The Author’s Guild blog has just posted a letter from Scott Turow titled “Grim News”. The post expounds upon how the DOJ’s recent announcement it intends to file suit against major publishers for conspiring to fix prices on books is a terrible thing for everyone, and basically defends the assorted publishers’ actions.
Leaving aside the major issue of trying to excuse publishers taking allegedly illegal actions in the defense of their business model, let’s look at the rest of the issues a minute.
Remember, his thoughts were sparked by the “Grim News” that the Department of Justice has just announced it plans to sue several major publishers and Apple for colluding to price fix ebooks with Apple, via the agency pricing system on ebooks. His thoughts are here.
Scott Confuses “Bookseller” with “Brick and Mortar Bookseller”
It’s an easy mistake to make. We’re all used to thinking about bookstores as those actual places you go to, you know, buy books. But that’s simply not the case for most readers anymore. Most consumer books are bought online. In fact, Amazon alone is thought to have close to half the trade book market in the US, these days.
Are the brick bookstores getting hammered? Sure. First by B&N – then by Borders – then Amazon, and now by ebooks from a variety of sellers. I know a lot of you reading this like the physical bookstores, enjoy browsing the stacks. Lots of folks liked buying CDs from a big CD store, too. That didn’t save CD stores, and bookstores are headed to the same place they did: online. Today most music is bought in MP3; and what’s left of the CD market is mostly either top album sales in Walmarts or online sales. Some music is coming out in MP3 only now, and that trend will likely grow.
We’re about seven years post iPod. We’re also about three years post Kindle. Based on comparisons of the trends in each, it is extremely likely that book buying is going to follow a similar pattern, which means over the next few years almost all chain bookstores will close, most indie bookstores (physical ones) will close, and most (but nowhere near all) books bought will be ebooks.
We don’t have to like it, but we should prepare ourselves for the idea. Ebooks are a replacement media, and are almost certainly the last nail in the coffin of physical bookstores. Nothing publishers or writers do is going to substantially slow that process.
Scott Attacks the Amazon Walled Garden
Scott attacks Amazon for having a walled garden, using it as an excuse for their alleged collusion with Apple. That would make sense – walled garden approaches to commerce limit competition, and aren’t really good for suppliers. But Apple, Sony, and B&N each have their own walled gardens too. It’s about as hard to get most Apple epubs into a Nook as it is to get most Kindle books into a Nook. Just because a company is using the epub “standard” doesn’t mean that DRM makes it easy to transfer the books to a new reader.
I recall getting a free review copy of Stephen King’s “11/22/63″ from the publisher’s website. I know from personal experience that converting a Kindle book to Nook is a LOT easier than getting that book onto the Nook software on my cell phone (yes, my cell phone has both Nook and Kindle apps – why not?). Shame on Scribner for making what ought to be an easy experience into one so painful that, tech savvy as I am, I had to spend half an hour trying to figure out how to follow arcane directions that I had to use Google to find in the first place.
Here’s the other catch: Amazon didn’t make their place a walled garden; publishers gave Amazon the walls. It’s called “DRM” – digital rights management. The little bits of code which prevent an ebook from being converted or copied. Years ago, the music industry figured out DRM was bad for business, bad for sales, and dumped it. The book publishing business has not caught on that the same might just be true for them, so pretty universally big publishers launch their ebooks with DRM.
Yes, I can remove DRM. In fact, just about anyone can remove DRM. But it’s a pain, and unless your Google-fu is strong enough, finding out how can be tough. Most customers probably won’t bother unless they’re driven to do so for some reason. Which means the DRM publishers *ordered* Amazon to put on their books is one of the most powerful tools Amazon has for retaining customers (note: Amazon is just as happy to not put DRM on books; none of my works have DRM on Amazon, because I don’t want DRM on my books – I want readers to be able to read my books where they want to). Once customers have invested heavily in a DRM-laden library from Amazon (or anyone else) they are unlikely to switch venues.
Publishers, you MADE the monster you fear.
Scott Mixes Up His Facts About Booksellers
Once again, recall: Scott only considers bookstores with a physical store “booksellers”. Those online places which ship tens of millions of books per year to customers don’t count.
He claims “bookstores are critical to modern bookselling”. No – they’re critical to large publishers maintaining their oligopoly on distribution of books. Books are selling just fine online.
He claims “Marketing studies consistently show that readers are far more adventurous in their choice of books when in a bookstore than when shopping online.” To which I reply, “lies, damned lies, and statistics”. There are very few studies out there about book buying patterns performed in the last two years which I have not read. I have never seen data which even vaguely backs up his claim. Citation, please?
