Open Letter to Amazon Gains Support of Best-Selling Authors

While this year’s Fourth of July fireworks displays around the country were bold and beautiful, the fireworks between online retail giant Amazon.com and long-standing book publisher Hachette were anything but. Over the holiday weekend, support for Authors Guild Council Member Douglas Preston’s open letter to Amazon hit 300 signatures, with big names like Stephen King, Scott Turow, Nora Roberts, and James Patterson as signers. The open letter calls on Amazon “to resolve its dispute with Hachette without hurting authors and without blocking or otherwise delaying the sale of books to its customers,” among other things. “No bookseller,” Preston writes, “should block the sale of books or otherwise prevent or discourage customers from ordering or receiving the books they want. It is not right for Amazon to single out a group of authors, who are not involved in the dispute, for selective retaliation.”

The letter lists three main issues that he and other authors have with Amazon:

  1. Boycotting Hachette authors, claiming their titles are “unavailable.”
  2. Refusing to discount many of Hachette’s books.
  3. Slowing the delivery to “several weeks” on many of Hachette’s titles.

According to a July 4, 2014, article in The Guardian, the “negotiations became public knowledge after Amazon began raising estimated delivery times for what Hachette claims are thousands of its titles. Amazon said earlier this week that its stance was ‘in the long-term interest of our customers’; Hachette has said that it is looking for ‘terms that value appropriately for the years ahead the author’s unique role in creating books, and the publisher’s role in editing, marketing, and distributing them.’”

Amazon’s response was short and sweet: “We take seriously and regret the impact it has when, however infrequently, a terms dispute with a publisher affects authors,” the statement continued. “We look forward to resolving this issue with Hachette as soon as possible.”

Not all authors support Hachette in this dispute, though. Self-published authors have created their own petition, with more than 7,000 signatures, asking Hachette for better royalty rates for authors—in essence, asking for a living wage. The last few decades have seen the reworking of creative industries, usually to the detriment of the artist. Record companies are squeezing the life-blood out of musicians for a higher production rate, galleries rarely take chances on new artists anymore because of the current state of the economy, and the movie industry has been creatively bankrupt for years. It’s become almost impossible to get noticed through traditional channels of promotion. The possibility for self-promotion in publishing is one of the only ways some authors can get in the game, and many self-published authors will continue to support Amazon during their tug-o-war with Hachette.

How much would Hachette lose if Amazon remains unmoved? Conversely, how much does Amazon stand to lose if giants like King, Roberts and Patterson decide to pull their works from the site? At the end of the day, there are no real winners in this dispute. It’s safe to say that authors—and readers—are the ones most likely to lose.

The Battle for a Digital Pricing Model that Works Part 4: The Return of the Jedi!

by Rebekah Hunt
According to Mark Coker, founder of Smashwords, the solution to the digital publishing issue is simple. “The day has come,” he says, “for publishers to offer a $4.00 book.” Has Mr. Coker lost his mind, or could this really be the future of ebook pricing? He goes on to elaborate, “Most books are too expensive. Compared to lower cost alternative media sources, books are becoming niche consumables like caviar. The high cost of books jeopardizes not only the future of books, but the future of the book publishing industry. Unless authors, publishers and booksellers cooperate to bring down the cost of books, book publishing faces a painful decline, much as we’re now witnessing with newspaper and magazine publishing.”
The low-cost book concept Coker proffers is not limited to what is good for publishers in the US market, however. “Here in the U.S.,” he explains, “most consumers already think twice before shelling out $7.50, $15.00 or $30.00 for a good read. If a book at the current prices represents a big purchase for citizens of the world’s most affluent economy, imagine the cost burden for the vast majority of the world’s literate people. The growth in worldwide literacy has created a massive affordability gap between those who want books, and those who can afford them. Therein lies both the threat and the opportunity facing publishers.”
There is precedent for the strategy as well, Coker says. “The publishing industry has successfully responded to the price issue in the past by releasing lower cost formats such as the mid-sized trade paperback and the small purse-sized mass-market paperback. Each lower cost format dropped the price 30-50 percent. By offering customers a cheaper, smaller and less expensive format, publishers expanded the available market for their books and enabled a larger number of readers to gain access to affordable reads. Imagine if books were only available in hard cover today. How many current readers would have long ago abandoned print books due to the high price and large size of hardcover? Ebooks are a lower cost format, and therefore may hold the key to the book industry’s salvation.”
But what about the danger that, by setting the price of ebooks too low, the publishing industry might suffer more than it benefits? “Many publishers view ebooks with a skeptical eye,” Coker says. “After all, won’t cheap ebooks cannibalize expensive print books? This is the wrong way to examine the situation. Lower cost ebooks help publishers retain customers who might otherwise abandon books altogether in favor of lower cost alternative media options. Ebooks also hold the promise to expand the worldwide market for books. Hundreds of millions of new middle class and literate consumers have come online outside the US, especially in developing countries.Ebooks offer significant economic advantages to authors and publishers as well. From a production perspective, publishers can convert print books into digital books at very little cost. Once a book is liberated as digital bits, the production, duplication and distribution of the book requires no ink, paper, fossil fuels, shipping boxes, physical bookstores or cash registers. The entire process becomes one of automated online self-serve transactions. Since it costs the author or publisher next to nil to ‘print’ each copy of an ebook, ebooks are extremely profitable on a per-unit basis, even at a low selling price.”
So, what would this type of pricing model really mean to the future of the market? According to Coker, “The advantages of ebook economics will become more apparent as ebooks grow to comprise a greater percentage of book industry sales. Some might fear that $4.00 books will eviscerate the earnings of mass-market authors and publishers. The likely outcome isn’t so simple. For the mass market, if publishers don’t quickly satisfy lower price points, they’ll continue losing customers. Customers who prefer ink on paper will continue purchasing more expensive formats. Not all books should be priced at $4.00. Publishers should segment their markets to ensure they’re delivering a range of products and formats that offer the target customer value that exceeds each price point.”

