December 17, 2009

Novelist convinces publishers to treat him like crap instead of customers

by Melville House

There is a lot of talk these days about the cost of e-books, when they’re going to be released, etc. but there is also a lot of anger towards publishers: Matt Stewart over at the Huffington Post rants against us, asking “why do you treat your customers like crap?” Well Matt, I’m sorry you feel that way, but I do have to respond. We’re not treating customers like crap! So why is it so difficult for consumers and e-tailers alike to understand the actual value of the book? I think we need to take a look back at the industry and what makes up the back-end.

A book is a much more complex project than most imagine, and there are a lot of people behind its development–more than just the author, editor, and printer. There are sales people and publicists, designers and marketers contributing as well, just to name a few. You are not just paying for an e-file when you buy an e-book. You’re paying for the content, the layout, the cover design and all of the promotion it took for the book to get your attention, whether it was advertisements, co-op or a publicist on the phone all day.

I disagree with the decision Simon & Schuster made last week, placing the e-book release halfway between the hardback and paperback releases. I personally agree with John Sargent and Macmillan‘s recent decision to sell e-books at hardcover price on release, and release enhanced versions of bestseller books that would sell for even more than the hardcover. Of course, pricing is up to retailers, as always–publishers can only suggest a price.

Readers and publishers alike need to stop envisioning books as just “content.” In many ways, the digital revolution makes the back-end invisible and therefore hard to quantify, monetarily. Does anyone ever think how expensive it is to run the massive Google server farms? Or the enviromental impact of the billions of cell phones, ipods, and e-readers (not to mention computers), that last for only a couple years and are not recyclable? (For more on that, see this previous Moby post and an amazing 60 Minutes documentary it cites). Publishing works the same way. A book is not just content and production. We’re not the enemy here, we’re just trying to feel our way forward to an unfamiliar future–and in an unfamiliar present. I’m not saying you have to agree with all of our decisions, but a little informed support please?

10 Comments

Kerry at 11:01 am on December 17, 2009

I completely understand that publishing is a difficult and expensive business, whether the product is an ebook or a hardcover. However, I really can’t get behind arbitrarily following the EXACT same pricing model for a physical, hardcover book that has to be printed, bound, stocked, shipped, returned, remaindered, etc., in selling ebooks that don’t have to go through any of these processes (even if they have their own set of costs). I really feel that keeping a print pricing model with digital content is putting a stake in the heart of the ebook revolution before it has a chance to get steady on its feet. Even if the costs really are EXACTLY the same (which seems highly, highly unlikely) for ebooks and hardcovers, I’d love to see an actual breakdown of the numbers to better understand publisher rationale for ebook pricing. I just feel so strongly that publishing has coasted on a “well, let’s just keep doing the same thing we’ve always done” model for far too long, and it is a damn shame for publishing to just continue on that track when ebooks offer the opportunity to do something so fundamentally and meaningfully different. In other words… how about a little informed pricing, please?
Kerry at 11:01 am on December 17, 2009

I completely understand that publishing is a difficult and expensive business, whether the product is an ebook or a hardcover. However, I really can’t get behind arbitrarily following the EXACT same pricing model for a physical, hardcover book that has to be printed, bound, stocked, shipped, returned, remaindered, etc., in selling ebooks that don’t have to go through any of these processes (even if they have their own set of costs). I really feel that keeping a print pricing model with digital content is putting a stake in the heart of the ebook revolution before it has a chance to get steady on its feet. Even if the costs really are EXACTLY the same (which seems highly, highly unlikely) for ebooks and hardcovers, I’d love to see an actual breakdown of the numbers to better understand publisher rationale for ebook pricing. I just feel so strongly that publishing has coasted on a “well, let’s just keep doing the same thing we’ve always done” model for far too long, and it is a damn shame for publishing to just continue on that track when ebooks offer the opportunity to do something so fundamentally and meaningfully different. In other words… how about a little informed pricing, please?
Bradley Robb at 12:55 pm on December 17, 2009

I think the problem that most customers have with pricing eBook at our even near the prices attributed to hardcovers is that customers expect prices to be relative to value, where as publishers (and all businesses, really) expect prices to be relative to cost.

There’s a major divide in there.

For a customer, a hardcover book has an intrinsic value that is evident. The books are printed on higher quality stock, they covers are glossy and generous. The book carries a physical heft which translates into at least perceived value in the mind of the customer. These books look good on the shelf, serving as decorative talismans even when not being read. Because of this, the hardcover has more value to the customer, and the customer is willing to pay more.