He says “Publishing shouldn’t have to choose between bricks and clicks.” He’s missed the point. Publishers don’t get to choose where they sell their product. Readers get to choose where they want to buy the product publishers sell. If readers want to buy books from physical bookstores, they will; if not, they won’t. Publishers don’t get a say in this.
He says “A robust book marketplace demands both bookstore showrooms to properly display new titles and online distribution for the convenience of customers.” A fascinating claim. Why? He never explains. In fact, the majority of fiction ebook bestsellers in my recent genre surveys have no print presence in bookstores, putting the lie to his claim. What he truly means is major publishers need bookstore showrooms to properly display their wares and advertise them to readers so they can charge higher prices for their work.
He claims that bestsellers are OK, but that “For new authors, however, a difficult profession is poised to become much more difficult.” Again, pretty obviously false. Even a cursory investigation of Amazon shows that, on that site alone, several thousand self published ebooks are selling in excess of a thousand copies a month. The reverse of his claim is actually true: as bookshelf space decreases, bestseller advances are going down. However, more “midlist” writers are making excellent returns on their work than we’ve seen in over fifty years.
Scott Thinks Agency Helped!
No, not really. What agency pricing did was allow publishers to set their prices: which they did. At very high levels. In fact, skimming by Amazon one can find hundreds of ebooks from major presses at $10-15. Most of those titles have numerous 1-star reviews from customers protesting the price. Publishers didn’t help themselves with their ebook pricing scheme.
But most devastating for publishers is the loss of a majority of the ebook market.
There’s only one type of book growing in sales today – ebooks. Print sales are declining, and will likely continue to decline in a rapid slide for years yet before they settle down. Ebooks are the growth market. Ebooks are what most readers will be buying – if they are not already – within a year or two. And by pricing themselves out of the market, all existing evidence says that publishers have handed a majority share of that market to self publishing writers and small presses. No, we don’t have all the data to absolutely and positively prove that as fact – but all data which does exist, including all the market surveys I have personally done, support that theory adequately enough.
The folks who will mourn the passing of agency pricing the most are not publishers – it’s the indie writers, the self publishers, who will miss it the most. Agency pricing has allowed self publishers to dominate ebook fiction in a manner which would never have been possible if Amazon and B&N had been able to discount books from major publishers. Once Amazon gets to discount the hit bestsellers (at their expense), indies will have a harder time of it. We can only hope enough writers will have won enough fanbase by the time that happens to make a difference in the long run.
So yes, when agency pricing falls, life will get harder for writers, but not for the reasons Scott suggests.
So what the heck is going on there over at the Author’s Guild?
They’re sticking up for publishers committing allegedly illegal actions. They’re spreading information that’s got more holes than swiss cheese, loaded with false claims and erroneous data. They’re favoring one retailer over another. They’re proving they’ve locked their minds into 20th century retail, ignoring the fact that for better or worse, retail has changed with the advent of the internet.
Perhaps Scott, who wrote this article, really believes this stuff he wrote; it’s certainly being shoved down the throat of the public by enough mass media sources (the owners of whom also own the publishers currently under threat). But shouldn’t somebody over at the Author’s Guild be better informed? It’s embarrassing to see this sort of tripe up on the website of what’s supposedly a writer-focused organization.
Some very bright folks pointed out that the data used for the survey on the 26th was actually pulled from Amazon’s Popularity index, rather than their Bestseller index. What’s the difference?
Popularity is the default index readers see when they just hop into a genre and browse. That makes it an excellent snapshot of what’s in front of readers at any given time. However, Amazon has set up the popularity algorithm to tend to favor books in the Select program, by “carrying over” a certain level of the popularity earned when a book goes free. Book goes off free, it lands on the paid list again, and as soon as it sells a little the carried over popularity catapults it up to the top of the list. That makes the Popularity listing volatile, a constantly shifting array of books.
Which is awesome for Amazon, from a sales perspective. You want your readers to see a new batch of books every time they visit. Churn is smart. But it’s not quite as good if one is collecting raw data on the state of sales – as we’ll see.
Amazon also has a Bestseller list, for ebooks, by genre. This is a much more static listing, made by compiling raw sales. It’s updated hourly, but books that get there tend to stay there for a while. So what might the difference be, if we compared Bestseller status with the constantly changing Popularity index?
To answer that question, I’ve compiled the same set of data on Amazon’s ebook bestseller list, for Science Fiction. As an added bonus, I’ve also compiled the same data (bestsellers) for fantasy. There are some interesting differences between the two data sets, as we’ll see.
