Dear readers:
As a warning, this post tonight is really long. If you don’t want to read a rant, I’ll see you in a new post tomorrow!
I try not to sensationalize items in the news or get on my soapbox about what is right or wrong; I will let other blog owners devoted to the Kindle do that for you. What I try to do is (a) give you the heads-up on what books are free in the Kindle format, and (b) give you a tip or two that will make your Kindle experience a little easier or unlock a feature you didn’t know was there.
Many of you have heard of the ongoing spat between Amazon and Macmillan, where three things appear to have happened:
- Macmillan attempted to force Amazon to change their model and charge different pricing for eBooks, generally around $14.99 per eBook to you and me.
- Amazon got mad at Macmillan, and pulled all of their titles (including their subsidiary titles – a list of subsidiaries is at the end of this post) over the weekend. You can read a summary of it in the Wall Street Journal by clicking here.
- Amazon capitulated today, and will charge $12.99 and higher for Macmillan and its subsidiaries eBooks.
If you would like to read the official Amazon statement, you can click here to read it on the Kindle discussion board: comments are being posted by the second from the Kindle community.
Why am I writing about this? Well, if people agree to pay those prices, other publishers will follow suit which will raise the overall pricing for you and me.
I don’t think Amazon really cares. Actually, I think they do care and want the higher pricing to succeed as they will make more money.
What can you do? You can either (a) boycott any of the Macmillan titles, or (b) agree to them and pay it. If I individually boycott them it won’t make one iota of difference. If you and I – plus a few hundred thousand other Kindle owners boycott them, they will probably change their pricing model as a percentage of something is a whole heck of a lot better than a percentage of nothing.
In my “real” life (if you think I blog full time for profit you’re crazy!), I am a CPA and know a little bit about pricing models: I personally think the publishers are sticking too hard to yesterday and not looking at the present and the future . Publishers stand, theoretically – depending upon how large of an advance they give authors, marketing, and payment of corporate salaries and overhead – to make a whole lot of money on eBooks vs. the traditional hardback or paperback. How? Well, of course I have an opinion on it so let me share it!
To publish a book, regardless of it being an eBook or paper, you need editors, proofers, etc. (you also need a few good authors who can tell a story people want to buy but that’s another conversation for another day). From there, all other costs a publisher has to cover in the cost of a book go out the window as they just don’t exist for an eBook. For example, consider the following which are eliminated:
- You don’t need to purchase a lot of paper by the eighteen-wheeler load.
- You certainly don’t need to go buy ink for the letters or heavy card or other paper stock to make covers.
- You don’t need warehouses to store the raw materials used in the production process (paper, ink, glue, staples).
- You also don’t need to hire warehouse personnel to count inventory, move boxes around the warehouse, load up more eighteen-wheelers to ship out inventory.
- Warehouse personnel, due to the labor-intensive nature of their jobs, tend to get hurt more: your worker’s compensation, health insurance, onsite nursing facilities, and other associated costs will decrease.
- If you don’t need to manufacture, store, or ship books, you won’t need as much production equipment, forklifts, eighteen-wheelers, etc. Your utility bill to light, heat / cool, diesel fuel, rental costs also go down.
- Since you’ve eliminated a lot of your fixed costs, you can also eliminate some of your corporate overhead: you won’t need as many human resource, accounting, and other corporate staff typical of this type of organization.
- When publishers send books out to retailers like Amazon, Barnes & Noble, Wal-Mart, etc., if a book doesn’t sell they have to buy them back. That means someone has to pay for that, too – including the shipping, unloading something that had already been packaged / loaded / shipped to a retailer already, as well as finding and paying for more warehouses to store this unwanted merchandise. Oh yea, you also need to hire people to periodically inventory this unwanted material, move it around the warehouse for a while, and eventually pay for destroying it after a few years of collecting dust.
Let’s compare and contrast that with the costs of an electronic book:
- You still need an editor and a proofer: no one wants to read garbage. You’ll also need some corporate staff to make things happen. Those things don’t change, nor does the #1 requirement of having an author who writes something compelling people would like to purchase.
- Once a book is proofed and type-set, you will need to hire someone who can convert it into Kindle format. I’ve converted 37 books to the Kindle format (so far), ranging from 10 to 1,500 typed pages, with and without pictures: it’s not too difficult, and formatting with an active table of contents is not too hard, either. If a certified bean counter like me can figure it out, I’m sure others can, too.
- Once a book has been converted, you need to ship it to the retailer and tell them the price. Let’s take Amazon with the Kindle and Barnes & Noble with the nook as an example. If I need to ship it to them, I can either (a) email it to my contact at the retailer, (b) spend about 10 minutes myself uploading to something similar to Amazon’s Digital Text Platform, or (c), I can burn it to a CD and FedEx or mail it to my contact at Amazon. That sure beats having to hire warehouse and logistics personnel to manage my inventory.
- If it sells, great! I need to sit back and collect a royalty check.
- Let’s assume I have a dud for a title, and no one really buys it. What do I need to do? Nothing! There are no books to accept returns on in my warehouse, no calls or other communication with the vendor required, and no reimbursements to be made to the retailer for the unsold inventory. I also don’t have to find warehouse space to store all of this unwanted “stuff.”
Some of the above is tongue and cheek – I am not advocating firing everyone and contributing further to this ongoing recession: you still will need to print some books, but just not as many. On the other hand, you’ll be able to cut out a significant amount of those costs.
