The Shatzkin Files

Amazon channels Orwell in its latest blast

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Anybody who reads Amazon’s latest volley in the Amazon-Hachette war and then David Streitfeld’s takedown of it on the New York Times’s web site will know that Amazon — either deliberately or with striking ignorance — distorted a George Orwell quote to make it appear that he was against low-priced paperbacks when he was actually for them.

This recalls the irrelevant but delicious irony that the one time Amazon exercised its ability to claw back ebooks it had sold was when they discovered that they were selling unauthorized ebooks of Orwell’s “1984”. The right thing to do was exactly what they did: pull back the copyright-violating ebooks and refund the money to the purchasers. This (apparently) one-time event has often been cited as some sort of generic fault with ebooks, as though ebook vendors would make a practice of taking back what they had sold their customers. This was a case where Amazon was villified in some quarters for doing the right thing which simply adds to the irony.

However, the most misleading aspect of the Amazon piece is not the Orwellian treatment of Orwell, but the twisted metaphor in which the low-priced ebook is the low-priced paperback of today’s world. (The analogy was one I wrote about three years ago with, I think somewhat more care for the facts.) Yes, they were both new formats with a lower cost basis that enabled a lower retail price to yield positive margins. And there’s one other striking similarity: they both unleashed a spate of genre fiction to satisfy the demand for the format, largely because the rights to higher-value books were not available for the cheaper format, but also because lower prices attract some readers more than others. But that is where the similarities end.

This argument against Hachette, using authors as proxies and lower-prices-for-consumers as the indisputable public good, once again employs two logical fallacies that are central to their argument that Hachette (and its parent company, invoked to give the appearance of relative equality of size between the combatants, which is still nowhere near the case) is craven and muleheaded and that Amazon is merely engaged in a fight for right.

1. Amazon’s logic is entirely internal to Amazon. It does not attempt to take into account, or even acknowledge, that publishers and their authors are dependent on other channels besides Amazon. And, in fact, the publishers and authors know for sure that the more the sales do concentrate within Amazon, the more their margins will be reduced.

2. The price elasticity statistics they invoke (for the second time in as many public statements), which are also entirely internal to Amazon, are averages. They don’t even offer us a standard deviation so we can get a sense of what share of the measured titles are near the average, let alone a genre- and topic-specific breakdown which would show, beyond the shadow of a doubt, that many Hachette books would not achieve the average elasticity rate. See if you can find anybody with an ounce of statistical sophistication who thinks a book by Malcolm Gladwell has the same price elasticity as a romance or sci-fi novel by a relatively unknown author.

The actual history of the paperback in America contains elements of what Amazon claims. It actually begins after World War II, not before (although Penguin began in this country in 1939). During World War II, under the leadership of historian and renaissance man Philip Van Doren Stern, the military made 25 cent paperbacks available to the troops. That introduced the idea to the masses and after the war several mass-market paperback houses started.

They distributed through the magazine distribution network: local wholesalers that “pushed” copies of printed material to newsstands and other intermediaries who took their distribution of copies, displayed them until the next edition of the magazine would come out, and then sent back the covers to get credit for what was not sold. The first paperback books had a similar short shelf life in that distribution environment.

What made the cheap prices possible were several factors:

1. The books themselves were frequently formulaic and short and therefore cheap for the publisher to buy. The universe of titles for the first several years was, aside from classics from the public domain, a different set of titles than those sold by mainline publishers through bookstores.

2. There was no expensive negotiation between publishers and the accounts over an order for each shipment of books. The wholesaler simply decided how many copies each outlet would get and, in the beginning, the wholesaler pretty much distributed what the publisher asked them to. The “check and balance” was that the publisher would get worthless covers back for the unsold books and that was their constraint against oversupplying the system. Over time, that aspect of things broke down and the publisher had to work the wholesalers to get the distributions they wanted.

3. The books themselves were cheaper too: less and cheaper paper and much less expensive binding.

4. The adoption of the magazine system of covers-only for returns created a big saving compared to the trade book practice that required returns of the whole book in saleable condition to get credit.

5. The retailer took a considerably smaller share of the retail price than bookstores got on trade books.

At the same time that the mass-market revolution was beginning, conventional trade publishers also started experimenting with the paperback format. The first extensive foray of this kind was by Doubleday in the early 1950s, when wunderkind Jason Epstein (later the founder of NY Review of Books and still active as one of the founding visionaries behind the Espresso Book Machine) created the Anchor Books line.

My father, Leonard Shatzkin, was Director of Research at Doubleday (today they would call it “New Business Development” or “Change Management”) at the time. He often talked about a sales conference at Bear Mountain where Sid Gross, who headed the Doubleday bookstores, railed against the cheap paperbacks on which the stores couldn’t make any money! So, it was true that the established publishing industry and the upstart paperback business had a period of almost two decades of very separate development.

It took until the 1960s — a decade-and-a-half after the paperback revolution started — before the two businesses really started to coalesce into one. And the process of integrating the two businesses really took another decade-and-a-half, finally concluding in the late 1970s when Penguin acquired Viking, Random House acquired Ballantine and Fawcett, and Bantam started to publish hardcover books.

My own first job in trade publishing was in 1962, working on the sales floor of the brand new, just-opened paperback department of Brentano’s Bookstore on 5th Avenue. Even then, the two businesses operated separately. The floor of the department had chin-high shelves all around with what we’d call “trade paperbacks” today, arranged by topic. They were mostly academic. On a wall were the racks of mass-market paperbacks and they were organized by publisher. If you wanted to find the paperbacks of a famous author whose rights had gone to a mass-market house, you had to know which house published that author to find the book. (That was good; it made work for sales clerks!)

There was a simple reason for that. The two kinds of paperbacks worked with different economics and distribution protocols. The trade paperbacks were bought like hardcovers; everything that was shipped in was because a buyer for Brentano’s had ordered it. The mass-markets were “rack-jobbed” by the publisher. They sent their own reps in to check stock on a weekly basis and they decided what new books went into the racks and what dead stock was pulled. It was to make the work of the publishers efficient that the mass-markets were grouped by publisher.

The highly successful commercial books that became mass-market paperbacks got there because the hardcover publisher, after it had booked most of the revenue it expected to get for the book, then sold mass-market rights to get another bite of the apple.

Little of this bears much resemblance to what is happening today. Little of this is comparable to the challenges trade publishers face keeping alive a multi-channel distribution system and a printed book market that still accounts for most of the sales for most of the books.

But the most striking difference today is that a single retailer controls so much of the commerce that it can, on its own, influence pricing for the entire industry. The mere fact that one single retailer can try that is itself a signal that we have an imbalance in the value chain that is unprecedented in the history of publishing.

One other aspect of this whole discussion which is mystifying (or revealing) is Amazon’s success getting indie authors to cheer them on as they pound the publishers to lower prices. (The new Amazon statement is made in a letter sent to KDP authors.) This is absolutely indisputably against the interests of the self-published authors themselves, who are much better off if the branded books have higher prices and leave the lower price tiers to them. That seemed obvious to me years ago. Yet, Amazon still successfully invokes the indie author militia to support them as they fight higher prices for the indies’ competition! You will undoubtedly see evidence of that in the comment string for this post (if history is any guide).

The tactic of publishing Michael Pietsch’s name and email address with a clear appeal for the indie authors to flood his inbox is an odious tactic, but, in fairness to Amazon, that odious tactic was initiated by the Authors United advertisement headed by Douglas Preston which gave Bezos’s email address. This is something that both sides should refrain from and, in this case, Amazon didn’t start it.

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  • emmittc

    Mike: thanks for sharing the history….very grateful to have some perspective from somebody who literally, it appears, grew up in and around the bookselling and publishing world and appreciates that it really does have a venerable past that does not have to be blithely trashed but can instruct and inform us today…..curious what Mr. Leonard Shatzkin would make of all of this…..

