Filed under: Retail, Software, Internet, iPad
Macmillan trying to sell readers 'hardcover' ebooks
John Siracusa drew my attention to an article by Macmillan CEO John Sargent on the agency model, availability and price, in which he says that the company actually plans to keep their hardcover/paperback separation even while selling ebooks. While new hardcover ebooks will sell for $14.99 and $12.99 ("a tremendous discount from the price of the printed hardcover books"), the company will aim to sell "ebook editions of paperback new releases" for as low as $6.99. As Siracusa goes on to say, "now let us all sit back and ponder the concept of 'paperback' and 'hardcover' ebooks."Macmillan is sticking with an old pricing scheme even in a brand new marketplace. Just what exactly makes the difference between a "hardcover ebook" and a "paperback ebook"? Read on to find out.
The first question is: "Why would someone buy a hardcover book?" I can only think of three reasons (Are there other reasons? There may be, I just can't think of any):
-
You're a big fan of {insert author's name here} and want to read his/her newest book as soon as it comes out.
-
You're a collector and prefer the perceived increased "value" of a hardcover.
-
You like the slightly bigger print/additional whitespace that you often get with a hardcover compared to a paperback.
Second question: Which of those reasons also apply to ebooks?
Certainly #1 applies. There's no faster way to get a book than to download it (assuming both are available on the same day, something else that Macmillan says they will be doing from now on).
On the other hand, #2 certainly does not apply. There's no perceived value of a "first edition" ebook. You're not going to display it on your bookshelf and of course you can't bring it to a book signing. You also can't loan it to your friend or donate it to the library.
What about #3? I assume all ebook readers offer variable font sizing, it seems like one of the most obvious features they could offer. In fact, you can probably make the print larger than the printed hardcover. #3 seems like a reason to prefer an ebook instead of a hardcover.
Third question: When was the last time you paid "list price" for a book? Macmillan says "printed hardcover books...generally range from $28.00 to $24.00." That's what I mean by "list price." I bet very few people ever pay that price. Brick & mortar bookstores have traditionally sold them for much less. It seems like Borders/Barnes & Noble have a "25% off" sticker for every new book that comes out.
I'll tell you when the last time I paid "list price": I wanted to get a signed copy of the latest Hodgman book, and the only way to do that was to order it from Politics & Prose who were only too happy to sell me a signed copy for the full list price, plus shipping. I think I paid about $30 for a book I could have ordered from Amazon for about $12-15.
I'm going to guess you haven't paid "list price" for many books since you first found out about Amazon.com.
Macmillan seems to have done to Amazon what the music industry eventually did to Apple and the iTunes store. Apple created the iTunes store and sold songs for 99¢, doing the most to effect music sales since Napster was first released. Over 10 billion songs have been downloaded legally since (not to mention all those sold through Amazon, etc.).
The music industry absolutely loved it... and wanted to change more per song. They eventually leveraged Amazon.com's MP3 store against Apple to force Apple to allow for variable pricing. $1.29 for "popular", 99¢ for "less popular" and 69¢ for some mythical level of songs, presumably ones no one wants to buy at all, i.e. "Let the Eagle Soar" by John Ashcroft.
(Aside: Almost 5 years later "Price as Signal" by Joel Spolsky remains the smartest thing I've read about what variable pricing means to the music business and why they wanted it.)
The music industry eventually got its way. They are now selling songs for $1.29 on iTunes, and guess what?! Higher prices mean slower sales. I know! Who would have guessed?!
Amazon created the Kindle and sold books for $9.99. The book industry absolutely loved it... and wanted to charge more per book. Publishers also didn't want the Kindle to be able to read books aloud because, well, obviously that was going to hurt audiobook sales, and where's the fun in not being able to charge someone multiple times for the same content?! Do you think they've learned nothing from George Lucas? Ironically, Amazon was leveraged by the announcement of Apple's iPad (turnabout is fair play). Apple, which fought long and hard for standardized pricing for music, easily accepted variable pricing for books.
