I was just looking over the English version of remarks given by Penguin Random House CEO Markus Dohle at the Frankfurt Book Fair in the last few days, and there are a few interesting tidbits to pick out.
First of all, Dohle must surely be double-jointed, as deftly as he is able to reach around and pat himself on the back. He congratulates the publishing industry for reaching a stable equilibrium at 80% print, 20% ebook sales of traditionally published books. It wasn’t so very long ago, Dohle points out, that people were predicting the death of the printed book.
Yet today’s reality shows that the relationship is exactly the opposite. Sales of the most popular e-books by traditional publishers have declined in the last three years in the major Anglo-American markets. In many European countries, e-book sales are stagnating; in emerging markets, revenue and sales are growing more slowly in the digital segment than expected. In fact, print books have experienced a veritable renaissance. This is having a massive stabilizing effect on physical retail. And we need to preserve a diverse retail landscape if we want to ultimately sustain the diversity of stories, opinions, and ideas in book form.
An then, a little further on in his talk, Dohle turns around and throws shade at the self-publishing industry:
Today, 50 million book titles–including all formats and used books–are available from Amazon. Yes, you heard correctly: 50 million. We are drowning in titles, and yet all of us are thirsting for the next great story. Nonetheless, this challenge also presents publishers with an opportunity.
We stand for quality, and we perfect each product—both the content and the packaging—before we bring it to market. With that, we give our readers the orientation and promise of quality they need to make their way through this deluge of new, and often self-published titles.
In 2012, Malcolm Gladwell already brilliantly described this opportunity when he said: “In a world of infinite choice, it is the editor who is the king. Don’t give me more, give me less and make it good–and you will be in business forever.”
On Mad Genius Club, Amanda S. Green points out that there’s a reason tradpub ebook sales remain stalled at 20%—it’s that the publishers have been doing everything they could to fight ebooks’ advance. Most notably, the publishers keep their ebook prices nearly as high as print book prices—high enough that Amazon is often able to undercut them by discounting the print price.
She also takes issue with Dohle laying claim to “quality” on behalf of traditional publishing:
Of course, [Dohle] doesn’t explain what he means by quality or the rest of it. If he is talking technical quality, I’d like to discuss with him the formatting issues, poor product quality (as in spines breaking much too easily, for example) and misspellings or other issues that should be caught by proofing that I find with traditionally published books. Sure, you can find those issues with indie published books but, when you are touting yourselves as the purveyors of quality, you should be able to stand behind that claim.
Meanwhile, Simon & Schuster CEO Carolyn Reidy has been heard to profess a belief that ebook adoption has stalled because people “got tired of screens.” We heard something similar from the Codex Group last year, with its talk of “digital fatigue” driving readers back to printed books.
And yet, as Nate Hoffelder points out, people clearly haven’t gotten tired of doing all sorts of non-book things on screens yet. Twitter and Facebook are still going strong. There’s no sign people are spending any less time online. Not only are Netflix and Hulu showing no signs of faltering, darned near every major movie studio and TV network out there is starting their own streaming video service to try to capture some of that audience. What’s so special about books that people should want to do everything but read them on digital devices?
Reidy added that she believes “very firmly” that a new version of the book based on digital delivery will come eventually, though she does not know what it might look like. “Some person who is young and grew up with the screen will come up with something that I hope we recognize,” she continued. “There will be a new form of it, because there has to be.”
Ah, the good old “if you build it, they will come” theory, which we’ve heard so many times over the last few years. People aren’t coming in droves to ebooks, so they must simply not have built a good format yet! And yet, while traditional publishing frantically builds dikes to keep out the rising ebook tide, that tide is lifting ever higher all the self-publishers who decided to build boats and set sail on it. Author Earnings reports the market share of lower-priced self-published ebooks continues to grow—while publishers like Dohle are proud of having managed to hold their market share down to 20% of traditionally published works.
Returning to Dohle’s talk, something else he discusses is the challenge of “digital transformation” that faces publishing, in which it needs to change from a business-to-business-focused industry to one that focuses on the consumer, using digital media to reach out and drive demand directly. (It’s about time they got around to realizing that; publishing professional Brett Sandusky had that epiphany seven years ago.) Hence, the publishing industry needs to focus on new ways to drive discoverability.
And that puts me in mind of a piece I ran across just the other day, in which digital consultant Michael Cairns discusses how some of the smaller publishers he’s been working with have been accomplishing a consumer-centric digital transformation. He also notes that Amazon has been a big driver of just that sort of change.
Publishers in education, reference and professional segments are beginning to execute operational change which supports this evolving viewpoint. And of course, there are “born digital” media organizations that aren’t wedded to legacy models. However, some of the best examples come from sectors outside media. Amazon.com is frequently cited as a proponent of the customer-centric view and their willingness to continue to rethink their operations from the customer perspective results in initiatives such as ‘one-click’ ordering to their recently announced wireless checkout process. Payment is made automatically via the Amazon app as the customer leaves the store. And we’ve seen what Amazon-owner Jeff Bezos has done in terms of transforming processes at The Washington Post since he acquired it.
Given the major publishers’ contentious history with Amazon, they probably wouldn’t be too thrilled to hear that.
It would seem that if the publishers really wanted to “digitally transform” their industry, and put the customer first, they would start paying more attention to what those customers want—most notably, lower ebook prices.
But looking at it another way, perhaps the publishers are getting what they actually want here—they’re keeping the bricks-and-mortar retail industry afloat, even if they’re sacrificing additional sales to do it. They’re intentionally putting the brakes on their own ebook growth by keeping prices high. As Dohle said in his remarks:
Just imagine that we now had a split of, let’s say, 50:50 between print and e-book sales. The book retail landscape would certainly look completely different, and would very likely be significantly smaller. Thus the strength of print books–and their continuous growth in some of our major markets–has been a stabilizing factor for the book business’ diversity and, with that, the entire book ecosystem.
