Price War Could Kill Industry (And Indeed So Could Industry)

The Price War has begun (again) and ebook prices for some titles are approaching nothing.

The Society of Authors says this will lead to [cannibalism and live eels running for parliament] the massive devaluation of the book. Publishers seem to be okay with the situation because they still receive a decent amount of money per unit sold: Amazon et al are eating the cost in order to steal a march on one another. Or more accurately, Amazon is eating the cost in order to maintain an epic dominance and others are eating the cost in a frantic and possibly hopeless attempt to claw themselves up an overhanging commercial cliff and onto the lush, lethal territories of the Kingdom of Bezos.

So much is normal. It's the state of play in the book world right now, just like James Daunt's embrace of Amazon for Waterstones and his subsequent wistful observation that 'in an ideal world, Amazon would have gone bust'. (Why. The. Face?!) If I was at Amazon, that would make me laugh: The conventional trade is so screwed that the guy who wants us gone is our willing flesh and blood representative? Awesome.

And the SoA may be right. It may be that people will start to see ebooks, or all books, as items which have no monetary value in the face of this massive discounting. Who can tell? Almost everything in the marketplace now, from loans to phones, is so horribly tangled and cross-subsidised that maybe no one has any idea what anything's worth any more, or even bothers to try to understand what is valuable. Have you ever sat down and worked out whether your phone tariff is more expensive than just buying the handset unsubsidised and paying a basic rate? Would you even know how?

But the SoA's complaint is not where I get unhappy. I get unhappy because once again the digital retailers are making the running, defining the playing field, and taking the hit so that they can do so. They are content to accept a loss in one area to gain control, and the publishing industry seems unwilling or unable to challenge this control, and that is not healthy for the industry.

I had an online conversation this week about bundling - selling ebooks and paper books together at a range of prices. Before you yawn (I am aware that I bang on about this) be assured that I'm not going to rehash the obvious virtues. What I'm saying today is a little different: the reasons why bundling is hard to achieve and why it is not happening cut right to the heart of the industry's loss of control over its own product. You can't bundle if you don't control prices. You can't bundle if you don't have customer data. You can't bundle if someone else controls your access to your customers and how you sell. Magazines like, say, New Scientist, can bundle different formats at different prices (incidentally playing with the purchasers' minds using low level behavioural economics to skew towards the more profitable options) because they hold the necessary cards. These are the advantages our industry has been giving away for the last few years. If publishers were prepared to sell direct to consumer, for example, they would gather data on who bought what books. They would know more about what sold, when, to whom, and even maybe a bit about why. They would be in a position to offer bargains, loyalty deals, tailored ads, and all the things which are the lifeblood of modern commerce. But they cannot do these things because they have yielded control of things they need in order to do them.

As it is, the industry has not shifted to meet a rapacious new way of trading which works really, really well, and that abdication of control is, to my eye, far more dangerous than the putative psychological devaluation of the book. In so far as I care.

How can I not care? Because I'm an author. My allegiance as an author (not as person who has friends in the industry or who has an emotional attachment to a given brand) is to my work, and my work will - I am increasingly sure - not suffer from the digital revolution, even if the big houses should fall. Which gatekeeper I sell through is less important. For example: the part of everyone which is fond of Penguin because Penguin did those amazing classic jackets would be sad if there was no Penguin any more, but it wouldn't necessarily change what Penguin's authors do so very much. The basic assumption that the interests of authors must align with those of traditional publishers is no longer strong. I'm very much a traditionally-published author and I feel a basic loyalty to my house, but I find it harder and harder to compose these mini-jeremiads which subtextually or overtly favour the traditional houses over Amazon's mighty empire, because after a certain amount of time yelling at swimmers that there's a shark in the water, even the most dedicated lifeguard gets hoarse and figures: okay, people, you want to be an appetiser, you swim right ahead.