As per the previous survey: EVERY attempt was made to ensure the data was as accurate as possible. Publishing companies owned by the author were counted as self publishing. Publishing companies which publish any submitted book for a fee were likewise counted as self publishing. Publishing companies which in any way vet incoming books or have a submission process were counted as traditional publishers. Whenever a question existed whether a publisher was trad or indie, I counted it as trad.
Science Fiction Top 99
When I collected this data, there was a glitched duplicate copy of “Dance of Dragons” on the top 100. The listing said unavailable, but was still showing in the top 100. Yes, we know Mr. Martin sells a lot of books. You don’t need to show us two copies of the same book in the top 100 to prove it. Anyway, I simply counted the other 99 listings, rather than count the same book twice.
The breakdown was 38 (38.4%) traditionally published books and 61 (61.6%) self published books. Of the 38 traditionally published books, 22 were first published ten or more years ago; only 16 were “recent” releases.
Pricing for SF
I’ve broken out pricing again by price, and by indie/trad. I’ve wrapped prices +/- 21 cents into the corresponding $x.99 category, for simplicity.
$0.99 – Indie 22, Trad 4, Total 26 (26.3%)
$1.99 – Indie 2, Trad 0, Total 2 (2%)
$2.99 – Indie 22, Trad 2, Total 24 (24.2%)
$3.99 – Indie 5, Trad 1, Total 6 (6.1%)
$4.99 – Indie 9, Trad 5, Total 14 (14.1%)
$5.99 – Indie 1, Trad 3, Total 4 (4%)
$6.99 – Indie 0, Trad 2, Total 2 (2%)
$7.99 – Indie 0, Trad 8, Total 8 (8.1%)
$8.99 – Indie 0, Trad 2, Total 2 (2%)
$9.99 – Indie 0, Trad 2, Total 2 (2%)
$10.99 Total 0
$11.99 Indie 0, Trad 2, Total 2 (2%)
$12.99 Indie 0, Trad 2, Total 2 (2%)
$13.99 Indie 0, Trad 4, Total 4 (4%)
$14.99 Indie 0, Trad 1, Total 1 (1%)
For a visual reference:
Once again, we’re seeing solid prices from many indie publishers. The 99 cent bracket was set for only 36% of indie books. About 25% had priced their books above $2.99. It will be interesting to watch how that pricing trend continues into the future.
Overall, while indies maintained a solid lead in the bestseller list (61 of 99 books), they lacked the complete dominance seen in the Popularity index – likely due to decreased influence of the Select free periods. Good information to have.
Fantasy Top 100
The fantasy results were substantially different from science fiction – surprising on the surface, given that the two genres are often merged in bookstores, and are part of the same category on Amazon. But fantasy readers showed a marked lack of attention for older works of fantasy. Of the 47 traditionally published titles, only four were first published over ten years ago. Over 90% of trad pub fantasy bestsellers were relatively recent books.
Overall, self published books represented only 53 of the top 100 books, substantially less than we saw in science fiction.
As we’ll see, fantasy readers also showed substantially more tolerance for higher prices, both from indies and from traditional publishers. The lack of indie writer dominance in this genre is probably related to this price tolerance.
I’ve broken out pricing again by price, and by indie/trad. I’ve wrapped prices +/- 21 cents into the corresponding $x.99 category, for simplicity. Additionally, one $2.51 book was counted as $2.99 (indie) and one $7.39 book was counted as $6.99 (trad).
$0.99 – Indie 13, Trad 0, Total 13 (13%)
$1.99 – Indie 2, Trad 0, Total 2 (2%)
$2.99 – Indie 23, Trad 0, Total 23 (23%)
$3.99 – Indie 12, Trad 0, Total 12 (12%)
$4.99 – Indie 2, Trad 1, Total 3 (3%)
$5.99 – Indie 0, Trad 0, Total 0 (0%)
$6.99 – Indie 0, Trad 1, Total 1 (1%)
$7.99 – Indie 0, Trad 20, Total 20 (20%)
$8.99 – Indie 1, Trad 11, Total 11 (11%)
$9.99 – Indie 0, Trad 3, Total 3 (3%)
$10.99 Total 0
$11.99 Indie 0, Trad 1, Total 1 (1%)
$12.99 Indie 0, Trad 6, Total 6 (6%)
$13.99 Indie 0, Trad 0, Total 0 (0%)
$14.99 Indie 0, Trad 3, Total 3 (3%)
$29.99 Indie 0, Trad 1, Total 1 (1%) (Martin boxed set)
For a visual reference:
This is a really interesting graph. What we see is a clear divide down the middle, with almost no overlap. On the one side, indie writers publishing mostly at the 99 cent, $2.99, and $3.99 price points. On the other, traditionally published books dominated by $7.99 and $8.99 pricing, with a scattering of higher numbers in sufficient density to be statistically significant.