    • That’s actually a really good question with a complex set of answers.

  • emmittc

    “Amazon’s logic is entirely internal to Amazon” – indeed – and the rabid focus on “low prices” as bait/pr to serve their objectives (market share) allows them to get away with seeming to have another interest in mind…..the concept of consumer has been grotesquely co-opted and now justifies all manner of corporate self serving practices and the idea of common good has been replaced by consumer good (=corporate/market growth for its own sake)….similar to how the much vaunted shareholders interest now trumps the commonwealth….also – the argument that low prices makes people read seems foolish to me…it might dictate WHAT people read – but not compel them to read….I think it is actually insulting and patronizing to assert that….

    “Most surprising to many skeptics in the trade was the fact that Pocket Books did not appear to compete with the same titles sold for higher prices. A Vermont bookseller reported that while he was selling “Bambi” for a quarter, he was also selling record numbers of the same book in fifty-cent and dollar editions. Pocket Books issued Dale Carnegie’s “How to Win Friends and Influence People”, but the book continued to sell in a $1.96 edition.”

    –Tebbel, John, A History of Book Publishing in the United States, Volume IV, The Great Change, 1940-1980 (New York: R.R. Bowker Company, 1981), 368.

    • Agree that prices influences choice of reading matter more than whether or not to read, competition with other media notwithstanding.
      Not sure what to make of the Tebbel quote. Not really enough data to draw any conclusions.

      • emmittc

        think tebbel quote just illustrates that books are not lawn chairs and readers have varied tastes and desires aside from lowest price (though it obviously factors in) – and that the idea of value is ignored by most of these narrow arguments about price – price and value are disconnected and should not be…..

        cultural content and patronage are important for many books that are not genre fiction – and arguably for some that are…interested readers can’t come close to helping support Robert Caro,Toni Morrison, Don DeLillo, Ishmael Reed, etc. etc by paying $1.99 (or even $9.99) every few years……there is a distinction to be made between the marketplace and culture – they intersect for sure but consideration of market at all costs (or at lowest cost) disserves the culture….we need balance….

        (and i found the “amazon books team” desperate snarky reference to “Arts and Letters” quite telling….and sad)

      • Elliot1234

        Nobody will support Robert Caro in the future. The ability to produce and market low price books means they will dominate, and Caro will have to find a way to take care of himself. He’s a smart guy. I bet he can do it. Maybe he will do much better at lower prices where the publisher gets nothing.

      • emmittc

        Will he take care of himself by tending bar, wall street banking or ?? so we have no future comparable historical scholarship?? or are you saying he (or future caro) will find a way to do his research and sustain himself? easy for you to say but you could be right – still beside the point I think…..

        not sure what you base your assumption that low price books will dominate….market is not free and is a fiction….manipulated and rigged….seems like a bleak low price world to me if that becomes the treasured value….

        the cost of low prices is transferred and paid by the culture in what is lost….the cultural price paid may not be valued by some – but is by others…winners and losers…..will have to fight it out in what might just be a larger battle…..advantage $$=power short term, numbers maybe down the line….

      • Elliot1234

        It is easy for me to say, and I am saying it, Caro will have to take care of himself. Maybe he will tend bar or work in a patent office. We will still have historical scholarship, and it will be done by people who are capable of taking care of themselves. The others will go do something else.

        I say low prices will dominate because books will follow the same path as many other goods. Lower production costs will lead to lower retail prices through competition. We already see it happening.

        The book market is very free. How is it being manipulated, and who is manipulating it? There has never been a time when entry into the market has had fewer barriers. We have never had more books available to so many people.

        Low prices are already a treasured value. It’s here. Bleak? I doubt it, but I am sure we will have people complaining about it. Many people currently making money from books will be out of work because authors and retailers will not use them. They will also go do something else. Nobody will notice.

        Nobody will care about a cultural price because they will not know what has been lost. How do we compute what is lost today? What has been lost over the last 100 years? How much has culture paid. It sounds good, but it is silly.

      • A great deal of what you say here is sad and true. But I see no particular virtue in accelerating the process.
        What is dubious is your contention that the market isn’t being “manipulated”. Doing so — tilting ebook prices lower — is Amazon’s stated intention. That’s not attempting manipulation?

      • Elliot1234

        If retailers setting retail prices is manipulation, then manipulation has no meaning. It happens in just about every other market in sight. It is normal, expected, and healthy activity.

      • A retailer setting its own prices both fine and normal. A single retailer having enough power to presume to set pricing policy for an industry should at least raise an eyebrow or two. And it is NOT normal.

      • Eric Riback

        Yes, amazon can sell at any price they choose. Since they choose not to lose money on ebooks any more they are trying to force the industry to adhere to what they feel the optimum price is. A retailer can choose to sell or not sell any product they want. A retailer whose premise is that they carry everything has limited their ability in that regard. Amazon may have to chose what it wants to be.

      • I don’t think we know that they “choose not to lose money on ebooks anymore” or what their strategy is in their current negotiations. Whatever their ebook strategy, I doubt they’re done applying margin pressure to brick-and-mortar retailers with low pricing. And I think the notion that margin needs are driving their strategy with publishers is way oversold. I have no inside information — that’s for sure — but I think the margins they make on book sales can’t be improved enough to make much overall impact on their numbers. We’re too small a part of their business to matter that much…

      • Elliot1234

        Internet sales are applying the same kind of pressure to all bricks & mortar operations. Books aren’t special. Times are changing across the board in retail. Consumers are pursuing their own welfare, and opting for new purchasing methods.

        Some retail models won’t be able to survive the change. I suspect the days of specialty stores like bookstores are numbered. l doubt consumers will put up with progress in every other retail market while books remain in the Twentieth Century.

      • I don’t disagree with a lot of what you’re saying. The difference is in our perspectives. I’m trying to help players in the industry that is transitioning to a digital future, recognizing that a lot of what is going to happen is not subject to the control of any publisher or player. Sure, there are a lot of forces no publisher can control. But I don’t think that’s what’s at issue between Amazon and Hachette. Amazon is trying to use its marketplace power to change the basis of Hachette’s pricing and the division of revenue between publisher and retailer. Why would anybody else who has to depend on Amazon’s sales *not *be thinking “there but for fortune” and thus inclined to take Hachette’s side? Only the indie author community doesn’t see it that way and some might say that’s a sign of their lack of business sophistication.

      • Elliot1234

        Amazon is trying to use itsmarketplace power to change the basis of Hachette’s pricing and the division of revenue between publisher and retailer.

        Division of what revenue? Under the prevailing model in the economy, the producer gets all the revenue from his sale to the retailer. There is no division.

        Then the retailer gets all the revenue from his sale to the consumer. There is no division.

        Why would anybody else who has to depend on Amazon’s sales *not *be thinking “there but for fortune” and thus inclined to take Hachette’s side?

        Others who deal with Amazon probably examine themselves and Hachette before presuming their situation is the same as Hachette’s. That can provide pretty good reasons for refraining from supporting Hachette. Perhaps they are just sophisticated business people.

        Only the indie author community doesn’t see it that way and some might say that’s a sign of their lack of business sophistication.

        Some might say just about anything. But if you are saying it, I challenge you to show independent authors are less informed and sophisticated in business than the traditionalist authors supporting Hachette.

        Independent authors come from all walks of life, and many have spent entire careers in business. I’m not sure why anyone should presume they lack business experience, sophistication, or acumen.

        If you want to show how unsophisticated independent authors are in business and economics, you can start with me. I am one, and I do not support Hachette.

