Thursday, April 12, 2012

The Publishing Industry: Misguided But Not Doomed

By now most have heard about the government's civil antitrust lawsuit against Apple and five of the big six New York publishers. Basically the government is accusing these groups of price fixing ebooks. They're accusing them of this because they were in fact, price-fixing ebooks. There's really no other way to look at it which is why three of the publishing houses accused have already settled out of court (although they admit to no wrong doing...a line they undoubtedly learned from the executives of Goldman Sachs).

They were price fixing ebooks because Amazon was selling the ebooks for less than the wholesale price they were paying.

That's right, Amazon was taking a loss in order to establish market dominance and sell their Kindles. That freaked the publishing world out because they figured that Amazon might eventually be in the position to demand that publishers lower their wholesale price...although I believe the Publishers' official suitable-for-public-consumption argument is that pricing ebooks too low lowers the value of the book (guess someone should tell this to the libraries).  

The publishers' fears aren't unreasonable. Amazon is a powerhouse and they're ballsy as hell. It's not difficult to imagine them negotiating the ebook wholesale price down.  I don't think they'll do it tomorrow but it's probably on the horizon. 

And publishers are not in the mood to negotiate. As it stands now, their profits are razor thin. Yes, ebooks sales are on the rise but not enough to compensate for the 17% decrease in print book sales. Shockingly, of every 1000 books published in 2009 only 62 have sold more than 5000 copies

For publishers, these are scary times and if Amazon makes them cut their prices these will be terrifying times.

Unless publishers start thinking outside the box. This is not something publishers are usually very good at. They have a business model that was basically formed around the time the printing press was invented and they're sticking to it. Pricing has never been a big part of this model. Over and over again you hear decision makers in the publishing industry explain that if people want an ebook they won't care if it's priced at $9.99 or $12.99. They'll pay those extra few dollars without thinking twice about it because they REALLY want that ebook.

The publishing industry may be the last industry that thinks like this. Even Neiman Marcus has recognized the need to employ competitive pricing. Times are tough. People are budgeting, their credit cards are maxed out. gets over half a million hits a day from people who are looking to save, on average, a total of $0.34 at the pump. 

And $12.99 just sounds so much bigger than $9.99. Yes, if a reader really wants the newest book from his favorite author he may splurge and get the ebook for $12.99 but any thought of buying two ebooks during that same shopping spree are thrown out the window which effectively dooms new authors trying to build up a readership. 

So then the question becomes, how do you cut your prices without decimating your profits? The publishing industry has decided to follow Greece and Spain's example. Cut, cut, cut and then feign surprise when the economy continues to shrink and their citizens (read authors) start trying to immigrate to other countries (like the land of self-publshing or Amazon imprints). I've been alerted to two typos in my self-published release, Vanity, Vengeance & A Weekend In Vegas. I've been able to fix them but more importantly, when I was being published by a traditional publisher a LOT more typos got through. That's because most publishers have cut the number of copyeditors they employ to a barebones level.  The few copyeditors they have left are overwhelmed and are so pressed for time that they miss stuff. A lot of stuff. So you can't say that, at least from a typo/spelling perspective, the publishing industry is offering authors or readers a better service/product than what's being offered by self-published authors. 

But there's marketing, right? Self-published authors don't have the marketing capabilities of publishers.

That's true...but in order for marketing capabilities to be useful they have to be implemented.  In an effort to cut costs publishers have shifted the expense of marketing onto their authors, basically letting many of their top selling writers know that if they want an ad they will not only have to pay for it, they'll have to design it too...and decide where that ad should be placed because they don't want to pay a marketing person to figure any of that out. Publishers will still put their A-listers up in nice hotels while they go on smaller and smaller tours but they're not really looking into new and innovative ways to market their products. They're just hoping their authors will figure it out. Authors are trying to pick up the slack but not all of us have marketing degrees (oddly enough, I do have a marketing degree but I'm the exception, not the rule). In a time when there are fewer and fewer bookstores and newspapers are being read online (piecemeal style) brainstorming and innovation becomes important. Amazon is successful because they are ALWAYS coming up with a new angle. 

The publishing industry's only new angle has been price fixing ebooks and that's about to go up in smoke. 

Don't get me wrong, I don't think the publishing industry is doomed. I don't even think that it's going to be entirely dominated by Amazon and self-published authors. I do think that the publishing industry is going to have to rethink their business model. They might want to think about improving their own websites so they can sell to readers directly (Harlequin is the only publisher that does this effectively...and the retail outlets they sell to don't seem to mind). They may have to invest in some market research and find ways to improve their direct-target-focused marketing strategies. They may have to play with their pricing.  

But they can't engage in price fixing. If they're going to survive they're going to have to be more creative than that and they can't expect that their authors are going to come up with marketing strategies that will save the entire industry. I think they'll get that...eventually.


Mikaela said...

This. All of it.

As a reader, I am much more likely to buy lower priced e-books than the 12.99 versions. If I can get 4 books for 15 dollar, why on earth would I pay 13 dollar for one?

I am hoping that more publishers realise the wisdom of Sourcebooks new book club. Pay 10 dollar for 6 months, and get 6 free books plus discounts ( which isn't that much bigger than the cut retailers get). Oh, and DRM free. I think that is the future.

kyradavis said...

I absolutely agree. Book publisher's are fretting that if they have those kinds of book clubs they'll have to redesign the compensation package for authors (right now authors get a percentage of the retail price of every book individually sold). The fact that renegotiating contracts they currently have with a lot of willing authors seems like a challenge to them shows how rigid the thinking of the publishing industry is. They honestly have to rethink everything.

catslady said...

Fascinating. What I don't understand is surely it is cheaper overall to sell an ebook than a print book? or am I wrong? I think authors should get paid the same and no less. But isn't the cost of actually having to print a paper book a lot more?

Terri Osburn said...

I have no idea how I missed it, but I didn't know any of this. Well, I knew the business model was seriously outdated and pricing was a mess, but not the rest.

Thank you for bringing me up to date in such a clear and thorough blog.

Terri Osburn said...

Here's a blog about that very thing, catslady. It was just brought to my attention today and I found it very interesting.

Robin Kaye said...

What a great blog, Kyra. Everything in the publishing industry is changing so quickly with the advent of e-books and the demise of Borders, I agree that the only way publishers are going to survive is to think outside the box.

catslady said...

Thanks, Terri. It's all very confusing I'm afraid. But I am shocked that paper is still so cheap considering what we are hearing about the disappearance of trees. I think the younger crowd will embrace ebooks more than us older folk that are use to and love our print books. Space is a very big problem.