At least some are. It’s foolish to say that all customers place the same, or even similar dollar value on books. This is why paperbacks, which offer less perceived value than hardcovers also sell for less money. And, unfortunately, customers perceive even less value in eBooks.

Customers recognize that an eBook is inherently less expensive to produce than a print book – even if they don’t realize that the difference is only a few dollars that are saved in the cost of printing, shipping, storing, and returns. But, there is still a perceived difference, and that’s important.

Why?

Because publishers can set the price of an eBook at whatever they want, but if the customer doesn’t find that price to be acceptable, demand will either plummet or shift. Certain customers will simply abstain from purchasing a product that they don’t feel is worth the asking price. Others will turn to legal alternatives, and still others will turn to illegal ones.

So, while publishers can claim (and support said claims) that the cost of an eBook is nearly as expensive as that of the hardcover, their arguments that the price should reflect have yet to be accepted in the market at large. Small scale studies have actually directly contradicted the publishers logic in this area – for example the experiments undertaken by author J. A. Konrath.

Konrath actively experimented with the prices he was charging for his eBooks and found that as he lowered the prices, he was able to likewise increase demand. True, each time he lowered the price he received a small profit from each book, but increased sales volume can easily offset the incremental loss in individual profits. That is, though he was making less off of each individual book sale, he was making more money in total because he was making more sales. This logic is further reinforced by the lack of repeated costs in digital goods – the shift from from a scarce quantity to an abundant one meant that Konrath could satisfy all potential demand after a single initial investment.

Or to put it in publishing terms, once a book “earns out” of the initial investment – the total cost for production that you mentioned in your post – ever cent afterwards is pure profit. This turns book sales from a constant churn, where meeting demand has a subsequent cost associated with it, into a race. To be a profitable publisher in a digital or abundant market, the publisher’s primary goal is to earn out of their costs as quickly as possible.

And that’s the challenge facing publishers today, isn’t it? When viewed in that sense, the pricing market is broken down into two primary trains of thought: keeping prices high allows publishers to make the maximum amount of money off of the smallest population, or lowest demand; keeping prices low allows publishers to make the maximum amount of money off of the largest population or highest demand.

Using a dual-pole (technically a “bipolar” model, but that word has certain negative mental associations) sales model, it would be logical for publishers to price their highest demand products at the lowest price possible to incentivize demand, while maintaining a moderately higher price on lower demand books to achieve the maximum profit that the demand will support. The balancing of prices helps each book to earn out at roughly the same speed.

Maintaining prices that exceed perceived public value, or demand, will only serve to push potential customers in three directions: they either will not buy the book at all (a potential lost sale for the publisher), they will buy another book (a potential sale for competition), or they will turn toward illegal, illicit, or second hand means to procure a book (the math gets trickier here).

In that line of thinking, I wouldn’t say that publishers arguing for higher prices on their eBooks is cheating the reader, I’d say they’re cheating the publisher and the author. The faster an eBook earns out of its total cost, the more quickly the involved parties can begin to make a profit. And unlike in traditional book sales, once an eBook becomes profitable, it stays profitable.
Bradley Robb at 12:55 pm on December 17, 2009

I think the problem that most customers have with pricing eBook at our even near the prices attributed to hardcovers is that customers expect prices to be relative to value, where as publishers (and all businesses, really) expect prices to be relative to cost.

There’s a major divide in there.

For a customer, a hardcover book has an intrinsic value that is evident. The books are printed on higher quality stock, they covers are glossy and generous. The book carries a physical heft which translates into at least perceived value in the mind of the customer. These books look good on the shelf, serving as decorative talismans even when not being read. Because of this, the hardcover has more value to the customer, and the customer is willing to pay more.

At least some are. It’s foolish to say that all customers place the same, or even similar dollar value on books. This is why paperbacks, which offer less perceived value than hardcovers also sell for less money. And, unfortunately, customers perceive even less value in eBooks.

Customers recognize that an eBook is inherently less expensive to produce than a print book â€“ even if they don’t realize that the difference is only a few dollars that are saved in the cost of printing, shipping, storing, and returns. But, there is still a perceived difference, and that’s important.

Why?