Clearly there’s a higher tolerance for steeper prices in this genre. It’s likely that indies could raise prices somewhat and still be effective sellers in fantasy. The steep valley sitting between the blue and red cliffs represents a potential area of additional profit for fantasy writers.
I intend to do more of these surveys down the road. Watching the changes over time will be interesting, and I believe it will help empower writers to make better, more informed decisions about their publishing options and pricing of their products.
It’s clear that there is substantial variance from genre to genre. Even in two genres typically seen as related, even overlapping, the data showed a large difference in both indie market share and in popular price points. Other genres will likely have their own secrets to reveal.
Lastly, while it appears that bestsellers are not dominated by indies to quite the degree the Popularity index suggested, self published books still have a majority of the bestseller lists in both genres surveyed, especially in science fiction. This would have been impossible a year ago – unthinkable two years ago! It’s fascinating to watch this sort of dramatic change unfold.
Thanks for the comments on the last survey. I hope this data proves as useful to everyone as the other, and hope you’ll continue to add your comments here! I enjoy hearing from folks who’ve gotten some value from what I’m doing here.
So there’s two big questions on everyone’s minds about ebooks these days, right?
1) How much of the market do indies (self publishers) really have?
2) What price is working for folks?
There’s going to be some variability to the answers. Some genres will likely see greater or less indie penetration; some will see higher or lower prices as the most popular. What follows is raw data mined from Amazon (which represents ~70% of the US ebook market, and is therefore a better tool for ebook numbers than Bookscan is for print). Answers from one genre won’t answer decisively for all genres. Nevertheless, it’s a useful tool for getting some ideas.
I picked science fiction for the genre to mine. A couple of reasons: SF was consistently a genre where indies had a lower presence in the top 25 bestselling list, for my December/January checks; and I write SF, and have read SF for over three decades, so I know the publisher names very well.
Analysis and data are from the top 200 bestselling science fiction ebooks on Amazon, February 26th 2012. EVERY attempt was made to ensure the data was as accurate as possible. Publishing companies owned by the author were counted as self publishing. Publishing companies which publish any submitted book for a fee were likewise counted as self publishing (there was one case of an Outskirts book). Publishing companies which in any way vet incoming books or have a submission process were counted as traditional publishers (couple of cases of Piers Anthony books by Premier Digital Publishing, for example). Whenever a question existed whether a publisher was trad or indie, I counted it as trad.
Please note that this is a limited data set, from one retailer (albeit a dominant one), about one genre of fiction.
Self Publishing (Indie) vs Traditional Publishing
Top 25 Bestselling breakdown was 72% indie, 28% traditional, with a 18/7 split.
Overall for the top 200 books, there were 154 indie books and 46 traditionally published books, or 77% indie and 23% traditional publisher.
Of interest: out of those 46 trad pub books, only 25 were recent books (which I define as originally published in the last ten years). The remaining 21 were older books, by authors like Burroughs, Heinlein, Asimov, Orwell, Anthony, and Adams. These older books represent most of the prices under $10 for traditionally published ebooks.
A couple of stray thoughts:
1) The idea that “only a few” self publishers are doing well is false. This is 154 books all selling well in excess of a thousand copies per month, in one (rather smallish) genre.
2) The data showed 72% indie penetration for the top 25, and 77% for the top 200. I suspect that the figure would remain roughly constant much deeper.
I’ve broken out pricing by price, and by indie/trad.
$0.99 – indie 48; trad 3; all 51 (25.5%)
$1.49/1.50 – indie 2; trad 0; all 2 (1%)
$1.99 – indie 7; trad 0; all 7 (3.5%)
$2.99 – indie 74; trad 4; all 78 (39%)
$3.95/99 – indie 8; trad 3; all 11 (5.5%)
$4.50/4.79/4.99 – indie 13; trad 7; all 20 (10%)
$5.99-6.35 – indie 2; trad 4; all 6 (3%)
$6.99 – indie 0; trad 4; all 4 (2%)
$7.95-$8.09 – indie 0; trad 10; all 10 (5%)
$8.99/9.00 – indie 0; trad 2; all 2 (1%)
$9.99 – indie 0; trad 3; all 3 (1.5%)
$11.99 – indie 0; trad 1; all 1 (0.5%)
$12.99 – indie 0; trad 2; all 2 (1%)
$13.99 – indie 0; trad 2; all 2 (1%)
$14.99 – indie 0; trad 1; all 1 (0.5%)
Despite the marked dominance of the 99 cent and $2.99 price points, I am noting an upward trend in self published ebook prices among better selling writers. As they grow fanbases, I suspect these writers are becoming more confident in their work and bolder in their pricing. There’s a distinct move toward the $4.50-$5.00 price point for indies (8.4% of indie books), and 14.9% of bestselling indie SF ebooks were priced above the $2.99 point.