Is this really all that different than Apple releasing the iPhone for $600 and then dropping the price to $400?
Yes and no.
Obviously Apple realized that it could profit by selling iPhones for more initially and then could boost sales by dropping the price after the early adopters had spent their money. In that sense it's much like someone who is going to buy the new Christopher Moore book the day that it comes out.
One difference is that book publishers are dangling by a hairy financial thread, whereas Apple has enough money to buy Canada and turn it into Steve Jobs' summer house.
Apple was also the only company in the world selling the iPhone, and even $600 was a "competitive" price. Those who bought when it came out were able to use it on a daily basis for two months before the price dropped to $400. Those who buy an ebook when it first comes out get to read it once and then, well, keep it in case they ever decide to read it again. While book publishers are the only ones selling particular books by particular authors, there are scads of other publishers, a seemingly endless supply of writers, and this thing called "the Interwebnet" which is offering people plenty to read, for free.
When you are buying a hardcover book, you're getting something which is clearly different than a paperback. It's also easy to argue that you are getting something better than a paperback (despite the fact that some people might prefer paperbacks to hardcover). That's why a hardcover is worth more than a paperback.
Why is an ebook worth more than the same ebook, months later? It isn't.
The most logical thing for ebook users to do is put a note in their calendars to remind them to buy the book in six months instead of when it comes out. It's not as if they will have trouble finding anything to read in the meantime.
The nearest comparison that I can make is to apps that I've purchased from the App Store. I've purchased several which later dropped their price significantly, e.g. $10 to $4, $5 to $3, etc. The "actual dollar amount" may not seem like that much, but percentage-wise, it's a big cut. The effect that it has had on me is pretty simple: I now wait before buying a new app. Not only do I get to hear other people review it (since there are still no "demo" versions available) but I also get to see if the price drops. Net result? Fewer impulse buys, and almost certainly fewer purchases overall.
It seems to me that is exactly what book publishers don't want to do: give people a reason to wait longer to buy books and a reason to resist impulse purchases. I'm sure publishing executives are worried about ebook sales cannibalizing more profitable hardcover sales, but I wonder if these aren't two separate markets. People who want to buy ebooks have made a conscious decision to not purchase physical books.
Macmillan seems to want to go about business using the same rules and models that have been in place: "buy early, pay more." But part of that equation has always been "buy early, pay more, get something better." Charging more for the same ebook completely misses the third part of that equation.
![TUAW [Cafepress]](http://www.blogsmithmedia.com/www.tuaw.com/media/tuaw-cafepress-promo.png)
Reader Comments (Page 1 of 2)
Steven Fredman said 7:51PM on 3-03-2010
The one thing holding back the widespread sales of e-book reasers is not the cost of the readers but the price of books. The publishers just do not get it!
Reply
Joshuahedlund said 4:03PM on 3-02-2010
(4. Hardcover books hold up better over time while paperbook bindings can be easily frayed)
Keeping the "hardcover / paperback" moniker is silly, but the concept of charging less for something as time goes by is seen in many places. Movies cost $8-$10 at the regular theater, then $1-$3 at the cheap show. DVDs cost $15-$20 when they first release, then they're $5 in the bargain bin. The items are mostly or completely identical; some people are willing to pay for the timing. It's all economics.
Reply
hmlong said 4:04PM on 3-02-2010
How is this any different than movie studios selling new releases on iTunes for $14.95, then dropping the price to $9.95 six months to a year later?
Answer? It isn't.
Publishers still worry about cannibalizing hardcover sales, as well as destroying the brick and mortar stores like Borders and Barnes & Noble.
Reply
Adam Rice said 4:13PM on 3-02-2010
I can't fault publishers for charging a premium on new releases, although I suspect that it will only pay off in rare cases (ie, Harry Potter). The "hardcover/softcover" e-book distinction is silly, and reveals a nostalgia that is either adorable or pathetic.
