Tag Archives: Amazon
Publishers Weekly reports that “After years of false starts, bundling e-books with print books may have gotten the spark it needed Tuesday morning when Amazon announced an October launch date for Kindle MatchBook. Under the program, customers who buy—or have bought—print editions of titles can buy the e-book at prices ranging from $2.99 to free. At launch, Amazon expects to have over 10,000 books in the program, ranging from new books to books that Amazon began selling when it first opened in 1995.”
For background here’s a piece we published several years ago:
Bundling is an age-old merchandising technique in which customers are offered a discount if they purchase two related products. In the case of books, it’s a combo of two formats, print edition and e-book. Though the technical barriers to delivering both in one transaction are coming down, the real issue is how much to charge for the bundle. A little test we gave readers a few years ago will give you a sense of how challenging the concept is:
When you purchase a print book you should be able to get the e-book for…
a) the full combined retail prices of print and e-book editions
b) an additional 50% of the retail price of the print edition
c) an additional 25% of the retail price of the print edition
d) $1.00 more than the retail price of the print edition
The choices aren’t just economic but philosophical, reflecting just how aggressive a publisher wants to be and the various thresholds at which the publisher believes consumer resistance will melt. A good argument can be made for each, and as the bundling issue warms up you can expect to hear them all endlessly debated.
The time will soon come when publishers will have to choose one of the above strategies and put it into effect. Misjudging consumer attitudes could prove to be a big mistake and possibly a ruinous one. My own view? I strongly believe that the e-book version should be included free of charge with the purchase of the print edition. What do you think – and why?
Details in Bundling: Publishing’s Next Battleground.
This blog post was originally published on Digital Book World under the title Why Do We Have to Choose Between Print and Digital?
In our previous posting we pointed out that today’s “speculative” publishing model, based on the returnability of unsold books, is no longer viable. It has served us well for the better part of a century. But the digital revolution has created a highly successful, efficient new model relying on pre-ordered and prepaid books printed on demand.
The publishing industry has had decades to deal with its addiction to returns. I have been beating this drum in vain for decades including an editorial in Publishers Weekly in 1992 (see Behind Publishing’s Wednesday of the Long Knives). Now it is too late. The old way can no longer be sustained. The good news, however, is that it no longer has to be. Amazon has demonstrated that the prepaid model is mature and ready to replace the old speculative one.
Publishing oracle Mike Shatzkin would seem to support this vision of things to come. In a recent article he projected “about half of new book sales will be made through online purchases if we count the print book sales made through online retailers (mostly Amazon). Online print sales can be served through inventory generated on demand. So, if these estimates are right, we are less than three years away from a publisher (or author) being able to reach half the market for a book without inventory risk!”
“Every publisher,” he adds, “should be preparing for the disruptive effects” of this paradigm shift. Among his recommendations are:
- Publishers are going to really have to rethink the development process for their ebooks.
- It will be eminently sensible to launch books with a no-inventory strategy and move to press runs with returns allowable when reviews or sales have proven that it makes sense…The idea of printing and distributing speculatively will make less and less sense as the potential market to be reached by that tactic diminishes as a share of the whole.
- By the end of 2012, we’re saying half of all the sales potential can also be reached with the product without a local nexus: no requirement of local inventory or any shipping or revenue collection facility beyond your digital distribution and print-on-demand partner.
- Because books or ebooks will be purchased by half of their customers electronically, the potential exists to know exactly who those are and to establish interaction with them…This opportunity presents a new battleground for competitive advantage that publishers will have to pursue both for marketing and for author relations.
- Publishers will have to start devoting the bandwidth and resources to direct sales that they devote to intermediary sales today. (See Direct Sales: Publishing’s Last Stand.)
- There’s an inevitable concurrent downward spiral of brick-and-mortar retail inherent in this forecast that sales are moving online. The nearly-limitless online selection has been an increasingly powerful magnet since the day Amazon opened and in the new paradigm there will be a growing body of talked-about content not visible on store shelves.
“On-demand printing is very much in demand in 2009,” says David Taylor, president of Lightning Source, the biggest POD supplier in the business. “The business model, quality and cost structure have matured considerably in recent years. With POD, publishers can better match supply to demand, thus eliminating the risks and costs associated with the book market….A globally distributed print model, where publishers use the same file to print at multiple locations that are closest to the origins of the orders, has given the book industry a platform to publish smarter. POD is no longer an optional novelty; it is an integral and essential part of the future of publishing.”