There’s also a distinct drop off point after $8.00. Very few books were able to prove highly successful above that price, indicating that about the price of a mass market paperback is the highest most consumers are willing to pay for most ebooks. The exceptions were books by well known name authors such as George R.R. Martin.
What’s next? Difficult to say. I feel that the 99 cent and $2.99 points will remain dominant for as long as Amazon continues to use their current pricing structure. The 99 cent point is the lowest price allowed; the $2.99 point is the lowest books can get a 70% royalty from Amazon. That makes these prices standard starting points for newer writers trying to “earn their chops”.
I believe we’re seeing a trend which will continue of self published authors starting at those points, then gradually moving prices up as they acquire more readership and audience. More books, more years of work in learning the craft, and more readers will enable writers to boost prices and therefore profit more from each sale.
On the trad pub side, I believe we’ll see less books published at prices over MMP price. Their ebook prices will trend down – *must* trend down, to compete with indie pricing – so we’ll see a settling into $5-8 for most traditionally published ebooks, with higher prices for books they believe will sell well at a higher price. However, with such a high percentage of the ebook market (in this genre; preliminary evidence suggests similar self publishing penetration in most other genres) seized by self published books, publishers are in a tough spot. Retaining dominance in chain bookstores is their only remaining point of strength. As sales in those chains continue to dwindle, publishers will be forced to find more effective ways to regain lost market share in ebooks, or be relegated to a minority market position.
I’d love to hear your thoughts on the data presented above! If you see flaws, please point them out; this is the first time I’ve done this in-depth a survey, but I intend to do more. If there are other things you think I ought to have looked at, or would like me to examine in future surveys, please let me know. Hopefully, this data will prove useful to many of us in making informed business decisions!
Yesterday, the Author’s Guild placed an ill-advised blog entry on their site. It’s such an obvious piece of fluff propaganda that it’s being picked apart around the internet. One of the better commentaries was penned by Passive Guy over on his blog.
I’ll agree with PG’s summary: the writer of said post was clueless.
PG hit the main points pretty well (and I recommend his article), but I want to expand on a couple of them.
Amazon’s first Kindle, released in November 2007, was certainly innovative, but its key breakthrough wasn’t any particular piece of technology. Sony had already commercialized e-ink display screens for handheld e-books in September 2006. (E Ink, a Cambridge company co-founded by MIT Media Lab professor Joseph Jacobson developed the displays used by both companies.) Amazon’s leap was to marry e-ink displays to another existing technology, wireless connectivity, to bring e-book shopping and downloading right to the handheld device.
Amazon’s innovation, in other words, was to untether the Sony device and put a virtual store inside it.
Not even close.
Amazon produced a decent device, yes. But Amazon’s primary innovation was to create a better user experience on their web store than anyone else. It’s why they’ve succeeded as well in online retail as they have. Yes, lower prices is part of that user experience. But Amazon customers routinely shop there even for items which are the same price elsewhere.
Because Amazon has the best designed retail website in the world.
It’s not about the device. It’s about the user experience.
Pricing – Predatory vs Smart
The article goes on to say:
But it was even worse than that. Amazon had deployed its buy-button removal weapon before, but never so publicly, never on such a massive scale, and never (to our knowledge) as a means of shielding its ability to use a separate anticompetitive tactic: its practice of routinely selling e-books at a loss. Such practices, commonly known as predatory pricing, are a means of using superior capital resources not to innovate nor to provide better service, but to weaken or eliminate competition.
Pricing your products lower to sell more is not an Amazon innovation. Local gas stations routinely battle each other to have the lowest price per gallon on gasoline. I worked at a convenience store, many years ago, which charged less for gallons of milk than any other store in the area. They lost money on the milk. They earned money on everything else customers bought when they came in for the milk.
Walmart is one of the best known examples of price reduction as a tool to build retail. Walmart routinely offers prices on most of their goods lower than other retailers in an area. They’ve built an enormous economy of scale to accomplish this, leveraging their ability to sell massive quantities of product to get that product at lower prices and sell it at lower margins.
Online sales use a different method to achieve lower prices. Economy of scale is less important than economy of expenses. Freed of physical stores, online retailers have dramatically reduced costs to do business. They convert those reduced expenses into an ability to price their goods at lower retail costs to the customer.