I think - though I'm not sure - that the traditional industry is suffering somewhat from a perspective issue; because individual houses have made enormous internal infrastructural changes to meet the digital age, they feel strongly that they are doing a lot. The trouble is that none of these changes are really visible externally. Ebook pricing remains absurd, and the text is still often poorly laid out or botched. Ebook deals with authors remain contentious and retain the appearance of being a fiddle. The industry's digital engagement with the audience remains in most cases negligible. Fundamentally, publishing remains cut off in its silo. It's not true that the digital shift always brings disintermediation. Amazon and the rest are the ultimate mediators, so good at it that they sit astride the connection between publisher and purchaser so that neither can see the other - and the industry allows this to continue and indeed to intensify. A few smaller outfits, notably Angry Robot, communicate very well and experiment with the digital side. Tor have gone DRM-free - but Hachette have responded by sending mildly sinister letters to authors who are published by both Tor and Hachette warning that Hachette consider DRM-free publication in other territories a potential problem and asking what action those authors propose to take (personally: I'd probably leave Hachette if I got a letter like that). A few Twitter accounts have sprung up which do chatter and share somewhat. But for the most part, the bus shelter/broadsheet ad still seems to be the paradigm, and DRM is still hallowed as a great saviour despite, er, probably not being one. Since the people I talk to broadly know all this, and say they want to change it, it's either the top levels of publishing which are in denial or the whole industry which is geared against mending its ways. Maybe both.

So while I do get the jitters about the 20p ebook some of the time, it's nothing compared to what I worry about all the rest of the time.



Conversely, some publishers

KeriPeardon's picture

Conversely, some publishers are driving up the price of ebooks until no one wants to buy them. I recently noticed that one author's non-fiction ebook is actually MORE expensive than a new print copy of his book.

I can't help but think that he, as an author, is getting hosed. I don't know what his contract says, but I make a lot more money selling ebooks than paper books ($3 and change versus $1). E-books cost only a few pennies to deliver and Amazon gives authors 70% of the remaining profit. So, by forcing people to buy paper books over ebooks, publishing companies seem to be reducing the amount of money their authors make.

I heard someone say that J. K. Rowling's new book is going to sell for $17.99 in e-format. Why on earth should I pay that for a book without paper or hardback cover?

It's like the more self-published authors lower the average price of an e-book ($2.99 at the moment), the more publishers raise the price of their ebooks. Which may be why a number of U.S. states have lawsuits against some publishers for price-fixing.

The race to the bottom of ebook prices

Great analysis, Nick, you're completely right about the problem being publishers losing control of their own data. We've blogged about the same subject. 

20p ebooks are essentially stunt marketing driven by retailers which might suit their purposes, but the jury's out as to whether they truly benefit publishing. Without the data that will tell publishers whether these tactics bring in revenue as well as profit, it risks getting publishers hooked on the crack cocaine of steep and unsustainable discounting.

A publishing market where sales are driven by loss leaders rather than special offers is a race to the bottom. It doesn’t need to be that way, but to guard against it publishers must be able to tell the two apart. And that’s why it’s never been more important for them to get a grip on their data.

bundling ebooks with paperbacks

A couple of years ago I went into a B&N outside Boston and discovered Manning Press, which publishes extremely handsome, elegantly designed computer books. (By elegance of design I mean that they have come up with a splendid way of elucidating blocks of code, linking relevant lines of code to explanation in the text with numbered cueballs [I think this is their term].)  The books have a tear-off sheet bound in which offers the ebook for free if you buy the paperback.  Once you have registered to do this, of course, you get notifications of special sales for 20%, 30%, 40%, even 50% off selected titles - which presumably they can afford to offer w/o losing money if they sell direct to the customer.

Another great thing they do is give you the chance to buy books still under development - for a modest price you can download the most recent version, and also download updates as these occur. Readers are encouraged to submit corrections. I seem to remember that this entitles you to the final ebook, when released; if you like, you can also then get the pb at a discount.  It's terrific.

There are practical reasons why one would be unlikely to sell off the pb once one had the ebook - given that these are about programming languages, you know you are likely to want several books open at the same time on your desk.  As I say, though, they are spectacularly beautiful books; if works of fiction looked that good I'm guessing free books would not flood the market with secondhand copies.



Error: Hachette/Little Brown

Nick Harkaway's picture

I note that Cory's article in PW has been amended to recognise that the mildly sinister missive came from Little, Brown rather than the entire Hachette group, although it seems unlikely that such a move would take place without any consultation. Although, of course, if it did, that also explains a lot about the industry in which we all work.

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