By now it must be clear to all but a handful of diehards that the business model based on returnability of books for credit, a practice instituted by the trade book industry some 75 years ago, is no longer viable. In fact it has proven to be a bargain with the Devil.
The original principle on which it was instituted – to encourage bookshops to invest in otherwise risky literary forms like first novels and poetry – was an admirable one, and publishers can look back with pride that their good will made possible the launch of countless great works and authors. But soaring returns have rendered this practice utterly dysfunctional. Return rates approaching or even exceeding 50% have slashed profit margins of trade book publishers to single digits, no digits or negative digits.
Though the industry managed to keep a lid on returns until the latter part of the 20th century, in the post-World War II era the system deteriorated as return rates escalated, triggering cash shortages. The consequences were catastrophic: countless underfinanced houses were driven into the arms of larger ones. These big fish in turn succumbed to even bigger fish until we ended up where we are today – with a handful of bloated leviathans. But even they have discovered that immense scale offers no immunity from the same toxic business model that forced smaller houses to give up the ghost. Huge publishers may have more blood to hemorrhage than small ones but eventually they succumb too.
Yet, despite decades of proof that returnability is a sucker’s game, the publishing industry is incapable of curing its addiction to the practice.
The time has come for publishers to accept the fact, now glaringly apparent to all but those in total denial, that no business enterprise can afford to sell just half or even two-thirds of what it manufactures – and to foot the bill for the return and disposal of the unsold other half.
Some pundits ascribe the woes of our business to printed books themselves, saying that the medium is no longer appropriate for our times. In truth nothing is wrong with printed books. Everything is wrong with the way they are distributed.
And the way they are distributed is appallingly profligate, taking a dreadful toll on the environment in terms of paper waste and carbon footprints. The tortuous methods by which bookstores account to publishers and publishers to authors are imbecilic and arguably fraudulent. An alien visitor tracking the journey of a printed book today from editorial office to printer to warehouse to bookstore, back to warehouse and then to remainder jobbers or pulpers would have genuine reason to wonder whether there is intelligent life on this planet.
For over a decade we have had before us a technique for publishing books called print on demand. Those who witnessed its introduction at a book expo in 1998 declared the process revolutionary. Though it’s taken a decade or so to refine the technology, they were absolutely correct. The delivery system has matured and begun to make serious inroads on the traditional one. Though representing only 2.5% of all book production in 2009, it is expected to grow at 16% per annum according to David Taylor, president of Lightning Source, the nation’s biggest POD firm. The first generation of Espresso POD machines, now being installed in libraries and bookstores, promises to expand the technology’s popularity even further. As anyone who has seen a demonstration of the Espresso can testify, the process itself is a technological miracle and will most certainly be miniaturized. It is easy to imagine a day when POD kiosks – in bookstore or non-bookstore venues – will issue books from an infinite inventory of digitally stored titles.
But it is not just the technology that is so exciting to contemplate. It’s the business principle underlying the process that promises the invigoration and perhaps even the salvation of printed books.
The Speculative Model
In today’s traditional model, which might be termed “speculative,” publishers relying on information gathered from booksellers make educated guesses about how many copies to print and distribute. The sale of a book occurs only after it has been published, placing the burden of financing its publication squarely on the shoulders of the publisher. To the degree that the publisher’s forecasts are incorrect, unsold copies will be returned. Settlement of retailer accounts are delayed or adjusted while returns are processed, delaying desperately needed cash flow to publishers. Publishers in turn must delay settlement of royalties to authors for months and even years until returns calculations are finalized.
In short, the entire system is founded on a negative principle: it’s not how many copies of a book are sold, but rather how many are not returned. Everybody in the chain suffers, from bookseller to publisher to author. Even readers suffer because the cost of all this inefficiency is passed along to them in the form of higher book prices.
The Prepaid Model
Now consider the business model created by print on demand, which we’ll call “Prepaid”. When a book is ready for sale it is displayed on the website of a publisher, author, retailer, or all three. Customers may browse or sample it online. When they decide to buy it they purchase it on the website, charging it to their credit card. Until that moment the physical book does not exist: it is simply a digital file on the server of a printing press. Unless the book shipped to the customer is defective, it is seldom returned. By adopting the print on demand model, the returns problem disappears. Settlement of bills is prompt. Whereas traditional publisher issue royalty statements semi-annually, print on demand makes quarterly or even monthly settlements possible – without reserves against returns!