      • Then YOU can start by explaining why it is in the interests of the independent author community, which largely gains success by using low prices, to bring DOWN the prices of the high-priced alternatives. Wouldn’t they gain a bigger pricing advantage if agency pricing worked and was enforced and Amazon was not allowed to discount? Yet, they don’t support that .

        You’re right that there are far too many self-published authors to generalize. So let’s just say (as I did in a blog post three years ago) that those self-published authors who oppose publishers’ attempts to keep ebook prices for branded authors up are working against their own self-interest. And perhaps that does start with you.

        If you want to get personal with your interaction, you’ll have to reveal who you are and if you want to invoke your experience, you’ll have to tell us what is. In this venue I autocratically make the rules in what I think are the interests of my readers. It’s called “curation”.

      • Elliot1234

        Then YOU can start by explaining why it is in the interests of the independent author community, which largely gains success by using low prices, to bring DOWN the prices of the high-priced alternatives.

        Thank you.

        There are at least four plausible reasons independents may want to see lower prices. There are probably more.

        This is all based on the notion of maximizing revenue for the author, rather than holding up unit prices.

        First, lower prices for traditional works and higher prices for independent works serve to erase some of the distinction between the two. That decreases an advantage traditional works have with some consumers since price no longer signals the difference. Remember that level playing field we keep hearing about? This tilts it in independents’ direction.

        Second, lower eBook prices put downward pressure on paper sales since some consumers will buy the eBook rather than the paper. This increases the market for eBooks, and increases the potential consumer base for independents who do not bother with paper. The field keeps sliding in independents’ direction.

        Third, paper marketing by traditionalists carries over to traditional eBooks. They benefit from paper marketing in bookstores. A loss of paper sales will reduce the impact of that marketing on eBooks, and reduce an advantage traditionalist eBooks have. Slip-sliding away…

        Fourth, Amazon has shown considerable talent in building market share. Given complete rtail pricing discretion, they can likely increase the market share for eBooks, and that increases the consumer base for independents. Tilt, tilt, tilt…

        those self-published authors who oppose publishers’ attempts to keep ebook prices for branded authors up are working against their own self-interest. And perhaps that does start with you.

        I doubt anything starts with me. But I disagree I am working against my self-interests. I look to total revenue based on the net effect of all the forces in the market. As summarized above. I see lower eBook prices in my self-interest.

        If you want to get personal with your interaction, you’ll have to reveal who you are and if you want to invoke your experience, you’ll have to tell us what is. In this venue I autocratically make the rules in what I think are the interests of my readers. It’s called “curation”.

        The last thing I want to do is get personal. I am content to deal with ideas and issues. Ideas and cogent argument stand on their own. As an independent author who might be considered lacking in business sophistication by some, I am happy to present those ideas and argument. The argument from authority is weak, and I refuse to deploy it.

        But I do find it bracing to engage an informed opponent in discussing general criticism aimed at a large group to which I belong. That is in my self-interest.

      • Elliot1234 – thanks for your comments. I have enjoyed reading them and the rebuttals by others. It is a useful discipline to discuss around an important point and I engage in that spirit – so here goes: I have a problem with your notion that Amazon are the ‘natural’ development of the publishing industry as it migrates online. Despite massive worldwide sales Amazon still make very small profits and for a long time did not break even. This is of course well known. It is only because of the extremely deep pockets of its mind-bogglingly wealthy investors that it has been able to sustain its growth and systematic undermining of bricks-and-mortar retailers in multiple industries. Put simply, investors were willing to subsidise the sale of each unit sold on Amazon for over a decade until the point now at which its market share is so great it can start to turn the tables on suppliers and/or cut them out entirely. This again is well known. I bring these points up again because you seem to be championing the market as an efficient system that brings down prices for consumers and characterising Shatzkin et al as being against the necessary machinations of it. However, the growth of Amazon to the point it is at now is obviously is nothing to do with perfect markets – the ideological end goal of a market economy. The consumer market did not choose Amazon; it was a business proposition to investors – ‘what if we *owned* online selling?!’. In other words, it is a business strategy that primarily serves one company. The problem, if we are going to talk along this theme, is that free markets do not exist to serve only the consumer. They also exist to provide jobs (for the consumer). The fact that Amazon is stripping actual jobs out of the supply chain (re: future Caro and ‘bloated’ publishers) may be more to do with its distortion of the market as a *strategically* overgrown retailer, than because of eBooks, the Internet or The Market.

        Amazon are not free-marketeers. If they believed in this they would let their platform act like a normal marketplace, work out arrangements that benefit suppliers and consumers and get on with their business of selling. What they are actually attempting to do is *disrupt* free (or at least mixed) market conditions to make better profits. This is fine. Disruption is sexy. Facebook is disruption. And businesses (especially ruthless growth needy ones) will try these things. But it is up to the commentators, the law makers and their partners (i.e. publishers) to decide what’s ethical, legal and marketable respectively. To throw up your hands and say ‘Meh, it’s economics’ is to confuse the way one company is strategically (and, in my mind, unethically) working, with the way of the world.

      • Although I’m sympathetic with the overall thrust of this argument, it isn’t really quite accurate to say that Amazon’s strategy was funded by “deep-pocketed investors”, as though a bunch of rich people decided to buy their way into Amazon’s position. And the fact of their lack of profits is also subtly misinterpreted.

        Amazon doesn’t make profits because it expenses capital investments and it only breaks even because it plows everything it can back into the future of its business. The investment capital comes from lots and lots of individual investors who buy into the strategy of investing for the future. Bezos successfully sold Wall Street on the fact that he could build an Everything Store by using the book business as a loss leader.

        Beyond that, your comment is largely accurate, but the genesis of the investment capital that enables it is far more of an accomplishment and much less of a rich man’s game than your comment might suggest.

      • Thank you. I appreciate the correction. I did imagine the bulk of the investment coming from larger investors, especially initially. And I don’t want to detract from Amazon’s general business achievements. As you have summarised: it is one thing to have a strategy and an entirely other thing to achieve it as it has done. My only point was to resurface this idea that we are talking about a business strategy, not a de facto market trend.

      • And on that we totally agree!

      • Elliot1234

        Sure it’s a trend. We see internet and eCommerce growing at a very healthy rate. Books aren’t special. They are just caught up in a much larger trend. Each market that is affected has unique characteristics, but they are all flowing with the same powerful trend.

        The only people I have seen buck this kind of trend are the Swiss watch makers. When the digital technology hit watches, they managed to make mechanical watches a prized good. A Rolex sells at many multiples of my digital Timex, but my Timex keeps better time.

      • Sanford Gray Thatcher

        And what about the rare book market? Technology hasn’t affected that much, except to reduce the costs of rare book sellers who don’t need to print and send out catalogues as much anymore.

      • Elliot1234

        Agree. Probably hasn’t had much impact on Gutenberg Bibles,

      • SLNH

        Yeah, Mike!!!!!!!! A statement I can totally agree with.

      • Elliot1234

        I don’t see Amazon as the natural development of anything. I see it as an ambitious exploiter of a new taechnology and business model. If Amazon didn’t do it, someone else would.

        I also see that technology enabling the production of goods at a much lower cost than in the past. History shows the natural development in such cases is for the lower costs to flow through to lower retail prices. It can’t be stopped.

        Regardles of both Amazon and the publishing incumbents, a new technology allows books to be produced at a much lower cost. When that happens, the markets take advantage of it. We might not be able to accurately forecast who will do what, but we can confidently say it will happen.

        So, I see the economic development as natural, and the exploiters of that develpment as incidental. It doesn’t matter who they are. Someone will do it.

        In terms of Amazon’s financing, we have to pay attention to free cash flow. If we check the external cash infusions, we won’t see much. But we do see patience from investors with the lack of appreciable financial profit.
        [Amazon finances are a huge topic, and I won’t pretend to do it justice here.]

