Also, why would Amazon care so much about how others market their content, to the point of trying to interfere? If your content is not worth $15, then nobody will buy it. If you suck at marketing, nobody will know to buy your (possibly great content). Why does Amazon get its hands dirty instead of simply giving you analytics-backed suggestions? Oh, that's right, because controlling the publishers is more profitable for them, and using their market position as leverage against publishers is a great way to do so.
The reason is: paper. Dead tree books weigh a lot and waste space. Therefore owning a library is a cost. Costs to move, costs storage space, costs effort to collate and maintain and protect.
E-books do not have that cost. Having a hundred e-books in your purse is a normal thing. Having a thousand? Well, it might make sorting through your personal equivalent of a branch library a little more fussy, but it won't weigh more or waste space.
People may not have more time, but they can divert time to books, and they can divert re-reading time to new-book reading time.
Owning a library has a higher value than owning a library of ebooks: social, decorative, nostalgic, works without power, easy share, can resell, etc. It more than evens out. But there is Steam effect - people will stockpile ebooks they don't read.
The error in your logic is that the size of the market for a given book actually depends on the price of that book. There's millions of books out there. Why would I pay $1000 for one when I can get so many others for $5? By lowering the price of books, Amazon increases the market size of each one.
There's also some behavioral economics involved, as I would assume people are far more likely to make a $5 impulse purchase (and look at that, Amazon has "one click send to Kindle!") than a $15 one.
Let me ask you this: would you rather buy one of the first 100 prints of Djikstra's "A Discipline of Programming" for $1000 or would you rather buy 200 Nancy Drew novels at $5/book? Books are not, to some extent, able to be substituted. Yes, if you are looking for a good vampire erotic fiction novel and are choosing between two unknown authors and one is priced at $15 and the other at $10, sure you would get the one priced at $10. But if both are priced at $10?
The point is that books are not bought as a simple commodity. Nobody says "I am low on books, let me go grab a random handful, based solely on price." No, people buy books with good reviews and by recommendation. When you are viewing volume book sales from Amazon's point of view, sure they all look the same. However, taking a closer look, a publisher might be able to price books more efficiently. If Amazon has helpful data to add to this, why don't they open it up and let everyone, publishers included, see it to help price the books better? Presenting a single data point in the huge possibility space of book prices is not a valid argument. Even if you let go of all the economics involved and stop thinking about how people buy books, don't you think that that ratio of 1.74 would be different for books priced at $12 and $17? Does this vary by month? Do certain genres have different price elasticity? Amazon is not trying to be helpful here. They are trying to squash publishers, gain control of the market and dictate prices, which they cannot currently do.
Because market data suggests that most people won't switch. They will buy book from "the new, hip writer X" or they won't buy at all.
Someone who intends to buy something by Malcolm Gladwell is unlikely to buy something from somebody else just because it's a little cheaper.
Amazon wants to maximize sales volume whereas the distributors and authors want to maximize profit. The two are often correlated, but not always.
Some books have only so much market. Amazon could declare an August special, The Critique of Pure Reason, leather cover, sewn binding, acid-free paper, yours for $5 and free shipping. Do you think that this would rocket it up on the charts?
This is only part of the picture. You're missing genre / topic which is a huge component.
They make $3 on every sale, so obviously it is in their interest to set the price to maximize revenue.
Your whole bit about "everyone doing it" and "race to the bottom" is an instance of the zero-sum fallacy.
All of the evidence points to the fact that people have more than sufficient entertainment options and have set their budgets at a fixed point.
It wasn't piracy that killed music. It was the fact that the prime purchasers of music had a fixed entertainment budget and switched to buying video games aka. zero-sum market.
Once piracy becomes an easily accessible and socially acceptable mainstream habit, it's going to be very hard to claw back market share.
Right now, ebook piracy is by far not as easy and convenient as video or music. That could change as long as ebooks remain overpriced compared to physical books, and DRM impaired to boot. (Sooner or latter the general public is going to find out the hard way how much DRM devalues their "property".)