Do the math: 30, 40 or 50% returns for the speculative model vs. 0% for the prepaid. Case closed. Or so you would think. Yet traditional publishers cling to the topsy-turvy model of paying a lot of money upfront for books they believe will be hits, then making educated guesses on the size of the audience, then overprinting, then recovering unsold stock and remaindering it or sending it to a pulp mill.
These practices can no longer be sustained, and the good news is that they don’t have to be. Amazon has demonstrated that the prepaid model is mature and ready to replace the old speculative one like a creature that has outgrown its carapace.
In the second installment of this posting we’ll hear what a well known publishing industry oracle thinks the industry must do to prepare for paradigm shift.
It takes a lot to leave me speechless but when I read that Amazon was contemplating selling used e-books I was too flabbergasted to make sense of it. Luckily Brian Merchant, a freelance writer, editor and blogger (http://www.treehugger.com/author/brian-merchant/) expressed his dismay, in a posting on Motherboard, better than I could ever hope to. So, with his kind permission, I reproduce his piece in full below.
By Brian Merchant
Amazon has a patent to sell used ebooks. When I first scanned that headline, I thought it must be some Onion-esque gag, and I’m sure I wasn’t alone. Used e-books? As in, rumpled up, dog-eared pdfs? Faded black-and-white Kindle cover art, Calibri notes typed in the margins that you can’t erase?
Barely-amusing image aside, used ebooks are for real. Or at least have a very real potential to become real. See, Amazon just cleared a patent for technology that would allow it to create an online marketplace for used ebooks–essentially, if you own an ebook, you would theoretically be able to put it up for sale on a secondary market.
The approved patent describes the process:
Digital objects including e-books, audio, video, computer applications, etc., purchased from an original vendor by a user are stored in a user’s personalized data store … When the user no longer desires to retain the right to access the now-used digital content, the user may move the used digital content to another user’s personalized data store when permissible and the used digital content is deleted from the originating user’s personalized data store.
Used ebook shoppers could buy your digital copy, directly from you, and Amazon would facilitate the transfer of files–and it would pocket a fee.
It’s a fascinating concept, really, but it could ultimately be devastating to the publishing industry and, potentially, to authors. First, the elephant-sized absurdity in the room: a “used ebook” is identical to a new one. It is a precise digital reproduction. The file does not age, it cannot be damaged, it cannot be altered–therefore, it is worth no less than any other copy, and the only premium purchasers of “new” ebooks would be paying for would be the right to read it first.
And that’s where we start running into problems. Nobody, besides die-hard fans of a given author on a big release date, would ever care enough to pay extra for digital dibs. Used ebooks would eliminate nearly all the incentive to buy “new” ebooks. And Amazon could be banking on that, even though at first blush it might appear to undercut its own business.
Bill Rosenblatt, a copyright expert and witness in numerous digital content patent cases, argues that the online retail giant may be angling to push publishers out for good with such a move. He explained his case to Wired:
Rosenblatt believes that a digital resale marketplace wouldn’t ultimately make Amazon a lot more money on books or music, at least not at first. But he thinks it would move much more of Amazon’s digital content business beyond the interference of publishers, just as publishers can’t dictate the terms of, for example, the sale of used physical books on Amazon. Just as with physical books, publishers would only have a say — or get a cut — the first time a customer buys a copy of an e-book. The second, third and fourth sales of that “same” e-book would be purely under Amazon’s control.
“If Amazon is allowed to get away with doing resale transactions without compensating publishers, then what they can do is say, ‘hey authors, sign with us and we’ll give you a piece of the resale,’” he says. “That could attract authors who might otherwise sign with traditional publishers.”
It would be an exceedingly brazen move on Amazon’s part, and would likely require the combined strength of every copyright lawyer its side of the Mississippi, but it’s entirely possible. And it’s bad news for authors too.
Because, what if they don’t sign on? Well, on the grounds that publishers and authors don’t get a cut of physical used books, Amazon could easily seek to justify refusing to pay writers for secondhand transactions. That’s what worries John Scalzi, the president of the Science Fiction and Fantasy Writers of America.
