Amazon vs. Hachette Update - It's About Price

[Sydney's Mom]

Finally, Amazon and Hatchett are back to where they started. Hatchett is again facing the "$9.99 problem" that Jobs solved so elegantly. Amazon was brilliant in setting up the argument, not as a lower cost of production, but as less value to the customer. We can't legally lend ebooks to a friend or family member, can't donate them to the library when we are done with them, can't even display them.

I agree with earlier posters-above $9.99 I go directly to the library. I was willing to buy Stephen King's newest, but it was $14.99. I am 4th, with 6 copies, on my library wait list. It isn't just me--I noted earlier that on the bestseller lists (on Amazon and NYT) the more "reasonably priced" block buster from Patterson was beating King.

I also agree with the argument concerning competing leisure activities. I spend more time watching movies on my Fire than reading. I read magazines and books on my ipad, but thanks to Calibre, I have never bought any from iTunes.

Musicians had to change when how people consumed music changed. Authors are fighting that, but they waited too long. How people read books and how they spend their leisure time has already changed.

I am grateful to Amazon for the kindle, and how it has changed my life. I know it isn't the only game in town, but it is the one that grabbed me. My library has Hatchett, so I need a reason to buy a book, and a very special reason to spend more than $9.99. Amazon all the way.

[tubemonkey]

Originally Posted by ApK

But you are doing a swell job of mimicking Hachette's spin doctors.

...

[SteveEisenberg]

Originally Posted by darryl

In your third paragraph what you seem to be saying is that without the subsidies from books that do sell the books that can't break even wouldn't be published. If this is in fact what you are saying, so what.

There is no genius in the system at all. I and others have no wish to subsidize your reading habits.

I don't think that fiction readers subsidize nonfiction readers. Lots of nonfiction sells well, especially in paper editions. Hachette (almost all fiction) didn't buy Perseus (heavily nonfiction) in order to lose money.

It may be that, on average, bestsellers subsidize midlist. But publishers do not know which titles are going to be the hits and which are going to be midlist. True, some famous names (James Patterson, Hillary Clinton) are surefire bestseller authors. But those authors demand such a high advance that the publisher may lose money on their bestseller. And if a publisher only publishes books by proven bestselling authors, it will eventually die. They do need to takes chances to survive.

Now, I would say that there are some subsidy situations. People who want to own books subsidize people who want to read and return (or resell). Also, people who want to read books shortly after publication subsidize those content to wait a few years. People who buy the hardback, or eBook, the week it comes out are subsidizing the man or woman borrowing a worn paperback in an African village reading room. Is this so horrible?

You might say that you are willing to pay $9.99, during the first month after an eBook release, to subsidize the reading room, but not $14.99. Fine. This will be reflected in Hachette sales data and they will price in the way their numbers people find maximizes revenue. But I can't buy the idea that Hachette is run by idiots who don't know what price to charge.

[Fluribus]

Originally Posted by SteveEisenberg

But because I agree with you, I know that Amazon knows what happens to the total Amazon sales of a book, eBook and paper, when they change the eBook price. That's what's they have to care more about internally than the effect on eBook sales alone. And yet they only released the effect on eBook sales. It's not lying. But it's an attempt to make a case rather than to be informative.

For people like me, it's all about the e. I would like to swap out at least 95% of my current paper library for electronic editions. Unless there is some reason that I need paper, I will not be getting paper. For novels, the odds of my purchasing paper are effectively zero. If they started selling them in hardcovers for $5 and ebooks for $25, they would never sell me so much as a single book.

I used to buy almost nothing but hardcover. Change happens. If there are enough others in a similar situation, then driving up ebook pricing to prop up paper sales will be dangerous. I don't know if the ebook revolution is an unstoppable force, but the big publishers look nothing like immovable objects. They risk getting squashed. Maybe Bezos will end up saving them from themselves.