I dunno about the US, where Amazon is king, but in most countries ebook adaption is stagnating and price is quoted as the #1 reason.
You seem to have not understood what books are for.
So the "total revenue" figure is pretty abstract; publishers (or authors, or distributors, or anyone, really) don't need to consider media as completely separate; what matter is total sales, including paper, on-demand, and ebooks.
So, if Amazon takes $5, then whoever provided the book lost money on that deal. (Profit went from $10 to $5 while sales did not double). In fact, if Amazon takes more than about $4, it's a wash (which is actually a loss because some of those 75% more customers would likely have bought the book later at a different price point). If, Amazon takes $3, profit goes up by about 2% maybe 3%, if and only if that 74% increase occurs. If that increase doesn't happen, sucks to be the publisher, but Amazon's profit went up.
If Amazon wants to move more Ebooks, why doesn't Amazon reduce the amount they take? Simple, because it doesn't pay in profit. So, Amazon wants somebody else to eat the price drop. Not exactly altruistic.
All of the arguments about Ebook (less distribution cost, marginal volume cost, etc.) apply MORE to Amazon than the publishers. The publishers at least have to find authors. Amazon does, what, exactly, to justify taking $3 an Ebook? Um, right, it provides the market domination that is effectively a monopoly to the point that it thinks it can dictate pricing to publishers.
That seems like a hard won data point, I'm surprised they threw it out to the public domain. It makes intuitive sense to me though. I buy a lot of ebooks and when they're really cheap I just buy them immediately rather than track them somewhere to go and purchase when I have time to read them later. My kindle has probably a half dozen books to read on it at the moment, and I imagine if they were $20-30 each I wouldn't be that flippant about it.
"Why not buy this game if it's only $5?"
20 minutes, 10 purchases, and $50 later with another set of titles to stale in the library.
"Why buy this game if it's not $1?"
I know there's other factors at work, but this is what publishers are (understandably) afraid of.
https://kdp.amazon.com/help?topicId=A22DBITFA52H1S
I imagine there's some sort of non-disclosure agreement attached to specific results (which is why I said effectively), but the universe of people that have access is so large (every KDP author), I don't think that matters much in practice - especially for general data points like this one.
Shots fired
What do publishers even do with regards to e-book distribution? Are they going the way of the record label company?
IMO they are going the way of the record label. Some publishing houses and record labels will continue to add value, while larger ones who used to use their brand to add value and had scaled to a point where that is their main value proposition are going to have a hard time, as we are seeing right now in OP.
Are they worth 35% of the profit? I don't think so. But probably more than 0%. I personally think it should be 70% author, 20% publisher, 10% Amazon.
If Amazon were worth only 10%, it would be irrelevant and publishers would go elsewhere.
If the combined value to an author of a publisher and Amazon were only 30%, they wouldn't rely on either so heavily. But here we are.
Second, publishers also make losses on books that don't sell and that they have to recover. The majority of books don't actually sell a whole lot of copies, so the fixed costs associated with producing a book can be a pretty high percentage of revenues for the average book.
Finally, publishers provide editing, translation into foreign languages or negotiation with foreign publishers (assuming your agent didn't retain translation/foreign publication rights), production, marketing, accounting and sales services, distribution, and warehousing (for dead tree books).
Note also that you can equally ask what Amazon provides with regards to ebook distribution: In the end, it's just another middleman that got a head start because it was first to market with the Kindle, but is otherwise unnecessary. In some markets, publishers selling directly to readers (on non-Kindle platforms) makes up a significant part of sales.
Are venture capital firms going to go the way of the record label company?
This is an important point when you consider the vendor lock-in of the Kindle "ecosystem." Instead of "e-book," a better phrase might be "Kindle software."
Amazon should be careful of throwing stones about illegal collusion as they approach market domination. It will be very easy for them to make a mistake which runs afoul of anti-trust law.