While the future of the publishing industry as we know it remains uncertain, this uncertainty is more the symptom of a massive evolution in the way books are distributed and consumed, rather than that of the industry’s inevitable collapse. “By offering consumers a low cost digital product,” Coker goes on to say, “the economics of ebooks create a virtuous, self-reinforcing cycle. The low price expands the available market by making it affordable to more consumers; low production and distribution expenses allow the publisher to earn a healthy margin; and the larger addressable market allows publishers to sell more units at greater profit margins.”
When Mr. Jovi accused Steve Jobs of “killing the music business,” whether demonstrating his age or his ignorance of the market, he meant that Mr. Jobs and the iTunes revolution had killed the business as he knew it. This is an important distinction, and one that the publishing industry would be wise to consider. Every few decades the traditional ways of distributing media undergo sweeping change and, despite the prophesies of doom, consumers and businesses have risen to the challenge and found innovative and exciting new ways to buy and sell the media they consume and produce. Yes, the publishing industry as we know it is marching into the tar pits along with the old record company dinosaurs, but it isn’t the end of the industry. It is an opportunity for the evolution and innovation that will allow us to rise to meet consumer expectations and succeed in the vital and rapidly expanding digital universe.
THE END!

The Battle For a Digital Pricing Model That Works. Part One: Pub Wars!

By Rebekah Hunt
In March of 2011, Jon Bon Jovi famously accused Steve Jobs of being “personally responsible for killing the music business,” in an interview with the London based Sunday Times. “Kids today,” the aging rocker said (probably after chasing some off his lawn), “have missed the whole experience of… taking your allowance money and making a decision based on the jacket, not knowing what the record sounded like, and looking at a couple of still pictures and imagining it.”
In his defense, he did acknowledge that this made him sound like an old man, but the self-awareness stopped there. Mr. Jovi failed to grasp the crux of the issue, which is the other part of the experience kids these days are missing: the experience of getting price-gouged by a greedy record company for a record that included a bunch of filler, propped up by one or two listenable songs and a ruthlessly promoted single, only to feel let down and cheated after being forced to buy it “not knowing what the record sounded like” and then being stuck with it. And it is this experience, not Steve Jobs, that really killed the music industry.
What does this have to do with the publishing industry? Everything. One of my major motivating interests in the publishing industry, specifically at this point in history, is the monumental evolution the market is undergoing. In the wake of the Napster/iTunes revolution and its palpable effects on the music industry, current developments in software, hardware, and online accessibility; other industries are quickly moving to follow suit.
Despite criticism of its bite-sized, carte-blanche style of selling media to consumers, iTunes has set the bar for consumer expectations of the availability and ease of consumption of media. Sites like Netflix and Hulu are leading the way in on-demand digital sales of television and films, even partially contributing to the Writers’ Guild strike of 2007-08 over residual payments based upon digital media downloads and online streaming content. The one industry that appears to be foundering in the current market’s sea change is the publishing industry.
This brings me to the ultimate question for the publishing industry: how is the publishing industry going to evolve to stay relevant in the current economic and technological climate? The obvious answer for now seems to be the migration of the written word away from paper and toward digital media, but the struggle over pricing and distribution of books and other publications in digital formats has been confusing at best, chaotic at worst. In order to find a solution, we first need to isolate the problem by examining the traditional publishing model and trying to assess the major factors contributing to its decline.
Stay tuned for next week’s blog, the Fall of the Old Republic (the decline of the publishing industry); and the week after that, for the Dark Side of the Force (digital piracy) and A New Hope (the publishing market evolves); and the week after that for the Return of the Jedi (an ebook pricing strategy that works).