“I’m awfully suspicious that it means nothing good for writers who want to get paid for their work using the current compensation model,” he writes on his blog. Scalzi foresees writer-led class action lawsuits aplenty should Amazon ever try to cut out author royalties on ebook resales. And Scalzi agrees that it’s trouble for the traditional publishing industry, too: “if I were a publisher I really wouldn’t have any doubt Amazon wants me dead,” he writes.
Still, the whole phantom of a secondhand ebook marketplace might not ever amount to much. As Marcus Wohlsen notes, Amazon may have secured the patent simply to bury it, to eliminate any possible threat of a secondhand ebook market to its standard business. It may deem the legal threats too great and deign not to push on. Or it may realize that if it ever admits to boxing out authors, consumers may revolt and just download pirated files or directly from author sites.
If Amazon does try this stunt, however, it will be attempting to seize on our nostalgic understanding of physical secondhand marketplaces: many readers love used bookstores and swapping well-worn paperbacks. Thanks to the cloud and increasingly bottomless RAM, the bookshelves of the future are near-infinite–we have no need to “swap” files. We can copy and forward them. Amazon would be relying on the notion that our habits of buying and selling tangible goods are deeply inculcated enough that we’d overlook the absurdity and potential exploitation of a secondhand ebook market.
Used ebooks are a paradoxical anachronism, a cannily capitalistic construct whose only aim is to squeeze authors and publishers. Again, it’s fascinating–but it’s also complete bullshit.
I’m really confused. On November 16, New York Times blogger Nick Bilton reported that the US Patent Office had approved Apple’s patent on the feature that enables you to virtually turn pages on your e-reader. But over two years ago, in August 2010, we reported that Microsoft had filed a patent application for the very same touch-screen page-turn! (See Can You Be Sued for Turning a Page?) What happened to Microsoft’s application? Did the Patent Office misplace it? Did Apple buy Microsoft out? Did Apple do some sort of end-around on its rival?
In fact, Microsoft’s patent had some special wrinkles such as the ability to flip a lot of pages at once (y0u do it by dragging your finger down the right margin). Another is pretty mind-blowing. “Sources other than fingers may be used to execute a page-turning gesture,” the filing stated. Anybody got an idea what else you might use to turn an e-book page? Your nose? Your elbow? Or some other, unmentionable, body part?
Whether or not Apple’s patent provides for flipping pages with organs other than fingers, they now own the exclusive right to the page-turn, and God help you if you infringe it. But, as Bolton points out, you risk a receiving a lawyer letter from Apple for violations that border on the bizarre. “The company has also been granted patents for an icon for music (which is a just a musical note), the glass staircase used in the company’s stores — yes, stairs, that people walk up — and for the packaging of its iPhone.”
Apple isn’t the only outfit sewing up everything but your right to breathe. Amazon was sued by a company claiming violation of its patent on one-click ordering online. And years before rival Barnes & Noble released the Nook, Amazon had patented the same underlying technology but conveniently didn’t reveal it until the Nook came out. (Never heard what happened to that claim.)
Back in 2010 when I reported on Microsoft’s page-turn application I said some pretty unkind things about patent lawyers. I called them “the ticks of the Digital Age. After quietly applying for a patent they set up their nest on a tree branch and patiently wait – sometimes for years – until a fat cat walks underneath their perch. Then they drop on their victim’s neck and drain its blood.”
Nothing I’ve heard since then has altered that opinion.
This blog post was originally published by Digital Book World with the title Who Owns Your Right to Turn Pages?
The idea that your next-door neighbor’s opinion may affect your decision to buy or pass up a book seems unlikely. True, word of mouth has always been a factor in the fate of successful books, but usually the mouth that the words come from belongs to someone you know, not an anonymous name on a website.
But wait — when you search your Zagat guide for a restaurant recommendation, do you know who has written the review? No, but in all likelihood it’s a restaurant patron with no more professional reviewing credentials than yourself. That doesn’t stop you from saying, “Let’s go here!” Some of your neighbors thought the food was good, the place clean, the atmosphere pleasant, the service excellent, and the prices right, and that’s good enough for you.
In short, we live in an age when peer review is meaningful if not significant, and Amazon.com has used this fact to create a cadre of reviewers who must be taken seriously.
Last May, Target, one of America’s biggest retail chains, announced it would no longer carry Kindles. Today it’s the turn of an even larger chain – indeed, the country’s largest. Wal-Mart will no longer carry Kindles either, report Stephanie Clifford and Julie Bosman of the New York Times.