Sale vs. licence
These are two separate issues.
http://gyrovague.com/2013/03/26/down-down-down-books-e-books...
Some crappy code for pulling these stats from Amazon:
http://whatever.scalzi.com/2014/07/30/amazons-latest-volley/
(Shorter Scalzi: Amazon are presenting as "good for authors" policies which, in fact, are only indisputably "good for Amazon"; the only authors they might be good for are those who cleave unto Amazon like limpets and don't do business with the other 70% of the book distribution business, and even then, it's somewhat questionable: Amazon's T&C's for authors publishing directly are invidious and include binding arbitration clauses and boilerplate giving AMZN the right to vary their terms unilaterally -- meaning AMZN basically have those authors by the short and curlies, in a manner that no real publishing company even attempts in their author contracts.)
"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."
So Scalzi and Hachette want me to subsidize Barnes & Noble? Mighty nice of them.
"...it appears to come with the ground assumption that books are interchangable units of entertainment, each equally as salable as the next, and that pricing is the only thing consumers react to."
That's an interesting statement to appear next to the Kirkus review of Lock In: "...yet more evidence that Scalzi is a master at creating appealing commercial fiction." My impression is that Amazon is more correct than Scalzi concerning the specific market in "commercial fiction".
Further, I'd be a little more sympathetic to him if he didn't include the argument, "...then I feel perfectly justified in considering your cost of production position vis a vis publishing as entirely hypocritical," if the publishing industry had not made that same argument for all of the price increases in the thirty years previous."
And then, of course, there's the bit about "Which is to say that between my publisher and Amazon, one of them gets to utter the immortal Darth Vader line “I am altering the deal. Pray I do not alter it further” to authors doing business with it and one does not."
It contrasts entertainingly with the fact that neither he nor his publisher are operating under the terms of the Kindle Direct agreement with Amazon, although I suspect his publisher has more authority than he admits, if he wants to get anything new published. Also with the fact that "Amazon is just 30% of the market."
I easily see #3 resulting in the bottom end selling at $5 and the top end selling at $9.99 because I suspect the reason Amazon picked that number is, overall, it generates more total sales [by dollar volume]. One of the few things Amazon is good at is accurately pricing products to maximize gross revenue.
That being the case, I don't think its likely to be the disastrous price point Scalzi thinks it is even if it squeezes the publisher's margins on the higher end books. Ebooks, once created, are a sunk cost...not an ongoing one so maximizing gross revenue works in everyone's favor.
What you're missing is that, from the author's point of view, ebooks are not interchangeable. A unit of my sales is not usefully interchangeable with a unit of Scalzi's. To Amazon we're fungible produce, but to us we're suppliers of bespoke one-of-a-kind products. The Amazon move squeezes those of us who are able to sell at a higher price point -- like me (current lead title priced at $12.99 on Amazon and selling jolly well; and at £7.99 in the UK, and doing well there, too).
Amazon's proposed $9.99 guillotine on pricing would basically impose a 30% cut in my income if sales volume of my titles remains static. And I haven't seen any evidence that the price elasticity of demand for novels by Charles Stross will respond to crude pricing signals the way that aggregate demands for all books will do across the board.
". And that 74% increase in copies sold makes it much more likely that the title will make it onto the national bestseller lists. (Any author who's trying to get on one of the national bestseller lists should insist to their publisher that their e-book be priced at $9.99 or lower.)"
Well, that's all well and good until everyone prices their e-books at $9.99 or lower, at which point we're back to square one. Unless the objective is to then have people who want a leg up to price their books at $8.99...
Also got a bit nasty when they mention, "ilegally colluded with their competitors" - was this ever established? I thought the publishers settled before it went to court, and only Apple was found guilty.
Finally, Love how Amazon is now trying to drive a wedge between the publishers and authors - "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."