This is an advantage which brick and mortar retail cannot compete with. The prognosis for brick and mortar retail? Anything which CAN be sold effectively online, WILL be sold online. Some small retail establishments will be able to survive in niche markets, but brick and mortar chains cannot compete with online retail.
It’s not predatory pricing. It’s smart pricing. Amazon turned a profit last year. B&N did not. Amazon is not the company with issues about how it prices its products…
Who is REALLY locking customers in?
Predatory pricing could, in turn, help Amazon buttress its other critical barrier to entry into the e-book marketplace: its use of a proprietary e-book format, rather than the industry-standard epub format. Kindle owners would naturally be reluctant to switch to incompatible devices after they had sunk money into a personal e-library of Kindle editions. Viewed this way, Amazon’s costs incurred in selling e-books at a loss amounted to an investment in erecting walls around its young, booming e-book marketplace. The more Amazon succeeded in locking customers in to Kindle’s device and format, the less rewarding the market for any potential competitor. Amazon’s investment could pay off handsomely as the e-book market took off.
Again, no. A failure to think this through seems typical here, but let’s consider the issue of formats for a moment.
First, let’s look at this from a publishers’ perspective. Publishers want to sell books. They ought to want those books to be as easy for readers to use, and transport from device to device, as possible. Instead, major publishers are universally adding DRM to their ebooks.
Now, understand, the Amazon format is almost identical to the epub. Converting one to another is easy, and fast. There are free software packages which can convert your entire library at the touch of a button. Users know this – it’s one reason why DRM-free books are more popular with readers, and why indie publishers add the line “DRM free” in their product description.
By adding DRM, publishers are helping Amazon lock customers into the Amazon system. The DRM generates the customer lock. Without DRM, users could easily move the book over to their new Nook, or Kobo reader, or whatever. With DRM as a barrier to exit, however, customers are loathe to leave the Kindle system for a new device.
In other words, publishers are directly contributing to the strength of Amazon’s position by using a technology (DRM) already proven to have no effect in reducing piracy.
Imitating roadkill is not an effective business strategy.
A truly competitive, open market has no indispensable player that can call the shots. The book publishing industry has such a player, and Amazon is poised and by all appearances eager to use its muscle to rip up the remaining physical infrastructure of book retailing and the vital book-browsing ecosystem it supports.
Here’s the thing. Amazon isn’t so much ripping up competitors as it is stepping over them, while they lie carpet-like on the floor.
Imitating roadkill is not an effective business strategy.
For bookstores? We know the brick and mortar bookstore is dying fast. We know online bookstores are the new thing, for ebooks and print books. Already, most books are bought online in the US, and that percentage will only grow.
So why, then, are there so few decent online bookstores?
Comparing Kobo, iBookstore, B&N.com, and most other online bookstores with Amazon is like comparing my three year old’s tricycle with a Jaguar or Ferrari. The other sites all look decent, mind you. But they lack the power, tools, features, content, and overall *feel* of a good store. Amazon has probably the best online retail store in the world. All a competitor has to do is copy them, and they’d at least be in the ball game with a fighting chance. Instead, they’ve produced webstores which simply don’t do the job well. They’re frustrating to use. They don’t allow users to browse well. They are not good shopping experiences.
Let’s bring it back around to publishers a sec. It’s ironic that the Author’s Guild is complaining about an Amazon monopoly, when the folks actually being investigated in the US and EU are the Big Publishers and Apple, for allegedly colluding to fix prices through the agency system they introduced and then forced on Amazon.
But the agency system is a triple disaster for publishers. On the one hand, it set them up for a class action lawsuit – led by Amazon! – and Justice Dept. investigations. On the other hand, it allowed publishers to set fixed prices that Amazon could not discount, which has resulted in self published books (generally about 1/3 to 1/2 the price of those from major publishers) taking a majority of ebook sales in many types of ebooks (of the top 200 bestselling science fiction ebooks on Amazon, 152 were self published as of Feb 14th 2012; across all fiction genres, the top 25 list in each genre was 72-92% self published in January).
More insidiously, the agency system actually shored up Amazon’s market control.
Because the agency system ensures that all ebooks are priced the same everywhere. Retailers cannot discount them, unless they find the book someplace elsewhere at a lower price. When all prices are the same everywhere on a product, what sells goods?
Service. Convenience. Ease of use. Powerful user tools, for an internet site.
All things Amazon has in spades, and all things none of their competitors have been able to manage. The result is predictable: Amazon has easily managed a majority share of ebook sales. They’ve had time to get popular now, so they’ll be harder to knock out of that seat than ever. But there’s no reason a new online bookstore couldn’t get some serious market share away from Amazon or (more likely) Amazon’s sleeping competitors. All the new store would have to do is provide as stellar a shopping experience as Amazon does. Ideally, an even more stellar one. When prices are the same everywhere, it all boils down to the user experience, and right now, no other store comes close to Amazon.