[Hrafn]

Originally Posted by SteveEisenberg

You might say that you are willing to pay $9.99, during the first month after an eBook release, to subsidize the reading room, but not $14.99. Fine. This will be reflected in Hachette sales data and they will price in the way their numbers people find maximizes revenue. But I can't buy the idea that Hachette is run by idiots who don't know what price to charge.

I'd "buy the idea" in a New York minute. Publishers have very little direct contact with end-buyers, so would have very little to go on in estimating price elasticities (the economic term for how price changes affect demand). Amazon on the other hand not only has large-scale direct contact, it is in a perfect position to run direct experiments to calculate these elasticities (changing their prices to book buyers and seeing how that changes demand). It almost certainly knows what its talking about (but will of course only reveal the parts of what it knows that helps its case).

So if Amazon states that books are highly price-elastic, I'd believe them -- particularly when independent data seems to support this claim.

[pwalker8]

Originally Posted by ApK

No, I don't think so. Just less, not a loss.

No, not that either. Amazon is a major player in market but not the only one, and they will not maintain their position if people can't get the books they want there.

For reference, see this thread above.

But you are doing a swell job of mimicking Hachette's spin doctors.

Yep, it was a loss, not less.

Dominate does not mean that Amazon is the only ebook seller, it means that Amazon holds the biggest market share by a large margin. The latest figures that I saw for ebooks in the US is 65%, with Apple and B&N getting most of the rest.

Ah yes, nothing like a gratuitous putdown to make one feel better about one's self. I find that insults and cheap rhetorical tricks are where one goes when the facts are against them.

[pwalker8]

Originally Posted by Fluribus

For people like me, it's all about the e. I would like to swap out at least 95% of my current paper library for electronic editions. Unless there is some reason that I need paper, I will not be getting paper. For novels, the odds of my purchasing paper are effectively zero. If they started selling them in hardcovers for $5 and ebooks for $25, they would never sell me so much as a single book.

I used to buy almost nothing but hardcover. Change happens. If there are enough others in a similar situation, then driving up ebook pricing to prop up paper sales will be dangerous. I don't know if the ebook revolution is an unstoppable force, but the big publishers look nothing like immovable objects. They risk getting squashed. Maybe Bezos will end up saving them from themselves.

I'm where you are when it comes to ebooks verse paper. Right now, I'm in the process of replacing my library with ebooks. I haven't bought a paper book in several years now. However, I am quite happy to pay $15 for one of my favorite author's latest books when it first comes out, rather than wait a year and pay $8 when the price drops. Heck, I'm even willing to pay the ARC premium from Baen books to get a book two months before it's officially published. To each his own.

[pwalker8]

Originally Posted by Hrafn

I'd "buy the idea" in a New York minute. Publishers have very little direct contact with end-buyers, so would have very little to go on in estimating price elasticities (the economic term for how price changes affect demand). Amazon on the other hand not only has large-scale direct contact, it is in a perfect position to run direct experiments to calculate these elasticities (changing their prices to book buyers and seeing how that changes demand). It almost certainly knows what its talking about (but will of course only reveal the parts of what it knows that helps its case).

So if Amazon states that books are highly price-elastic, I'd believe them -- particularly when independent data seems to support this claim.

Publishers may have very little direct contact with specific end-buyers, but they have a whole lot more information than Amazon when it comes to how many books they can sell at what prices for various categories of authors (i.e. well known best sellers, well known mid-tier, etc...). Publishers have been experimenting with various prices points for various types of books for a long time.

[darryl]

Originally Posted by SteveEisenberg

I don't think that fiction readers subsidize nonfiction readers. Lots of nonfiction sells well, especially in paper editions. Hachette (almost all fiction) didn't buy Perseus (heavily nonfiction) in order to lose money.

It may be that, on average, bestsellers subsidize midlist. But publishers do not know which titles are going to be the hits and which are going to be midlist. True, some famous names (James Patterson, Hillary Clinton) are surefire bestseller authors. But those authors demand such a high advance that the publisher may lose money on their bestseller. And if a publisher only publishes books by proven bestselling authors, it will eventually die. They do need to takes chances to survive.