While I doubt that many will have the insight to do it, publishers could offer e-books with some kind of added value, like access to online roundtables with the author, annotated editions, that sort of thing.
Reply
wygit said 4:23PM on 3-02-2010
I don't understand the author's reasoning at all...
MOST markets work this way.
DVD's? $20+ when they come out, $10 3-6 months later
Fashion? check
Cars? check
Hell, most movie theaters have a "no discounts the first week" policy on blockbusters.
No, an ebook that comes out with the hardback isn't any better, but it's here NOW.
Some people will pay for that. I see no problem letting them.
Reply
JD said 4:24PM on 3-02-2010
Recall that in that New York Times piece from the other day, which was generally quite sympathetic to publishers, the math from their own chart showed that the $9.99 price was about as profitable to publishers as selling a $25 hard cover, and the $12.99 price (which they now protest is the lowest they can possibly go) makes them an extra 30% over the hard cover profit. So while a price that declines with time makes sense, it should be declining from $9.99 downwards, not $12.99 or $14.99.
Reply
Scott said 9:40AM on 3-03-2010
Apples and oranges comparison. The $9.99 Amazon ebook is as profitable for publishers as a $25 hardcover because Amazon pays the same wholesale price for both: half the list price, or about $12.50. (As do book and mortar stores; the "25% off" list price is still profitable for both publisher and bookstore.) Amazon then sells the ebook *at a loss* to drive adoption of the Kindle as the ebook reader of choice. Under the agency model, the publisher gets 70% of the *selling* price and the retailer gets 30%. Using this model, ebooks would have to be priced at almost $18 for the publisher to make the same $12.50, so they're actually making *less* money with the $12.99-14.99 price range.
JD said 7:49PM on 3-08-2010
You are mistaken. Among other things, you have forgotten in include the reduced costs to the publisher for not having to print the physical book -- the entire basis of this argument.
See http://www.nytimes.com/imagepages/2010/03/01/business/01ebook_g.html
for a good breakdown of the costs. As it shows, the best estimate for a $10 ebook on the 70/30 model is that the publisher makes $3.51 - $4.26 in profit -- about exactly what they currently make for a hardcover. For $12.99, they make almost 25% more profit per book that they do from the hardcover.
Shirli said 4:28PM on 3-02-2010
I personally would like to see a rental model. There just aren't too many books I'm going to read more than once.
Reply
Jason Martin said 4:29PM on 3-02-2010
Do we know for sure that the only distinction between "hardcover" and "paperback" ebooks is price? I could imagine a premium being place for additional content, such as supplemental multimedia, commentaries, or other supplemental material that the casual reader might not care about but a "book geek" might be willing to pay a "hardcover" price for (think iTunes Extra or iTunes LP for books).
Reply
Keith Smith said 4:35PM on 3-02-2010
I can see this as viable, sure. For popular authors who see the first year of their novel as a hardcover (currently $25 - $30) and then a re-release in paperback ($7 - $15 depending on size - standard, maxi or trade), this model makes as much sense as the other comparisons listed above, the DVD new-release-to-bargain-bin being the more relevant. What I cannot see is a paperback that lists on the shelf for $7.99 is expected to sell as an e-book for $7.99, or even $6.99. You can purchase physical books at Wal-Mart, BJs, etc for less than that. That doesn't work for me.
Reply
doog said 4:35PM on 3-02-2010
I do this with "real" books all of the time. There are books that, for various reasons, I want to pay a premium to read shortly after release. It may be that I am a big fan of the author; it may be that it is part of a series that I have been reading, and I want the newest one as soon as it is out. It may be that I have read a review of the book pre-release or shortly after release, and, for whatever reason, it interests me.