This is Amazon turning up the heat on the publishers. Remember, Amazon/Bezos are ruthless - they could not care at all what is fair - but they are going to use every tool in their kit to win at this negotiation.
I fail to see how the authors getting 35%, unhindered by the publisher's whims, can be unfair.
Does any company of that size care what's "fair"?
In what sense? In the sense that we know to a fairly high degree of certainty that it happened? Yes. In the sense that you would never lose a libel suit for saying that it happened? Also yes. In the sense that a final judgment was entered in a trial case to this effect? Only then would the answer be no.
No. At least not according to OP. They suggest that books compete against other forms of information and entertainment and that below $9.99 a larger share of that market would be occupied by ebooks.
Is this an implicit admission that Amazon is eating the cost of those returns? Or do they mean something specific like the physical infrastructure for returns?
Publishers don't want paperbacks back, they just want proof that the book didn't sell. That was always just the front cover. You may have shipped the books to someone who did the stripping, but I very much doubt the publisher ever saw the text block.
What % I get when it's sold (kindle or dead tree) is absolutely none of Amazon's business. I negotiated with my publisher (not Hachette), I'm happy with the results, I don't need other people telling me what's best.
If you're an author the absolute best you can hope to get is 35% of the sale price -- that is, the price your readers are willing to pay to read your work. Usually, it's even much less.
The publisher keeps at least 35%; the distributor, 30%. It's unclear to me what value these actors are offering, for this amount of money.
Disintermediation hasn't happened yet (what happened is, Amazon took the place of bookstores, and publishers are still around).
But disintermediation will happen eventually; when that day comes this discussion will sound silly and strange.
But what is the alternative for those customers: do they maybe buy the paperback version instead? If that's the case, Hachette might miss out on revenue, but they also keep their paper-based business running and stay somewhat independent of Amazon.
Their post is titled "Update re: Amazon/Hachette Business Interruption". However, they don't state what their specific demands are and why the business was (in their words) interrupted.
Amazon's proclaimed objectives aren't as important as knowing what their specific demands (from Hachette) are. I'm not a book-author, but as a developer, I set the prices of the software products I develop (Apple and Google let me do that, Amazon doesn't). So my sympathies are with the book publishers, but even if they weren't, I'd still like Amazon to explicitly spell out their demands instead of using self-serving pricing elasticity theories to sway public opinion.
Won't this mean actually the reverse?
Well, with Amazon there could be lost sales due to refusing to stock/sell.
Despite Amazon's talking points, they are relatively price inelastic. Perhaps, right now, they aren't, since people are still dealing with market novelty, but over the long term, time is a bigger sink than money, when it comes to books.
If I stop collecting books, can I become a people? Is there like a specific process or licensing body?
I'd be surprised if your data was better than Amazon's.
Ever "follow" someone on social media because you like their writing? Collecting books from an author is like that, except that you're also feeding the author, so they can write more books for you to read. So you get 64,000 words in a book instead of 64 words in a tweet.
A lower starting price increases the initial pool of people who are exposed to an author's fiction or non-fiction worldview. Authors need more input into the price curve which modulates growth of their community of readers. Neither publisher (old boss) nor Amazon (new boss) is maximizing the use of technology to improve relationships between reader-people and writer-people.
I'd bet your average book consumer, with rows and rows of beautiful, trendy, or important books on his shelves, has read maybe 10% of those tomes. If that. 10% is probably a generous figure. Even true bibliophiles have read maybe 25-50% of their books.
There is a long and well-known phenomenon in the publishing world, which I'll call "trophy collecting." It's the process by which someone buys and conspicuously displays popular or well-regarded books on his shelves, mostly for the social esteem of being seen to have them. This is, more or less, how most literary fiction and wonky nonfiction gets sold.
I'm reading less at the moment than I used to, but I regularly have periods of reading around three novels a week. If it were not for the existence of libraries and second hand book stores, I would find money to be a far bigger restriction than time, especially when I was a teenager.