Now, I would say that there are some subsidy situations. People who want to own books subsidize people who want to read and return (or resell). Also, people who want to read books shortly after publication subsidize those content to wait a few years. People who buy the hardback, or eBook, the week it comes out are subsidizing the man or woman borrowing a worn paperback in an African village reading room. Is this so horrible?

You might say that you are willing to pay $9.99, during the first month after an eBook release, to subsidize the reading room, but not $14.99. Fine. This will be reflected in Hachette sales data and they will price in the way their numbers people find maximizes revenue. But I can't buy the idea that Hachette is run by idiots who don't know what price to charge.

Sorry Steve. I was a bit lazy in describing the posters apparent category as non-fiction. Much non-fiction is no doubt very profitable. I think the actual category the poster seems to prefer is obscure non-fiction which few others want to read and which has few prospects of even breaking even. In fact, I don't agree with the subsidy argument. It seems to arise from an assertion by some that publishers use profits from profitable segments of their business for the good of all to publish books they consider worthwhile which are unlikely to be profitable. To the extent that this is done, and I would expect that to be a very small extent indeed, it amounts to little more than a public relations effort and provides a pretixt to support higher prices. Another "motherhood" type justification like developing the local industry. The plain fact is that profits are made which require business decisions as to how to distribute or utilise them. Subsidy or not is really probably a red herring in this context. The real questions are whether publishers do behave in such an altruistic fashion, and if so, if it is worthwhile or whether the money would be better applied to other areas, in particular reducing prices generally.

Your comments about a Publisher only selling books by proven authors of bestsellers and the need to take chances to survive are fairly accurate in describing the existing situation and print books, but imho not ebooks and the brave new world we are entering.

I think we should simply agree to disagree on the subsidy situations you describe. It is irrelevant in any event, though if I am wrong then the subsidy unwillingly provided is a general one to all who take advantage of it. In fact, the hypothetical worn paperback in an African Reading Room, emotional as it is, is a most unlikely outcome. Particularly with an EBook.

And as for the idea that Hachette is being run by idiots who don't know what price to charge, imho nothing could be further from the truth. Hachette, and the other BPH are run by hardheaded businessman who want to preserve a comfortable and profitable business model which has existed for a long time. They know very well how to price, but wish to do so in accordance with their own objectives, one of which seems to be suppressing so far as possible ebook sales. On the other hand, Amazon is focussed mainly on EBooks, and I doubt they would cry any tears at the collapse of the Print Book market, other, of course, than print on demand. This explains the behaviour of Hachette and the BPH. Those steering their course are certainly not stupid.

[Fluribus]

Originally Posted by Hrafn

I'd "buy the idea" in a New York minute. Publishers have very little direct contact with end-buyers, so would have very little to go on in estimating price elasticities (the economic term for how price changes affect demand). Amazon on the other hand not only has large-scale direct contact, it is in a perfect position to run direct experiments to calculate these elasticities (changing their prices to book buyers and seeing how that changes demand). It almost certainly knows what its talking about (but will of course only reveal the parts of what it knows that helps its case).

I've seen articles saying that publishers complain bitterly about the fact that Amazon shares very little data with them. I have no doubt that Amazon knows more than the publishers do.

Originally Posted by pwalker8

I'm where you are when it comes to ebooks verse paper. Right now, I'm in the process of replacing my library with ebooks. I haven't bought a paper book in several years now. However, I am quite happy to pay $15 for one of my favorite author's latest books when it first comes out, rather than wait a year and pay $8 when the price drops. Heck, I'm even willing to pay the ARC premium from Baen books to get a book two months before it's officially published. To each his own.

Not only will I not pay the $15, but an author runs the great risk of his book being entirely forgotten by the time the price drops.