        However, i disagree that investors are carrying Amazon. They are making an excellent return on their stock investment. They don’t care if they make money from the income statement or stock appreciation. Take away the stock appreciation, and those happy investors will turn on a dime..

        I would definitely say Amazon is a free marketer. It operates within a free market, but does not operate a free market. That is a huge distinction. Nobody operates an all inclusive free market. But they do operate as individual actors within that free market.

        Nobody lets their own platform and resources act like a free market. They maintain property rights to their resources.They use their platform and resources to compete with other players in a free market. We call their aggregate activity a free market, but no single actor has property rights for that market. Nobody does.

      • Agreed that the investors in Amazon are doing just fine!

        But it is relevant to those of us in the business that Amazon has gained such substantial market share that what they do influences everybody else’s economics and behavior. The extent to which that is true is unnprecedented. For whatever that’s worth.

      • Elliot1234

        Sure it’s relevant. It’s relevant to me, too. It would be irresponsible not to see the relevance of the biggest retailer in a market.

        I’m not sure it’s unprecedented. I’d have to review other markets. Walmart comes to mind, but there are both similarities and differences there.

      • Andy

        With that mentioned, you need to also need to pint out the obvious. Who exactly influenced economics and behavior of the publishing industry before Amazon existed – on a true and unprecedented scale!? That would be your buddies – the Big Publishers. And why everyone asks did they combine to form the Big 5. To wield that clout more ruthlessly and effectively! It is the ultimate irony when a large business starts to get beat at it’s own game and cries foul over the very same tactics it used so effectively. It is the same sad thrashings we have seen since the beginning of time when the new replaces the old. It is an interesting mental exercise to argue about the topic and over fine details but in the end changes nothing. Even if hatchette “wins” this dispute it does little to slow the end of publishing as we know it. Dead men walking.

      • “Combine as the Big Five”? Perhaps you’re referring to the DoJ action but, even then, did you even know that the biggest of the Big Six, now the bigger half of the biggest of the Big Five, was not involved in the initial shift to agency or the lawsuit? Probably not…

      • SLNH

        Yes, I know Random House was not involved because they did not want to force their retailers to the agency model and didn’t until Apple forced them by refusing book apps from them.

      • I don’t know what they told you, but that bears no resemblance to what Random House executives told me at the time that they didn’t do it and a year later when they did.

      • SLNH

        It wasn’t what they told me but what was reported back in 2010 when prices went into effect before anyone was accused of collusion. They weren’t trying to look good as there was no need to at that time.

      • A lot of things are “reported”. That is inconsistent with my understanding. I know nothing about your sources. I wrote about it at the time if you care.

      • Sanford Gray Thatcher

        It is not only the Big Five who see Amazon as bad for the long-term health of the publishing business. many university presses do also.

      • Elliot1234

        Wonder what those presses think of SSRN?

      • Sanford Gray Thatcher

        I’m not sure what your point is. Being an advocate generally of “open access,” which i implemented at Penn State U.P., I like things like SSRN.

      • Elliot1234

        SSRN is a low cost outlet. It eliminates the need for intermediaries. Seems a bit like self-publishing.

      • Steven Zacharius

        The big 5 are the big 5 because publishing is not a high profit business. The larger publishers bought the others out to expand their business, because that’s the easier way to grow your bottom-line. You get synergies by wiping out warehouses and labor and it makes the combined company more profitable.

      • Elliot1234

        Of course. And the same quality product can be produced at a reduced cost.

      • SLNH

        Publishers find it more profitable to eliminate warehouses while Amazon grows market share by building them. And don’t lose focus that while Amazon is growing ebooks it is also selling print books and with a higher discount than ebooks.

      • Of course they are. Physical bookstores are not weakened by ebooks alone! And they were weakened substantially before ebooks arose at all.

      • SLNH

        Agreed, and what circumstances weakened them, do you believe?

      • Many. And I’ve written about THAT many times too. You can start with a post from five years ago called “Why are you for killing bookstores?”

      • Sanford Gray Thatcher

        Anybody who actually works in a publishing house knows that ebooks are not cheaper to produce, unless the accounting of costs is done in such a way as to have the print edition subsidize the ebook. If an ebook is not preceded by, or accompanied by, a print edition, it will cost as much to publish as a print edition. Self-publishers hide this fact from themselves because they don;t account for costs that are normally involved in publishing, like design, copyediting, marketing, etc. Self-publishers don;t need to avail themselves of any of these services, but if they don’t, they will be doing publishing on the cheap and the products they produce will look cheap to buyers.

      • Elliot1234

        But we can observe self-publishers are really doing it cheaper. It doesn’t matter how they do it, just that they deliver the product. They don’t care what we think about their production process. They don’t care what publishers think of it. They care about consumers, and consumers are buying the product.

        Self-publishers are intimately aware of costs for covers, editing, and marketing. They write the checks.

      • Steven Zacharius

        They are also not taking into account an advance. That’s probably the biggest cost for the publisher depending on the size of that advance.

      • Elliot1234

        It makes sense for traditional publishers to consider advances, and it makes sense for traditional authors to consider advances. But indpendents have a different buisness model and cost structure, so advances are not something they manage like they manage costs for covers, editing, and marketing.

      • Sanford Gray Thatcher

        Are you happy about having a cheaper product with poor design and no editing drive better books out of the market?

      • Elliot1234

        My happiness doesn’t matter.

        Consumers are making choices. There is no reason to presume they are choosing poorly designed books with no editing.

        There is a set of independent books that are poorly designed with no editing.

        There is also a set of independent books that are well designed and well edited.

        So what reason do we have to presume consumers are choosing from the set of poorly designed books with no editing?

        It is far more likely they are choosing from the well designed and well edited set. That is where consumer value is found.

      • Sanford Gray Thatcher

        You’re right that not all regularly published books are well edited. I have written reviews of books published by such prestigious houses as Oxford U.P. where I found examples of shoddy editing. But from what I’ve read about self-published books, they are far more likely to have had no professional design or editing done at all compared with regularly published books. I have no idea how consumers might react to such issues of quality, but given the frequent grammatical lapses I witness every day, I’m not sanguine that they would recognize errors (like dangling modifiers) when they see them.

      • Elliot1234

        I didn’t say anyhting about regularly published books, and I haven’t written reviews of anything. I’m barely literate. . I limited my comments to independent books. I use “independent” as a synonym for self-published.

        Self-published books may be more likely to have had no professional design or editing. But that tells us nothing about the quality of the final product. it merely observes the production process. Independents do things differently.

        But, let’s accept that there is a higher percentage of independent books with poor editing and design. What reason would we have to presume they are the ones driving the competition out of the market? Why would consumers choose inferior independent books when there are superior independent books?

        I would suggest the well designed and edited independents are the books driving out the competiton. And why presume the competition is better?

      • SLNH

        During my school years, I received high grades in English. It would take more than errors in dangling modifiers to bother me. Each reader has their own method of interpreting what interests or disturbs them in reading material.

      • Steven Zacharius

        Consumers are absolutely buying ebooks from traditional publishers at regular prices. They are buying indie books at primarily low prices. They have a choice.

      • Elliot1234

        Consumers are absolutely buying ebooks from traditional publishers at regular prices.

        Of course they are. We can see that. We can also see they are buying increasing numbers of independent books.

      • SLNH

        Investors are not subsidizing the sale of Amazon units. They are buying and selling previously issued stock FROM EACH OTHER based on the value they perceive in the company.

      • Amazon’s stock price is understood to be an important part of their compensation. And it protects the company from takeover. They would definitely be hurt if the price went down. I don’t pretend to know whether their current attempts to improve margin are related to a desire to keep the stock up or not, but they certainly pay internal attention to it.