Honestly, I’d love to be in that field right now. I think the ebook world is ripe for a hot new company to come up and smack some heads around. More, I think Amazon would welcome some serious competition, even if it came from a small spitfire company. Remember, Amazon started as a small spitfire company, too. They know too well that companies which linger for long without serious competition begin to slow down and stop innovating, which is death when that next spitfire rolls up his sleeves and goes to work. And Amazon certainly isn’t getting any competition from other bookstores right now.
They’re not getting any real competition from major publishers in that business, either. You’d think, if a new publisher sprang up offering better royalty rates, better contract terms, and better marketing efforts, that big publishers would at least think about stepping up their game. Instead? No change. So big publishers are faced with three issues:
– Midlist writers leaving them to self publish.
– Bestsellers leaving to go publish with Amazon imprints.
– The sure and certain knowledge that most books they turn down will be sitting there for sale as competition soon afterward. Probably at 1/3 to 1/2 the price they sell books, too.
But like the other bookstores, publishers seem more inclined to play carpet than they are to step up and actually compete.
Folks, I don’t have time for people who refuse to compete, and then whine because someone else is doing better than them.
Publishers and bookstores alike can survive – and thrive – in this, if they look at the Amazon moves as challenges to be matched and surpassed, rather than unfair business practices. You want to win, get in the game. Otherwise, go home and stop whining.
This is the beginning of a new series I’ll be following up on regularly. Here, I’ll be writing about publishers: big, small, and self. How they fit into the new publishing paradigm. What they can do to maximize their success given all the changes we’re seeing today. About what big publishers can learn from smaller presses, smaller presses can learn from self publishers, and self publishers can learn from everone else. We’re living in a fascinating time of epic change. And as with any industry with great disruption, publishing will see some groups able to leverage the change for greater success, while others remain mired in past practices and fail.
Book Marketing – The Old Way
For the last twenty years, most publishers in the United States have been heavily engaged in a vibrant marketing business. This book industry has spawned numerous book fairs, where publishers push their newest releases. Certain publications with only a few thousand readers each month are considered both successful and highly important, because they are a medium through which publishers can reach key book buyers. The entire model has been one of publishers producing books and then selling their wares to a very slim number of major book buyers at chain markets – Borders, Books a Million, Barnes and Nobles, B Dalton, Waldenbooks – and non-bookstore chains like Walmart and Target.
Over the last decade we’ve seen that market compress. Daltons and Waldenbooks went away, which was fine because they were simply absorbed by bigger competitors. Online bookstores were OK as well, because they were just more shelf space to sell books. Even Borders going under would not have been a disaster under the old model – loss of shelf space for a while, yes, but the market would recover.
But over the last ten years, things have been changing. Book buying has moved increasingly online. By some estimates, Amazon alone may sell half of all books in the US today, ignoring all other online booksellers. Online bookstores have several key advantages over brick and mortar stores:
- They have lower overhead, so they can charge less for product and still make money.
- They have centralized storage of books rather than distributed storage, therefore the shelf space is effectively unlimited. With ebooks, this has grown even more true.
- They represent an easy way for customers to browse books and get nearly any book they could want.
Which is all great for readers. But online bookstores represent a particular problem for publishers, because of that virtually unlimited shelf space. You don’t need to sell books to an online retailer. They take all of them. They take every major publisher release, all the small press releases, and are now actively taking books even from self published authors and giving them the same shelf space as any NYC-published book.
Bookstores Are Changing
Right now, the last bastion of chain bookstores is in trouble: B&N is teetering on the edge of bankruptcy. The fact that they’re considering spinning off their Nook as its own business spells out clearly that they’re in trouble. The Nook IS the future for B&N. The only reason to spin it out is if they believe they cannot save the rest of the company, and are trying to salvage what they can before the rest goes under.
Indie bookstores are going under at a faster rate than ever before, and although we’re seeing a surge of new stores open in the wake of Borders closing, and will probably see more open after B&N dumps the brick and mortar stores (or folds entirely), most of those will simply not be able to succeed in an environment where books are cheaper online, and online stores offer more breadth of availability.
The only brick and mortar bookstore which can survive these changes will be one which can offer books as cheap as Amazon, offer immediate access to as many books as Amazon, and still remain profitable. A difficult proposition (albeit not an impossible one).
Suddenly, we’re looking at a near future where 80-90% or more of books might be purchased online (ebooks and print).