So maybe the publishers are happy with selling fewer books if it keeps the bookstores around longer. As Dohle noted, digital discoverability is a challenge, but it’s easy for readers to discover titles when they can browse the bookstores in person. If they’re happy with that, perhaps we should just leave them to stagnate there while self-published ebooks gobble up more and more of the market. (At least until and unless Amazon decides to expand its physical bookstores on a massive scale and finish doing to Barnes & Noble’s bookstores what Barnes & Noble did to independent stores a few decades ago.)
Though one place I wouldn’t go is where Amanda S. Green does in her piece. Returning to the issue of what Dohle really means by “quality,” she attributes a more ideological value to it:
But we all know what he means, don’t we? Publishers are the gatekeepers of rightthink. If you aren’t presenting them with the fad of the day along with the proper tickler list of social issues, etc., they aren’t going to care about what the story happens to be. They have forgotten that readers of fiction want to be entertained. Sure, you can have a message in your fiction but the fiction had better be compelling and entertaining first and foremost or the reader isn’t going to keep buying your product.
I don’t think that’s really at issue here. I still find plenty of big publishers’ books entertaining, and I certainly don’t recall being bombarded with messages to the exclusion of a compelling and entertaining story. Perhaps I just don’t read the right books. But then, it’s not too surprising that Green would be quick to ascribe political motivations to the publishers; she’s one of the Sad Puppies crew, and their entire movement was built upon the idea that the Hugo Awards were dominated by an in-crowd who made more conservative writers into political outsiders. (And they pointed to books like Ann Leckie’s “Ancillary” series as examples of politics trumping story—whereas I personally found them to be perfectly compelling reading.)
In any case, the major publishers seem to be happy with the world they’ve made for themselves, and don’t seem to be paying much attention to self-publishing beyond scoffing at it for perceived shortcomings in quality. Will traditional publishing be able to keep going on that way if these trends continue?
I will look forward to finding that out.
It is really amazing to be able to praise the suppression of ebooks to 20% as a “victory for diversity”!
Independent fiction authors have ample reason to hope their fiction ebooks sell well on Amazon. Priced $2.95, they’d get about $2.10 minus a bloated “download fee” that’ll drive that down to perhaps $1.80. Given their lower costs and expectations, that might be fine.
But no major publisher wants their ebooks to sell in much quantity under Amazon’s terms for sound financial reasons. They’re typically publishing bestsellers from popular authors. There’s no reason for them to price those books under $10, and their authors would raise hell if they tried.
And what happens the moment they price a Kindle ebook at over $9.95 to cover their expectations? The royalty that Amazon pays drops to 30%. Price a book at $9.95 and they get a bit under $7.00, which may not be enough for them, their authors and their expensive advertising. Raise that price to $10.95, and Amazon is only paying them a bit over $3, and pocketing the other $8 itself. Those publishers are not in business to make Jeff Bezos rich.
Assume for instance, that to recoup their costs and please a famous author, they must earn $10 per sale, whether that book is print or digital. If the great bulk of their sales came through Apple, which pays 70% at all retail prices, they could price the ebook version just over $14 and do fine.
But since Amazon dominates the ebook market and is only paying them 30%, they must price that ebooks at over $30 to earn that $10, with some $20 of that going to Amazon. Why would they want to do that?
Note too another factor. These people print and sell books in large quantities and have efficient distribution systems. A book that might cost a smaller publisher $6 to print and ship, they can distribute for $3. For them the cost ratio between print and digital are far different than they are for small printers and independent authors.
That’s why they’re delighted that ebook sales have flattened out at 20%. They’re smart business people. They’ve run the numbers and know that selling their ebooks by Amazon’s rules makes no sense. Amazon’s rules mean they have to price that ebook high to earn the same income that print books give. And given that they have to price ebooks high to earn little, low ebooks sales don’t bother them in the slightest.
I suspect the attitude at the major publishers is that they’ll market ebooks for those who won’t buy anything else and that will pay close to hardback prices for them. For those who want their ebooks to be priced well below their print books, they care not. Why should they price low and lose money while enriching Amazon?
I agree with your post, excepting one issue. The deep catalog. Those books in print are mostly driven by used purchases and library checkouts. And they’ve mostly been forgotten and don’t sell well. They are not making alot of money off of those books. Those books should not be priced at $10 for the ebook version. They would make alot more money selling them at a lower price point (supply demand) and gain positive reception which would benefit all of their sales. I would tweak their model with that one addition, I think
$14 when only the hardcover is out (what they currently do)
$10 when the paperback is released (what they currently do)
$6 when no longer selling well (what they should do but are not)
Big publishers have different contracts with Amazon than self-published authors, so your calculations are not correct, and without seeing the actual contracts, it is impossible to say what a big publisher makes on an ebook sale.
Also, what matters with ebooks is not how much the publisher makes per sale, but how much they make overall. Since there is almost no additional cost to sell an ebook, it is better to sell 1000 books at $4.99 for a total revenue of about $5000 than it is to sell 300 books at $9.99 for total revenue of $3000. Amazon knows what prices produce the largest revenue which is why the ebooks in their own imprints are generally priced at $4.99
The real reason that publishers price ebooks higher is to protect their paper book business and the somewhat exclusive arrangements they have with brick and mortar bookstores. It may be working for them in the short run, but if Barnes and Noble does not survive, they will be even more dependent on Amazon, which by the way now sells over half of the paper books in the US, and most of the recent increase in paper sales have been on Amazon as sales at other stores has been flat or declining.