      • SLNH

        You are right that it is an important part of compensation as they cut perks everywhere else including executive salary. But if Bezos does own 20% of the stock, I can’t imagine that a takeover bid is two likely.

      • Takeover is the most extreme form of pain publicly traded shares can inflict. There are many annoyances and inconveniences short of that I’m sure Amazon would prefer to avoid.

      • Hi SNLH. You may have misread the post. The effective subsidy that I refer to occurred between 1997 to 2001 when Amazon y-o-y returned a loss, post offering. It was building some of the $40b infrastructure it boasts today, of course.

      • The idea that indies will sell more if branded content is the same price is nothing short of preposterous *except *to the extent that lower prices leads to the destruction of the print book ecosystem and tilts everything to ebooks (including marketing). (A good and valid point you make.) But now that we’re really clear about where the positive effect comes from, what *possible
        *reaction could be expected from incumbent publishers and the incumbent author base than to support the big publishers and oppose the indie author militia?

      • Elliot1234

        Well, if there is a path for independents to benefit from a price reduction in branded content, then the idea isn’t preposterous. It is quite plausible to see much of print supplanted by eBooks using both current and future innovations in eReading software.

        I expect incumbents to act just like they are acting. It’s normal for people to act in their self-interest.

      • “I’m waiting to hear why any indie author cares about the price of Hachette books on Amazon?”

        As the price of traditionally published ebooks lowers people will be more likely to switch to reading on ereaders, thus widening the pool of potential new readers for indie authors. The prevalence of ebooks will increase.

        Also, if traditionally published ebooks cost less the perception will be that indie books priced at $2.99 or $3.99 aren’t inferior to traditionally published books which will be at $4.99 or $5.99. We’ll all be right there beside each other the way indie movies are there next to big movies on Netflix, or small bands are there next to big bands on Spotify. More even playing field.

      • Steven Zacharius

        So basically you’re saying that indies are interested in lower prices to destroy traditional publishing? You say they want to wipe out print books.

      • Elliot1234

        So basically you’re saying that indies are interested in lower prices to destroy traditional publishing? You say they want to wipe out print books.

        That’s not what I said.

        I don’t speak for independent authors. I have no idea if there is a material number of independents who share my analysis of the market.

        I also didn’t say they want to wipe out the print market. Those are your words, not mine.

        What I presented was my analysis of the market in answer to Mike’s question . I think it is a sound analysis and stand behind it.

        What do you think? How about fiction? Do you think independent authors would benefit if print fiction disappeared? What’s your analysis? Do you think independents would benefit by bringing down the prices of high-priced alternatives?

      • Sanford Gray Thatcher

        Maybe the Hachettes of the world, while they still can make enough money from selling print books, should just give away the ebooks after a certain time following publication, thereby satisfying customers while leaving Amazon with zero opportunity to make any money from selling them. Some university presses, like California and Pitt, are already doing this with their backlists. And as more presses move toward and “open access” model for ebooks, Amazon will have no business from them at all!

      • Sounds like suicide for the trade publishers to me! Not much point in making yourself collateral damage in a fight with Amazon. For a lot of fiction, half the sales are digital!

      • Sanford Gray Thatcher

        What proportion of sales of new fiction occur in the first year? If it’s 90%, then lost print sales after the first year would be minimal, and some people would continue to want print even after a free ebook is posted. If the retail price of the ebook is forced to be very low, how much income would the publisher be losing anyway?

      • The idea simply doesn’t work for me. And I think you’d have a really hard time selling it to agents too. I doubt they’d interpret their contracts as allowing that. The whole idea just looks to me like a rabbit hole.

      • Elliot1234

        I second the motion. The day the publishers make their ebooks free is a day I will spend in a frothing download frenzy.

      • Elliot1234

        A retailer whose premise is that they carry everything has limited their ability in that regard. Amazon may have to chose what it wants to be.

        No buisness is limited by outsiders’ interpretation of its premises.

      • Steven Zacharius

        Since when don’t they choose to lose many any longer? Is this a new policy that I’ve missed?

      • Eric Riback

        My assumption, which Shatzkin says is wrong. My thought is they want prices to be in a certain place and in past they were willing to set them there regardless of the MRSP and wholesale cost. Reported today in Wall Street Journal, they are now asking Disney to compensate them when they have to sell DVDs below cost to compete with Best Buy and WalMart.

      • Elliot1234

        What is Amazon’s policy on that? In particular, what is their policy on profit from eBooks?

      • Elliot1234

        But Amazon can set only its own prices. I have seen no evidence it is trying to set prices for other retailers or define publisher contracts with other retailers.. They are free to prices as they choose.

        However, it is normal for the lowest prices to set the prevailing price ranges across the market. It happens everyday. After considering transaction costs and indirect benefits, buyers are attracted to the low prices, and competition moves to meet them.

        Raised eyebrows tell us little. But we might be far more concerned when producers try to insulate themselves from the effects of retail price competition by controlling retail price. That relieves pressure on producers to become more efficient. It leads to bloated producers and less consumer welfare. Producers are quite happy to avoid competing with each other if they can all lock in an assured profit with lower unit sales.

      • Your “bloated producers” are our “publishing industry”. Sucking money out of it is not in the common interest of all the people in it. Amazon wins because they’re actually playing a different game and don’t share our self-interest. Don’t expect everybody else — or maybe *anybody *else — to cheer that on. Or help it along.

      • Elliot1234

        Note I presented a general case about the bloat that results from producers controlling retail prices. I fully expect publishers would fit the model just like any other producers if they controlled retail prices. The bloat comes from removing the competitive pressures that flow through from retail competition.

        Nobody is sucking money out of publishers. They face a new model that isn’t nearly as favorable to them.

        I completely agree a loss of market power is not in the common interest of all the people in publishing. But that is changing a bit. Now that independent authors are part of the publishing industry, interests are beginning to diverge.

        Of course Amazon is playing a different game, and does not share your self-interest. Neither do I.

        Many people will cheer on the new model. Millions of consumers love clicking on a book and reading it in sixty seconds. They like ordering paper books and having them on the doorstep in two days.

        And even more important, they like low prices and lots of available choices, and they have a history of enthusiastically cheering for them.

      • Eliot, you’re a bright guy, so let’s get this straight.

        Two, and ONLY two, categories of author actually are making this new paradigm work for them in any substantial way: those who are prolific genre fiction writers and those authors with a lengthy published backlist that they have clawed back rights to. That’s it. Nothing else.

        I don’t know what percentage of the total publishing business that is. 5%? almost certainly not 10%. But a handful of people who are in those two categories and have made it work are now telling everybody else how things ought to work.

        I really don’t want to “publish” any more generalizing from those specifics. It’s specious and it gets plenty of space on the Internet without me giving it more here.

      • Elliot1234

        Me? Smart? I doubt it. Some might say I lack business sophistication.

        But good for those genre writers and backlisters. Someone has to lead the way. This transition is far from finished. Many others will observe, learn from them, and introduce innovations I’m not smart enough to see coming.

        But I think there is a third category. Consumers seem to be making it work pretty well for them.

        I agree innovators are not shy, and can be quite eloquent in evangelizing for the new model.

        I’m happy to deal with all the stats and generalizations. Lots of people involved in all this have some pretty good ideas and insights.

      • Uh, yes. But if all the evidence of the new paradigm is coming from two very specific cohorts, then there is *no *evidence that the paradigm will apply in the same way outside those cohorts. That projection is an *assumption. *Not a forecast supported by evidence.

      • Elliot1234

        Of course there is no evidence for what the future holds. It hasn’t happened yet.

        But we can learn from the past. We have seen technologies adopted and adapted by lots of different market players. It starts out small, then expands as both producers and consumers become comfortable with the shift.