Bottom-line is, publishers charge $25 or more for paper books because there are a lot of costs involved in the production of the physical (not the electronic) book. You’re also paying for the costs of failed titles, the CEO and other corporate staff’s large salaries and nice offices, and things totally unrelated to the book you are purchasing.
I am not against anyone making more than an average profit – I am a capitalist through-and-through. I just can’t stand monopolistic powers that could affect me. That’s what Macmillan is doing, and that’s why I will be doing my best to exercise my rights as a consumer into buying any of their eBooks – I think the paper book (hardback in this case) makes their resulting profit margins less, and my overall cost of readership less.
Let me give you an example:
In May 2009, I bought the book One Second After by William R. Forstchen; I thought it was an outstanding book – consider it this generation’s version of the Pat Frank classic Alas Babylon (side note: why isn’t Alas Babylon available in Kindle format?). The Kindle version I bought was $9.99 and the hardcover version was $14.99 (it is $13.32 from a third party Amazon seller, brand new today). One Second After was an outstanding book, in my humble opinion. Consider Forge Press (a Macmillan subsidiary), whenever the Kindle version is available again, will charge $14.99 for the eBook version.
Let’s see – I can get the eBook version for $14.99 or hardback version for $13.22 – shipping is free, as I am an Amazon Prime member which means UPS will send it to me in two business days, or I can wait five business days for free regular shipping. Amazon is subsidizing some of the purchase price, as Amazon has to pay a percentage of the publisher’s retail price. Let’s say it’s 50% of $24.95 – the publisher gets $12.48, and Amazon gets about $2.50 – that;s a razor margin if I ever saw one.
Seven times out of ten I will order the hardback version. Why? Well, I will read it fairly soon after receiving it, then I will do one of four things:
- Loan it to a friend to read.
- Take it to Half Price Books and get $5-$7 for it as it is a new book (probably only a buck or two if it was a couple of years old).
- Sell it on eBay for $8-$9 and net $5-$7 after the eBay and PayPal selling fees.
- Keep it on the bookshelf.
Taking these in a random order –
#1 doesn’t happen very often as I have found out the hard way a lot of the books I loan out never seem to make it back on time. That sounds like a reflection of my friends, but that is also another story for another day (and a different blog).
#4 also doesn’t happen very often as my bookshelves are overflowing.
#3 used to be one of the main options, but packing up and mailing, waiting on people to pay (if they weren’t a deadbeat bidder) was too much of a hassle. Besides, my wife banned me from selling on eBay for a while (seriously, my PowerSeller status went down the tubes), and I suddenly discovered how much free time I had. I kind of like the free time.
#2 is what usually happens. Seeing as how the net cost of me reading the book is now somewhere in the $8-$10 range (cost of the book less the amount received from Half Price Books), I’ll do that the majority of the time: remember, I am an accountant and that’s just the way I am programmed internally.
Why seven out of ten times with option #2 vs. 100%? Well, sometimes there are things called impulse purchases, or I am at an airport and see something at Hudson’s News for almost full price – in the Hudson News example, I will read the book description, etc. then walk over to my gate, fire up the Kindle, and purchase it for a lot cheaper that way. I’m sure I am not the only one doing that.
To wind up my long-winded example, in this case I buy the hardback book. The publisher had all of those costs I mentioned way at the beginning of this blog post, and the price earned $12.48 before paying his corporate overhead, costs to the author, marketing, returns, etc. Or, he could sell it with a fraction of the overhead for something else.
Makes you see both sides of the argument, doesn’t it? For argument’s sake, lets say I’m the publisher and I sell it for $9.99 – with 30% going to Amazon and the remainder to me ($6.99). I would argue the incremental profit of selling a paper book vs. an electronic book of $5.49 is not enough to cover all of those fixed costs associated with the paper version of the book.
That’s my two cents, and sorry to rant. I’m going to do my best to avoid (boycott) Macmillan and its subsidiaries for a while. If others do it, too, maybe the law of supply and demand will kick in and the prices will be lowered. Besides, I’ve found a lot of great independent authors I never would have otherwise found if it wasn’t for my Kindle.
Michael
Here is the list of Macmillan’s publishing footprint, courtesy of several blogs but first sent out by Bufo Calvin, who is not one of those soapbox bloggers I mentioned in the first paragraph, he’s actually one of the more helpful folks ot in the Kindle community, in the I Love my Kindle Blog:
Browse by author:
http://us.macmillan.com/browsebyauthor.aspx
Publishing trade names:
Farrar, Straus and Giroux
FSG Hardcovers
FSG Paperbacks
Hill & Wang
Faber & Faber
First Second
Henry Holt & Co.
Henry Holt Hardcovers
Henry Holt Paperbacks
Metropolitan Books
Times Books
Macmillan Audio
Behind the Wheel
Nature Publishing Group
Palgrave Macmillan
Picador
Quick and Dirty Tips
Scientific American
St. Martin’s Press
Minotaur Books
Thomas Dunne Books
Tor/Forge
Tor Books
Forge Books
Orb Books
Tor/Seven Seas
Bedford, Freeman and Worth
Bedford/St. Martin’s
W.H. Freeman
Worth Publishers
BFW High School
i>clicker
Hayden-McNeil
Palgrave Macmillan
Trade Books For Courses
FSG Books for Young Readers
Feiwel & Friends
Holt Books for Young Readers
Kingfisher
Roaring Brook
Priddy Books
Starscape/Tor Teen
Square Fish
Young Listeners
Macmillan Kids
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