Digital Pirates II: The Curse of the Black URL

By Rebekah Hunt
In my last thrilling, swashbuckling article on digital piracy, I explored the differences between the piracy of films and that of books. However, the most pressing question surrounding the piracy of digital content is this: does piracy of digital content hurt sales? As it turns out, opinions on this very complex issue are extremely divided. The same article from digitalbookworld.com contains two diametrically opposed viewpoints.
According to bestselling author Hugh Howey, “I love pirates. I get money from them all the time… They send me money thanking me because they loved my book. I sometimes go onto torrent sites and if I don’t see my book there I feel bad because it means I’m not in demand.”
Michael D. Smith, professor of information technology and marketing at Carnegie Mellon University, tells a different story. “Publishers can and do compete with pirated versions of their content available for free,” he says. “When ABC added its content to Hulu, incidences of piracy of ABC content decreased 37%.” That’s a compelling, if not exactly rigorously examined connection (chronology is assumed to represent causality with no other evidence shown) in the television industry, but what about books?
Smith makes reference to an “anonymous publisher that selectively windowed its ebook and print book titles to see if releasing the digital version after the print version would result in increased sales for the print version.” He concludes, “Sales of print copies increased by 0.4%—but ebook sales decreased by 52% and overall sales dropped by 22%, presumably because of piracy.”
This explanation raises more questions than it answers. For one, how did they determine that ebook sales decreased after the digital versions were released, if releasing the digital version was the experimental condition and was only measurable after it was introduced? Unless we’re in some sort of Looper situation, you can’t have a decline in digital sales if no digital sales existed before you introduced them in order to measure their effect, can you?
More important is that little word “presumably.” Once again, this argument is fraught with the failure to adequately distinguish between correlation and causation, as no evidence is given that establishes the causal link, only chronology. Smith goes on to suggest that “publishers should adopt two major strategies in combating piracy: Make their content available online and use anti-piracy laws.”
Chris Anderson, Editor-in-chief of Wired, and author of the amazing economics book Free, has a more reasoned perspective. He addresses the fear of piracy and unauthorized distribution of digital content, saying,  “All that counts as Very Scary Stuff to industry executives, and as a result they’re looking for ‘strong’ DRM before they consider letting their premier content circulate online.” He maintains that all the fear of piracy and the tactics adopted by companies to protect their precious treasures are a mistake. “If your content is uncrackable, it means you’ve probably locked the market down so tight that even honest consumers are being inconvenienced.” He advises content providers to “be careful what you ask for, because you just might get it. ‘Uncrackable’ DRM could make the P2P problem worse, by driving more users underground and depressing prices.
Anderson also claims that “zero-percent piracy is not only unattainable, it’s economically suboptimal.” He elaborates, saying, “piracy can actually let you raise your prices.” How could this be true, you ask? Because, “the pirate price is so low that it’s rarely possible to close that gap enough to make much of a difference… The usual price-setting method is to look at the entire potential market, from the many at the economic lower end to the few at the top, and set a price somewhere in between the top and bottom that will maximize total revenues. But if you cede the bottom to piracy, you can set a price between the top and the middle. The result: higher revenues per copy, and potentially higher revenues overall.”
This seems to fly in the face of traditional economic models, but as we have seen time and time again, everything about the digital content market consistently does that anyway. “The lesson,” Anderson says, is that “markets should exhibit just enough piracy to suggest that the industry has got the balance of control about right: not too loose and not too tight. That number is not zero percent (which requires protection methods so invasive they kill demand), and it’s not 100% (which kills the business). It’s somewhere in-between… Most consumers see the value in paying for something of guaranteed quality and legality, as long as you don’t treat them like potential criminals.”