        But, I do like the idea that if somehting hasn’t happened it won’t.

      • Steven Zacharius

        Let’s not forget that that those specific cohorts are generating huge publicity for themselves and thus are gaining a wide audience for their books. It’s a good business cycle for them.

      • jay

        But is the traditional publishing industry any different? Making a living as an author will always be difficult, and only a small percentage of people who try will succeed.
        That said, what is the statistical validity of stating that “most” people who try self-publishing will fail to earn a living at it without also making an attempt to quantify what percentage of people who attempt to have books published traditionally will achieve that goal?
        It is the ratio of success, levels between the two options that is relevant.

      • Right. The numerator and denominator both matter!

        And we don’t know them.

        But whatever the odds of success for self-publishing, they are considerably less if you aren’t in one of the two categories I’ve identified. Vanishingly small.

      • Steven Zacharius

        This is only true if they don’t have a most favored nation clause in any of their contracts. If they do, Amazon has to get the lowest price. This was a main benefit of agency pricing. It put everybody at a level playing field.

      • Elliot1234

        Sorry. I understand MFN, but don’t understand your reference to it.

      • emmittc

        social and cultural opportunity costs are incurred when social and cultural values are contorted or distorted into faux market driven goals of self serving interests of powerful market players…..bottom line – books are not “other goods” – and the attempt to treat them as such cheats us all…there appears to be a mantra that nobody will notice – we are noticing NOW….and the consequences can be judged based upon the present and the past – just because it may not be “noticed” in the future (after damage may be done) does not mean there is no impact and that it does not matter….not clear on how consequences can evaporate in a historical process….

      • It is true that there can be an impact whether or not it is noticed. It is also true that there can be impacts that are consequential but aren’t noticed by enough people — or the people that do notice don’t have the power to change anything — to be prevented or ameliorated. It is pretty clear to me that a diminution of publisher power in favor of Amazon as a publisher and self-publishing will indeed result in fewer Caro-type books being funded for commercial reasons, which probably means simply fewer being funded. And created. The “new system” may have its upsides, but a reduction in heavy-investment non-fiction will be one of the losses.

      • Elliot1234

        Sure there will be an impact. And that impact will lead to many other responses and cascading impacts.

        It’s not clear to me there will be fewer Caros. Looking at other markets, they seem to thrive after change. People come up with new ways to do things. They come up with lots of stuff we aren’t smart enough to predict.

        There was a great deal of consolidation of publishing firms over the last 100 years. That certainly had an impact. What was the cultural cost? What was paid? Does anybody know? Does anybody care?

        The fact that I can’t predict the innovations of the future doesn’t stop them.

      • Sanford Gray Thatcher

        It is quote possible that we will return to the age of patronage, only in a different form that reflects the technologies of our era–e.g., crowdsource funding for books produced by people like Caro. It is already happening.

      • Elliot you are too astute.

      • Elliot1234

        I accept things will not happen due to market structures. That applies to the last hundred years as well as to the future. But if nobody knows what the culture has lost over the last hundred years, then nobody will notice in the future. There is nothing wrong with the theory, but in practice nobody cares.

        The culture will move in some unknown direction, and it will take books with it. Some people won’t like it. OK.

        Look around. Who is lamenting all the cultural stuff we haven’t had over the last hundred years. What has the cultural price been? Nobody cares. They won’t care in the future either. The opportunity cost won’t be recognized.

      • Sanford Gray Thatcher

        Bottled water is very cheap to produce, but the companies that sell it manage to do so at less than rock-bottom prices. How come, if your logic holds?

      • Elliot1234

        Not sure what logic you are referencing.

        But in general trems, bottled water is minute sliver of all water consumption. It’s a luxury good. Tap water dominates.

        Not sure if that answered your question, but if not, just elaborate a bit.

      • Sanford Gray Thatcher

        I thought you were arguing that cheaper prices ipso facto expand markets. I was trying to use an example where that logic would appear not to hold.

      • Elliot1234

        Cheaper products can certainly expand the market. but we have to identify if the expansion is in volume, dollars, or both. Units can expand while dollars fall.

        Amazon’s measure of elasticity showed the unit % increase was greater than the % price drop. That means both units and dollars expand.

        If the unit % increase had been less than the % price drop, units would expand, while dollars fall.

        [Yes, in trying to make the point, I am ignoring the negative sign.]

        I don’t know what it costs to put a bottle of water on the shelf. But I do know bottling, storage, transportation, and distribution probably cost the same as Coke. Not knowing anything more about the cost structure of the bottled water market, I won’t say any more.

  • paulkbiba

    Since Hachette is the type of company that would illegally conspire to keep ebook prices high, I, as a consumer, place no credibility in anything they say – at least until they purge their management of the executives who made that decision. I haven’t seen this happen yet, so I will continue to believe that they remain basically amoral in their philosophy and have no interest in the consumer/reader. Thus, I automatically gravitate to the “opposite side”, whatever that may be.

    Illegal actions have consequences.

    • Pardon me, but I find righteous indignation in matters of commerce both offputting and unpersuasive. Really: bully for you.

      • paulkbiba

        Well, they are your client, after all.

      • Well of course. I’m not nearly as righteous, moral, and upstanding as you! Congratulations on being such a great guy.

    • Steven Zacharius

      Hachette has had management changes. They had nothing to do with DOJ charges.

  • Barry Eisler

    Mike —

    It’s certainly possible that high agency prices create an opportunity for indie authors to sell their books for less. But there is another possibility — that more readers will spend more money on all books overall if more individual books cost less.

    To put it another way: if I had a choice between selling my books at $5.00 into a market where all other books were priced at $15.00, on the one hand, and selling my books at $5.00 into a market where all other books were priced at $5.00, on the other hand, I would prefer the second market because it would be so much bigger.

    One other way of looking at it: among people who go into a bookstore thinking to buy one $20 hardback, and discover the store is having a three-for-the-price-of-two sale, how many wind up spending $40 and leaving with three books?

    The point is, you can grow a market with low prices in such a way that individual sellers make more money in the bigger low-price market than they would have made undercutting prices in the smaller, high-priced market. When perceived value goes up, consumers spend more money. The market thereby grows, and individual sellers, even if the percentage of their slice of that market remains constant, make more money.

    I’ve done no empirical studies on the book market and have only my own experience in the world as a guide (and my own pricing experiments with my own books). So I could be wrong about the book market generally — but as a matter of logic, it seems a mistake to to treat as an axiom the assumption that lower across-the-board book prices must necessarily hurt indie authors’ bottom lines.

    • What you call “a possibility” I would call “a long shot”. Or maybe “wishful thinking”. Your logic obviously differs; mine doesn’t get me there.

    • William Ash

      Mr. Eisler:

      I think taking your experience of one of the publishing world’s one percenters and saying it is somehow universal is not very helpful. I think it is great that you and you friends are having the success you do, but it is hardly applicable to publishing in general.

      Please stop talking about books as if they are bananas. Actually, books can be very different. I cannot ignore my costs. I can’t simply allow to take what crumbs a retailer is willing to offer me. If you think that the economies for serial fiction writers are the same for my photo documentary books? I can tell you they are not.

      Now, Amazon has been good to you and I am sure they benefit from you greatly as well. But both you and they can live off a penny a click. Some books simply don’t generate the sales as others. The mass-sales models don’t work for most books. Amazon has obviously cherry picked its number to support its argument. Reducing price does not magically mean more units sold, and that is true in many industries.

      But it is not simply lower prices hurt indie bottom lines, it is a retailer forcing indies to take lower prices. That is very different. If I have no control over price, how can I make sure my returns pay for my book? It is easier to live off of thin margins when I make billions, unfortunately, not my situation.

      • Elliot1234

        Reducing price does not magically mean more units sold, and that is true in many industries.

