenue than at $14.99.

  • I for one flat refuse to pay more than $9.99 for an ebook and I will never forgive Steve Jobs for causing this mess in the first place.
  • by Vrallis (33290)

    I still want to know why the fuck an eBook with virtually zero cost of goods is near twice the price of an actual paperback with serious manufacturing, storage, and distribution costs.

    If eBooks were sold with the same profit margins as paperback they'd probably be about $2. I refuse to pay much more than that for one.

    • First off, the higher priced ebooks are not meant to be competitive with paperbacks, but with hardcover releases. Generally, the hardcover and the ebook will come out at about the same time with the ebook being cheaper. I would also note (anecdotally) that most ebooks seem to come down in price in sync with the release of a paperback edition.

      Second, according to a commenter on Scalzi's website who claims to have experience in the industry ( going by the nym --E [scalzi.com]), it costs about one to two bucks to print an

  • by walterbyrd (182728) on Wednesday July 30, 2014 @09:25PM (#47571711)

    Cut out the useless publisher, and the author gets 70%.

    Why do you need a publisher to sell an ebook?

    Idunno. Maybe a publisher does have some use. But does an ebook publisher deserve a whopping 30% ?

  • by Balinares (316703) on Thursday July 31, 2014 @09:12AM (#47574099)

    Whenever this topic comes up, we end up discussing what publishers really do.

    Every time, someone with some knowledge of how the publishing industry works turns up and explains how there is this long road between the author's draft and the book in your hands, made of editing, copy-editing, typesetting, cover design, marketing and more, and the publisher is the truck driver that sees the draft to the end of that road. That's correct.

    But I've come to the conclusion that none of that is the one irreplaceable service publishers perform in the system.

    All of the above can, to some extent, and for a fee, be performed just as well by independent contractors. (There are great independent editors out there, and aren't we all glad for that.)

    The one important thing publishers do is: they take the loss on books that don't earn out.

    Now hear me out.

    I know how we, Slashdot readers, tend to think about those things. In our minds, if the book doesn't earn out (that is, it brings in less money than the publisher gave the author as an advance), then it's got to be someone's fault, right? Bad writer, bad publisher. Something.

    Wrong.

    The thing is, a successful book requires a lot of factors. Great writing doesn't suffice. The public is fickle. Yesterday, supernatural romance sold by the truckload, now it doesn't. GRRM was a great writer for decades before you even heard of him. Harry Potter didn't start hitting it big until three or four books into the series. Word of mouth matters, but only after the readership has exceeded a certain critical mass. And until then... someone has to take the loss.

    Because, here's the thing. GRRM, Rowling, they're outliers. Many books -- most books, AFAIK -- don't quite earn out. Many deserve to, but don't, because that's not how the world works.

    But they still got written, you still read some of them, you still loved some of them, and that only happened because someone, somewhere, was willing to pay an author to keep writing, and take the risk that the great book in their hands may not earn that money back.

    And that, friends, is what publishers really do.

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