Speculation focuses on the practice known as showrooming. In showrooming, customers enter a retail store and, when they have located the product they’re shopping for, walk out, go home and purchase the item on the Internet at a lower price. Some shoppers simply scan the bar code of the product in the store and order it online on the spot. This in effect makes the brick and mortar store a mere “showroom” for customers to examine products they have no intention of buying there. Last Christmas Amazon actually promoted the practice, alarming and outraging many stores and store chains. We know of at least one publisher that fought back by discontinuing distribution of its books on Amazon.
Though Wal-Mart didn’t give a reason for ditching Kindles, it appears that it was Kindle’s Fire tablet that pushed the retailer over the line. The Fire, a far more all-purpose device than the original Kindle e-book reader, can be used to buy from Amazon countless products carried by Wal-Mart, and buy them perhaps at a price lower than Wal-Mart. “’The Kindle Fire is the Trojan horse,’” the Times reporters quote the head of an e-book recommendation site. “’It’s a shopping platform that covers so many more categories than e-books. It affects Wal-Mart in a different way than the early Kindles and e-readers did.’”
Clifford and Bosman are the same team that wrote up Target’s action last spring. Here’s our posting about that event, and all you have to do to understand what’s going on is substitute “Wal-Mart” for “Target”.
Independent bookstores aren’t the only retailers chafing at the practice of showroom. Just ask Target.
The latest objector is Target, the giant retail store chain. Executives, reacting to what they perceived as showrooming of Amazon’s Kindle e-book reader, informed Amazon they would no longer carry it.
Though Amazon sells most of its Kindles on its own website, many customers like to examine them physically, just as they may now do with Kindle’s rival, Barnes & Noble’s Nook, which may be “road-tested” by customers in B&N’s brick and mortar bookstore. Recognizing consumers’ natural impulse to touch, Amazon began distributing Kindles in big retail chains.
It’s hard to predict what impact Target’s action will have on Kindle sales. With nearly 1,770 stores in 49 states and gross revenues of $65 billion, boycott of a product by Target can have a seriously detrimental impact on any supplier. More ominously, if Staples, Best Buy and Wal-Mart, which also sell Kindles, see themselves as showrooming victims and follow Target’s lead, it could put a crimp in Amazon’s sales – and its image.
For the complete story read Target, Unhappy With Being an Amazon Showroom, Will Stop Selling Kindles by Stephanie Clifford and Julie Bosman in the New York Times.
This blog post was originally published by Digital Book World under the title One Showroom Too Far: Why Wal-Mart Shut Its Doors to Kindle.
Of the many companies that have reinvented themselves in the violent upheavals of 21st century publishing, Ingram Content Group (as it is now called) stands out as one of the most resourceful. It has transformed itself from what Publishers Weekly described as “the book industry’s quintessential middleman” to what former CEO Skip Prichard called a “centerspoke of an industry in transition.” At its core is the mission of “helping content reach its destination,” as Prichard put it, and to enable publishers do that efficiently whether the product is tangible or digital.
It’s likely that Amazon admires Ingram for the same reasons, for it has just announced that it has engaged Ingram to distribute the e-books produced by its recently created publishing company. Those e-books will still of course continue to be sold on Kindle, but they will also be available throughout Ingram’s vast network of retailers, many of which are competitive with Amazon.
Laura Hazard Owen, reporting the story exclusively on PaidContent, writes that “The deal, with Ingram’s digital distribution arm CoreSource, will make the ebooks available to Amazon competitors like Barnes & Noble, Apple and Kobo — though, of course, those competitors aren’t compelled to stock Amazon titles.
“The idea of Apple selling Amazon’s ebooks,” adds Owen, “is particularly interesting, given the Department of Justice’s lawsuit against Apple and book publishers for allegedly colluding to set ebook prices.”
The Ingram coup is a feather in the cap of Laurence Kirshbaum, who heads the East Coast operation of Amazon’s publishing operations. Amazon’s insistence on exclusivity has not only alienated competitors but worried authors seeking the broadest marketplace for their work. The alliance with Ingram suggests a shift in policy and offers the intriguing hope that Amazon Publishing will extend its good will to printed books and hold out the olive branch out to bookstores
This blog post was originally published by Digital Book World as Amazon Friending Rivals?