[rhadin]

Originally Posted by pwalker8

I'm where you are when it comes to ebooks verse paper. Right now, I'm in the process of replacing my library with ebooks. I haven't bought a paper book in several years now. However, I am quite happy to pay $15 for one of my favorite author's latest books when it first comes out, rather than wait a year and pay $8 when the price drops. Heck, I'm even willing to pay the ARC premium from Baen books to get a book two months before it's officially published. To each his own.

And I'm just the opposite. I consider ebooks to be throwaways -- read once, then forget. Any book I want to keep in my library I buy in hardcover. I never buy an ebook to replace a book in my library. Occasionally I will buy both the hardcover and ebook versions of a book but that is not usual. I do it when I want to be able to read the book on a trip or in circumstances where the hardcover would not be convenient.

As regards ebook pricing, because I consider ebooks to be throwaways, I generally will not spend more than $5 on ebook. Occasionally I have no choice and I will spend what is required to get the ebook I want. OTOH, I have no problem spending $80 and more on a hardcover that I intend to keep.

Ultimately, the ebook vs. print book debate boils down to personal preference. I see nothing wrong with being ebook only, print only, or a combination.

[Hrafn]

Originally Posted by pwalker8

Publishers may have very little direct contact with specific end-buyers, but they have a whole lot more information than Amazon when it comes to how many books they can sell at what prices for various categories of authors (i.e. well known best sellers, well known mid-tier, etc...). Publishers have been experimenting with various prices points for various types of books for a long time.

No, [the publishers] do not have "a whole lot more information" they have information that is a whole lot more aggregated, and therefore is a whole lot less useful for estimating elasticities. Is the fact that we sold less books this holiday season for higher unit prices because of the price, or because of an economic downturn? Is the fact that people are buying more $20 Harry Potter books than $25 Stephen King books because they're cheaper, or because people like Harry Potter more?

Statistically, heavily aggregated data means very few 'degrees of freedom' and a model that is nowhere near robust, because so many contributory factors end up being conflated.

I know all this because (i) I've got a degree in Statistics & (ii) because I've actually worked in the field of Regulatory Economics/Competition Law, including on calculating price elasticities.

[crossi]

I have no quarrel with the priciple that new releases by popular authors be priced high for the first year or so. I ocassionally (though very rarely) bought the hardback of some book when I just couldn't wait for my favored MM paperback. Seems sensible to me. They should see soon enough if people aren't buying at that price. But while they have every right to set the ammount that they get for a book from the retailer I do not see that they have any right to interfere with the retailer's business by mandating how much the retailer sells it for. They certainly aren't going to influence me to either buy the hardback or the ebook at hardback prices by such a strategy. I'll just buy a different ebook and wait for a better price on that one. Charging high prices for backlist ebooks is even stupider. Either the customer considered it long ago and rejected reading it, or they read it long ago and are in the read once and never again group or they are rereaders and still have a paper copy and have no real need to buy the ebook. Some of the rereaders might rebuy it if the price was good but not if they price it the same as new releases.

[ApK]

Originally Posted by pwalker8

Yep, it was a loss, not less.

Explain.

Ah yes, nothing like a gratuitous putdown to make one feel better about one's self. I find that insults and cheap rhetorical tricks are where one goes when the facts are against them.

Ah, no. Not gratuitous, nor a putdown. You are over-stating and biasing the interpretation of the facts in the same way Hatchette's hardball-playing corporate negotiators would.
And what's so cheap about the rhetoric? I think it was pretty good.

[tompe]

Originally Posted by Sydney's Mom

Finally, Amazon and Hatchett are back to where they started. Hatchett is again facing the "$9.99 problem" that Jobs solved so elegantly. Amazon was brilliant in setting up the argument, not as a lower cost of production, but as less value to the customer. We can't legally lend ebooks to a friend or family member, can't donate them to the library when we are done with them, can't even display them.

The $9.99 price was only for best sellers in the beginning. It was not setup to be the maximum price.