Now, on the one hand, that’s OK. Publishers will still have a great outlet for books. It’ll be online instead of in brick retail, but the venues are still there. But on the other hand, it’s a problem because most publishers have spent a very long time becoming expert marketers…
…to chain bookstores.
Which aren’t going to exist much longer.
Without the bookstore chains, all that marketing experience is out the window. There’s no need for it, anymore, not when anyone can upload a book to online bookstores as easily as they can. There’s no selling anymore. Suddenly the book fairs and expos are pointless. Kirkus loses its primary purpose (helping publishers sell books to retail chains). The massive industry built around that type of marketing is undermined and loses value. It’s already lost value, and loses more with every brick bookstore closure and every new customer who moves to ebooks or online print book buying.
New Marketing for the New Publisher
Writers have been able to be their own publishers for a very long time now. Editing, cover art, and book formatting have always been available for people who wanted to create their own books. But in the past, almost all of these efforts failed, earning the (justly) derided title of “vanity publishing”. Writers, and even to some degree small publishers, lacked one key ingredient: distribution. Major publishers had a virtual lock on book distribution. This has for decades been the primary value publishers offer to writers; everything else they do can be outsourced.
When the distribution lock went away with the dominance of online bookstores, it’s left publishers in something of a pickle. Everything they offer, writers can now do for themselves, and generally do cheaper. A major topic last month at Digital Book World was what, if anything, publishers could offer writers to retain a good sense of value on their side of the deal?
I believe that the answer is marketing. But not the marketing of last year, done to bookstore chains that are dead or dying. Rather, I believe publishers must learn to market themselves effectively to readers.
Understand, most publishers haven’t done much of this sort of work for a very long time. There’s a serious learning curve attached. But writers out there are definitely seeing the value which an excellent marketing department can give their books. Ridan Publishing has seen virtually every book they have launched reach its respective genre bestseller list, and is now being approached by “name” fantasy and science fiction writers like Joe Haldeman interested in working with them. That’s an enormous coup for a small press like Ridan. But writers as a whole seem to feel that their superb marketing department is well worth the 30% of net that Ridan keeps.
Yes, they keep less than half what a major publisher does for ebook sales, even though they do substantially more. And that’s the sort of math I believe publishers are going to need to get used to in the near future; but pricing and royalty shares should be their own post.
Marketing isn’t about selling to bookstores anymore. It’s about reaching readers.
1) It’s about building brand recognition as a publisher. Right now, most readers don’t recognize the names of most publishers, or even care who published a given book. With a few exceptions (certain romance presses, and some science fiction publishers like Baen), readers buy a book for the author, not the publisher. This element is critical to change. Publishers need to build brand loyalty among readers to their specific imprints. What this means, for a large publisher, is that a central access point of shared resources should be used collectively by a very large number of small imprints. Each imprint would work with a small number of highly focused books, all of them excellent, all of them related enough in subject or tone that readers of one will tend to enjoy the others. Brand loyalty – to publisher, not to writer – is going to be critical in building publisher value.
2) Reviews are as important as ever. Which reviews are important has changed. At the moment, the most important book reviews in the world are probably the ones written by readers, on Amazon. Major industry reviews are no longer key to book success and will grow less so as brick and mortar retail continues to contract. The NYT reviews are no longer what they were a decade ago. Today, getting reviews where readers buy books is most important, and a set of disseminated reviews at various book blogs around the internet is second. You want reviews to be placed where readers can easily see them and have their fancy tweaked.
3) Direct customer relationships are crucial. Most of the successful indies and small presses I see today utilize direct relationships with their readers. One of the most common elements of this system is a mailing list. Twitter, Facebook, and blogs can be useful tools to acquire readers for your deeper connection methods (like newsletters), but by themselves tend to have only mediocre results in actually pushing sales. Social media is about connections, not about selling. Using it to build deeper connections with readers/fans is useful. Publishers must then drive those connections into brand loyalties, converting those brief connections into lasting customer relationships.
It’s a very different form of selling from what most large publishers are used to.
I’m not sure how many of them are going to be able to make the shift. Those who do will probably excel in the new industry. Those who can’t will probably see their market share and influence continue to diminish, and may eventually fold from the trade book industry altogether. No matter – for each that folds, I predict we’ll see several outstanding new companies spring up to replace them, agile and adapting to each new change as it comes along.
As writer/publishers, owners of small publishing companies, or management at larger publishers, we face a significant challenge in the years ahead – to find ways to build our specific brands into something readers can have loyalty toward, and then leveraging that loyalty by continuing to consistently produce books that slice of the overall readership will love to read.
Special thanks to Kris Rusch, whose article here sparked the idea for this general response to one of the greatest challenges our industry faces today!