        What indistries do not face downward sloping demand curves?

      • William Ash

        Apparently, quite a few:

        Although, that has nothing to do with my statement. Simply stated, lower price, in and of itself, does not drive demand.

      • Elliot1234

        Those graphs show employment over time. They are not demand curves.

        I agree price alone does not drive demand. The goods also have be available and attractive to the consumer.

        So the set of consumers who find the goods attractive buys more at lower prices, and fewer at higher prices. Reducing price for attractive goods does result in more units sold. Raising it results on fewer units being sold.

        If consumers are buying at price X, we can presume they find the goods attractive. Lowering the price to X-Y leads to more sales.

        So what industries do not face a downward sloping demand curve?

      • William Ash

        Well, that does not work for cameras. Lowering the margins is not made up by additional sales. I suspect, photo documentary books don’t suddenly sell better when the price is lowered either. Also, luxury goods sell partly because of the price–there is perceived quality. The problem with your hypothesis is you think demand is unlimited, when demand can be very limited based on the audience. I doubt halving opera ticket prices will spur a flurry of new opera houses around the country.

        So, you don’t think employment is connected to demand in an industry? Please show that those do not correlate. Most industries grow based on demand. Employment is a metric of that.

      • Elliot1234

        1. If margin means the difference between a retailer’s cost and his selling price, then margin has nothing to do with consumer demand. Price does. Consumers don’t care what the retailer paid for the stuff. Consumers care about the price consumers have to pay..

        2. Demand is always limited. I have said nothing about unlimited demand.

        3. Luxury goods do have an attraction to some because of a higher price. Lower it in that range, and they sell more to those folks. Lower it further and other shoppers who don’t equate high price with quality start buying. Lower it even futher and I buy a Rolex. Luxury goods face downward sloping demand curves like everythinmg else.

        4. Cut opera tickets in half, and more tickets will sell. Lots of opera fans will be able to go to the opera twice a year instead of once a year. Students who can’t even go once a year will revel in the strains of La Traviata..

        5. Higher demand is an upward pressure on employment in the industry. However, the issue was whether firms face downward sloping demand curves. They face downward sloping demand curves if demand is high, and they face them if demand is low. They face them if employment is high, and they face them if employment is low. Employment levels don’t change the fact that goods face downward sloping demand curves.

      • Steven Zacharius

        This is quite correct. There are hundreds of thousands of books on Kindle for 2.99 or less that probably sell 50 copies a year.

      • Elliot1234

        There are probably hundreds of thousands of books on Kindle that sell zero.

        I suspect that of all the millions of books published over the last fifty years, there are hundreds of thousands that sell zero. Maybe more.

      • Steven Zacharius

        No, that would not be the case. If the publisher is taking the time to publish the book it’s not going to have a sale of zero. It might only sell 1000 copies but not zero. And the job of the publisher, at least the commercial publishers, is to make sure this doesn’t happen. If it did, we don’t acquire that author again? Then they decide to self publish and sell their books for 1.99 in hopes of discovering a new market. Sometimes it happens to but most people aren’t that lucky. It’s all about discoverability.

      • I think the *extent* the elasticity is as important as the fact of it. Amazon claims a number, probably an average, as if it is true for every single title. It almost certainly isn’t. So the conclusions they draw from the measurement they claim is way beyond what the facts would justify. And Eisler’s specific claim — that lower prices for everybody means more sales for everybody (arguing my point that the indies actually benefit from the majors having higher prices) — is both counterintuitive AND not supported by any facts.

      • Elliot1234

        Amazon certainly has not claimed the elasticity measure holds for every single title. But I have read people claiming they do say it.

        Price elasticity is a very common topic in economics. Nobody holds it applies to every single instance of a product. Amazon language has been consistent with what we see in normal economic discussion.

        I disagree with your characterization of what Eisler said, but he can speak for himself.

      • Amazon doesn’t explicitly make the *claim*; they imply with their logic that the elasticity measurements they supplied constituted evidence that Hachette was ignoring good economic sense and the fact is that the data they were willing to provide nowhere near proved that case. You can nitpick the way I made that point, but them’s the facts.

      • Elliot1234

        Sure they did. Good for them. That is much different point than you initially made.

        I would take it even further. It is a general statement from Amazon that the welfare of authors, publishers, retailers, and consumers of these books is enhanced at the lower prices.

      • jay

        But how else can you look at a market except as an average? Yes, perhaps some books would underperform Amazon’s numbers, but by mathematical definition, at least as many would overperform. Stating that the average sales would be higher means, by definition, that more money is being taken in overall. Simply saying that some book, somewhere might underperform the average means nothing. There will be variations in how books perform under any pricing structure.

      • It’s pretty basic to statistical analysis that not all “averages” are the same. That’s why we have “standard deviations”, “modes”, and “medians” to help us understand them. Without those additional tools, we really *don’t *understand

      • Steven Zacharius

        There are hundreds of thousands of books on Amazon that are $.99. We routinely price some debut books at very low prices and that has very little bearing on if they will sell. There’s too much competition at low prices to make a book standout just by price.

      • Elliot1234

        Sure. But the downward sloping demand curve still operates.

    • Steven Zacharius

      Barry I’m waiting to hear why any indie author cares about the price of Hachette books on Amazon? Are you concerned their authors are being hurt? Are you concerned that they’d be making more money if Hachette lowered their prices? Isn’t this Hachette’s decision to make since they’re the one making the investment in these authors? It’s quite different than an indie author putting a book up on KDP and selling it. They don’t have an investment to cover that could be from a few thousand dollars to millions of dollars. And in traditional publishing it could be two years before the first dime of revenue starts coming in.

      I’d also like to know if you, Hugh and Joe all have the same exact Kindle contracts as all the other KDP authors or do you have some extra perks since you are Amazon’s prime promoters (pun not intended). You all criticize traditional publishing contracts. You talk about lifetime copyright issues, low royalties, time delays in publishing. I really want to know if you’re contracts are the same as the really small KDP authors.

      I’ve read so many ludicrous comments on some of the blogs, in particular The Passive Voice, from people who have no idea about how traditional publishing works. You, Hugh and Joe are obviously more knowledgeable than most of these people. The blogging that the three of you do helps to promote your own book sales, which is great. You’ve all created a sales machine. That’s what you should be talking about in your blogs; not bashing traditional publishing. If you want to teach people how to self-publish; that’s great. But the comments that are just ludicrous and show no understanding of the business makes so many of the blogs seem foolish. For example, the constant comments that Hachette should ship their books faster to Amazon and that then there wouldn’t be the delay in Amazon selling these titles. I know you’re all smarter than to even remotely believe that’s possible. Why don’t you stand up and correct some of these comments?

      • “I’m waiting to hear why any indie author cares about the price of Hachette books on Amazon?”

        As the price of traditionally published ebooks lowers people will be more likely to switch to ereaders, thus widening the pool of potential new readers for indie authors. The prevalence of ebooks will increase.

        Also, if traditionally published ebooks cost less the perception will be that indie books priced at $2.99 or $3.99 aren’t inferior to traditionally published books which will be at $4.99 or $5.99. We’ll all be right there looking the same—the way indie movies are there next to big movies on Netflix, or small bands are there next to big bands on Spotify. More even playing field.

      • Steven Zacharius

        Ereader sales are not increasing despite their low cost. There are loads of low priced or free books already out there including the classics for free. People will always pay more for what they perceive to be a higher quality product or a brake they recognize immediately; in this case the brand being the author. Even if prices were to come down they are always going to recognize the big names and they will always get top placement because of the size of the publisher’s list.
        I don’t think the comparison to indie movies is a great one. Even most indie movies cost millions to make. And it’ still the exception when one makes it really big.