Because publishers can set the price of an eBook at whatever they want, but if the customer doesn’t find that price to be acceptable, demand will either plummet or shift. Certain customers will simply abstain from purchasing a product that they don’t feel is worth the asking price. Others will turn to legal alternatives, and still others will turn to illegal ones.

So, while publishers can claim (and support said claims) that the cost of an eBook is nearly as expensive as that of the hardcover, their arguments that the price should reflect have yet to be accepted in the market at large. Small scale studies have actually directly contradicted the publishers logic in this area â€“ for example the experiments undertaken by author J. A. Konrath.

Konrath actively experimented with the prices he was charging for his eBooks and found that as he lowered the prices, he was able to likewise increase demand. True, each time he lowered the price he received a small profit from each book, but increased sales volume can easily offset the incremental loss in individual profits. That is, though he was making less off of each individual book sale, he was making more money in total because he was making more sales. This logic is further reinforced by the lack of repeated costs in digital goods â€“ the shift from from a scarce quantity to an abundant one meant that Konrath could satisfy all potential demand after a single initial investment.

Or to put it in publishing terms, once a book â€œearns outâ€ of the initial investment â€“ the total cost for production that you mentioned in your post â€“ ever cent afterwards is pure profit. This turns book sales from a constant churn, where meeting demand has a subsequent cost associated with it, into a race. To be a profitable publisher in a digital or abundant market, the publisher’s primary goal is to earn out of their costs as quickly as possible.

And that’s the challenge facing publishers today, isn’t it? When viewed in that sense, the pricing market is broken down into two primary trains of thought: keeping prices high allows publishers to make the maximum amount of money off of the smallest population, or lowest demand; keeping prices low allows publishers to make the maximum amount of money off of the largest population or highest demand.

Using a dual-pole (technically a â€œbipolarâ€ model, but that word has certain negative mental associations) sales model, it would be logical for publishers to price their highest demand products at the lowest price possible to incentivize demand, while maintaining a moderately higher price on lower demand books to achieve the maximum profit that the demand will support. The balancing of prices helps each book to earn out at roughly the same speed.

Maintaining prices that exceed perceived public value, or demand, will only serve to push potential customers in three directions: they either will not buy the book at all (a potential lost sale for the publisher), they will buy another book (a potential sale for competition), or they will turn toward illegal, illicit, or second hand means to procure a book (the math gets trickier here).

In that line of thinking, I wouldn’t say that publishers arguing for higher prices on their eBooks is cheating the reader, I’d say they’re cheating the publisher and the author. The faster an eBook earns out of its total cost, the more quickly the involved parties can begin to make a profit. And unlike in traditional book sales, once an eBook becomes profitable, it stays profitable.
Quentin at 3:27 pm on December 17, 2009

May I lend a small amount of perspective?

You’re arguing. With a man. Who is tweeting. His debut novel. And is proud of the fact.

Let’s let that sink in for a moment.
Quentin at 3:27 pm on December 17, 2009

May I lend a small amount of perspective?

You’re arguing. With a man. Who is tweeting. His debut novel. And is proud of the fact.

Let’s let that sink in for a moment.
Matt Stewart at 3:06 am on December 19, 2009

Hey guys, Matt Stewart here.

Backend is irrelevant for consumers. Consumers don’t care about what it takes to make a book, a website, a movie, whatever. Their decision is – “what would I rather do with my time and money?” And they’re a lot more likely to do whatever is most convenient – whether that be buy a book or download a movie.

As for pricing, I’m with Kerry. How can publishing possibly justify charging the same price when you take the entire manufacturing, shipping and ridiculous remainder system out of the process?
Matt Stewart at 3:06 am on December 19, 2009

Hey guys, Matt Stewart here.

Backend is irrelevant for consumers. Consumers don’t care about what it takes to make a book, a website, a movie, whatever. Their decision is – “what would I rather do with my time and money?” And they’re a lot more likely to do whatever is most convenient – whether that be buy a book or download a movie.

As for pricing, I’m with Kerry. How can publishing possibly justify charging the same price when you take the entire manufacturing, shipping and ridiculous remainder system out of the process?
Matt Stewart at 3:08 am on December 19, 2009

ps how to I convince you to treat me NOT like crap? (that goes for you too Quentin)

how about by announcing my mancrush on tao lin?
Matt Stewart at 3:08 am on December 19, 2009

ps how to I convince you to treat me NOT like crap? (that goes for you too Quentin)

how about by announcing my mancrush on tao lin?