This is the only reason I buy a hardcover book. Otherwise, I prefer it in softcover. When I get some sort of device that allows reading of ebooks, it will be the same reason why I will consider paying a premium to read a book right away rather than wait for it later on.
As for what JD said above, I believe that publishers have been struggling to get profits from "real" books for years, so of course they will want to try to get higher profits, if they can.
In short, publishers will price books where the market says they should; where they maximize profit for their business. If they price too high, not enough people will buy; too low, and they will lose potential profit. If they predict enough people are willing to pay $15 at the date of release to make the most profit, *that* is how they will price the book.
Reply
Dave said 4:58PM on 3-02-2010
"whereas Apple has enough money to buy Canada"
You know, that's almost offensive to those of us living in Canada. At any rate, it's a poor comparison the two are not even close. Canada's net worth is substantially more than Apple's (even taking the paltry difference between the US and Canadian dollar into account).
Reply
Drakhul said 5:19PM on 3-02-2010
Apparently attempts at HUMOR need to be in purple text or something so you morons can tell it's HUMOR. Anyone who was offended by the HUMOR needs to grow up.
Johnny Thrash said 5:17PM on 3-02-2010
I get most of my first edition hardbacks for typically 18$... if they think I am paying 15$ for the same book when there is no ink usage, paper usage, hard back boarding, stitching, threading or fabric covering, they have lost their minds.
Reply
Drakhul said 5:21PM on 3-02-2010
I agree... I MIGHT pay $10 for my favorite authors... the profit on an ebook would have to be a lot... there is very little overhead.
davidt said 6:01PM on 3-02-2010
They are being sneaky. They keep trying various arguments to keep people thinking about the comparison with paper books.
There is not comparison. There is no actual item sold. Some bits on you own local storage are aligned in the same way as their master copy on their storage. It costs absolutely zero incremental dollars to sell the second and subsequent copy of an ebook.
The price should be simply what people are willing to pay. That way the publisher gets some positive number of dollars and not zero as it is now.
Think of the car salesman's trick about asking you what color you want. By assuming that you have already decided to buy, you can often be gulled into replying: "Red." By having these constant cost comparison they are assuming that any of the cost arguments matter. They don't. Not one bit!
Reply
Scott said 9:59AM on 3-03-2010
There's a total comparison between ebooks and physical books: they are both the product of the same creative process, which starts with an author's idea, proceeds through the writing of the manuscript, and winds up with the creative input of editors, designers, and layout artists. The only real difference is the form of the final readable product. So while you're correct that there's no marginal cost to producing another digital copy of a book (or very low marginal cost - storage and bandwidth isn't free), the same *fixed* costs have to be covered, and those fixed costs represent the bulk of the unit cost of producing a book, and so have to be taken into account when determining the book's price. Pricing books simply by the criterion of "what people are willing to pay" produces no guarantee that the authors, editors, etc. will be able to cover their costs. If they can't cover their costs, people will not produce books. Why is this so difficult for people to understand?
ianlive said 6:23PM on 3-02-2010
The authors link to Joel Spolsky made me
smile. He's a great blogger and I've learned a lot from his articles.
And man, it is a lot of frigging work leaving comments on this blog. Especially from an iPhone.
Reply
jekyblue said 6:35PM on 3-02-2010
Just like for hard back books, when it's an author I like I am willing to pay more for an ebook in order to get immediate access to it. But it pisses me off that McMillan wants to charge me more than $9.99 for the Kindle book but they aren't willing to make a minimal effort to provide acceptable formatting that might justify the higher price. Recent example: recently I paid $15 for a much desired ebook and the multi-line chapter headings were overlaid, making them near impossible to read. Here's a concept for McMillan: charge me LESS for the quickly done, poorly formatted version of the ebook, take some time to do it right and then charge me MORE for an ebook that has the goodies that should be possible in this format. Ultimately they'd have to drop the price again as popularity waned, but there have been some ebooks where I would have happily waited and paid more for maps and figures and readable text.
Reply