      • Elliot1234

        I wonder if the day of the dedicated eReader has gone by? There is a huge choice of good tablets that accept the eReader apps. I have the Kindle app on six different machines. I’m not even sure where my Kindle unit is since I use the tablets to read. And tablet sales dwarf dedicated reader sales.

        I agree there is a higher demand for some books than for others. We can observe that.

      • Steven Zacharius

        You can’t beat the dedicated reader for lightweight and e-ink. It is virtually impossible to use a tablet outside at the pool or beach. Also the battery life in the dedicated reader like the kindle paperwhite is far longer than a tablet.

      • Elliot1234

        Any product has advantages and disadvantages. Consumers weigh them. E-Ink cretainly has an advantage in sunlight.

        However, we have still seen a huge increase in the number of tablets being sold, and it is reasonable to presume many people are putting those Kindle apps on their devices. Amazon probably knows exactly how many, and how many pages are read on them.

        So, I’d say it is risky to consider sales trends in dedicated readers as an index of the market for eBooks. That market jumps from one device to another.

        It gets murky, too. Is the Kindle Fire an ereader?

      • The Kindle Fire is a tablet, not an e-reader.

        And I agree that the e-reader market will continue to decline. It is true that it has small advantages in certain situations, but the ubiquity of multi-function devices will make any dedicated device less attractive. That includes e-readers, phones that only make phone calls, and cameras that only take pictures.

      • Elliot1234

        I don’t think I have read any book on a single device for at least a year. I’ll access the same book from a Nexus, iPad, Chromebook, or iPhone. I’m reading the Amazon cloud, and tapping into it with whatever works best at the moment.

      • Steven Zacharius

        Fire is a tablet. I agree a lot of people read on tablets and surprisingly on phones. The trend of reading on phones might actually increase and help Apple iBooks sales increase when they come out with their larger phones later this year.

      • Robgb

        I’ve started reading on my phone ever since I got the Samsung Mega, which has a six-inch screen. I think people tend to have multiple ways to read, and with syncing across devices, its an easy thing to do.

        When I’m outside getting sun, I use my Kindle. If I’m in the car, waiting on my wife, I use my phone or my tablet. We don’t have to be limited to one device.

      • Yeah people like Patterson and King will always be able to sell more because of name recognition but those are the elite of the elite. Most published authors the public hasn’t heard of. Hell much of the public hasn’t heard of Lee Child.

        There are some cheap traditional ebooks, not loads. There are many in the Kindle specials section of Amazon, but if you go through the NYT bestseller list and type the book titles into Amazon, it’s clear most of them are over $7. The classics don’t count because that is a totally different realm than the latest Tom Clancy book.

        Also, I think ebook sales will keep going up even if sole ereader device sales don’t increase. Like everyone’s said, you can read ebooks on tablets and phones. I think gradually people will realize how much cheaper ebooks are and go for that instead of a $25 hardback.

        Also, I read fiction exclusively on an old Kindle so there are people who use them, though I agree most people aren’t into it.

        I actually think this is a ridiculous debate because traditional publishing won’t die out completely. There will still be bookstores, just not as many, and it’ll be better for the masses in general. Probably not better for those with invested interest in the publishing system as is currently.

      • An author doesn’t have to be Stephen King or James Patterson to have a loyal audience. And it doesn’t take sales numbers like they achieve to make a living. There are lots of author brands that can find their following in the Internet age. That’s why one of the two paths to self-publishing success starts with an author who reclaimed rights to a backlist. Those books have audience equity. Of course, non-fiction, particularly, can be seriously dated.

      • Rysa Walker

        This is an excellent point. Every teen I know reads e-books, but not on an ereader. They read on their iPads or even on their phones. This is true for many adults, as well. They are “e-readers” even if they aren’t buying separate e-readers. And once kids start reading e-books, they rarely pick up print…

      • Yes and also I realized something else. I think Amazon doesn’t want to bring ebook prices THAT low, like down to $3 or $4, but they simply don’t want to price any ebooks over $10—which in my opinion is quite sensible. It’s ridiculous for an ebook to be over $10. I’m more than willing to pay for literature, but feel I’m getting ripped off when an ebook costs $12.

        Also, even if the max price for a Kindle book gets capped at $10, that still is much more expensive than the $2.99 most indie authors charge for their own work, so the disparity in price will still be there, keeping the distinction between indie and big house books. I’m not even certain if that distinction is an advantage for indie authors, however.

        To me, the major point is that lower prices will get more people reading ebooks, which expands the potential pool for customers.

      • Robgb

        Ereaders aren’t the only delivery method for ebooks. Many read on tablets, some read on their computers.

        As for prices coming down, even at 8.99 to 9.99 (which I have to assume is about as low as publishers would be able to go with new books and still make money), indies pricing at $4.99 will be more appealing to those looking to discover new authors. So, if trad prices DO come down, it’ll be great for readers, for untested trad authors looking to be discovered, and for indie authors who can still undercut those prices due to lack of overhead.

        Hell, I can make a grand a month selling one book for 99 cents. Multiply that by ten or twenty books and you’ve got a pretty good income. Change that price to $3.99 or $4.99 and you may sell a few less books, but you’ll make considerably more money. And you’ll still be undercutting trad pub prices.

      • Good logic. You can raise the price of the books, sell fewer, and make more money! And that applies to publishers too.

      • SLNH

        Explain to me then how the antitrust case showed sales dropping for the publishers accused of conspiracy once they raised prices but Random House who didn’t, increased.

      • Too boring to explain! Simply: Amazon discounted their books. They gamed the situation very successfully. Well covered at the time. Wrote a post about it. If you care you can search the site and find it.

      • Robgb

        Absolutely. *I* know why publishers want to charge higher prices. I think most people do. But many of those prices are out of reach of the average reader.

      • Strikes me as flawed on many levels. First of all, no pricing differential can mask the fact that James Patterson is James Patterson and his book is going to be more appealing to more people than a book by somebody they’s never heard of. The unknown needs the price advantage. And to the extent that the “strategy” is designed to move people away from print books faster, Amazon is the *only *player in the market that wants that to be accelerated. PARTICULARLY at the expense of ebook margin. Do indies think it is just great if Amazon is strengthened in relation to everybody else? Will they STILL think it is great when Amazon uses that market power to reduce THEIR share of the revenue as they have with the publishers?

      • Elliot1234

        I’m afraid few would confuse my name with Stephen King or John Grisham. But there are lots of other traditionally published authors whose names might very well get confused with mine..

        You can’t imagine how culturally backward and grossly uneducated I felt when I scanned the Preston 900 and hardly recognized any of the names.

        Makes one wonder what it means to be unknown, and to whom.

        This is an easy test to take at home. Just look at the Preston 900 list and see how many of them you recognize..

      • Steven Zacharius

        That’s wishful thinking. People would never confuse an author’s name that is a household name like Stephen King, John Grisham, etc…with a name they’re not familiar with. There are already loads of traditionally published ebooks at substantially lower prices. It takes more than just a low price to make the books appeal to a consumer. Marketing is of major importance. If Hugh Howey and Joe Konrath didn’t blog every day to the indie authors do you think they would have the same readership? Their blog is a marketing machine which is why they continually find things to write about even if it’s all really meaningless.

      • Robgb

        I don’t blog at all and have really only a facebook presence (with a limited audience), yet I’ve sold thousands of books over the last couple years. If all it took to gain readers was blog about inside baseball, then I’d be doing it every day. But I don’t need to. I attract readers with my books, just as Barry, Hugh and Joe do. Why is that so hard to accept? People actually ARE capable of doing it on their own.

      • That’s great to hear (for your sake) but useless as analyzable data (for anybody else to draw any conclusions from).

      • Robgb

        As opposed to Steve’s “analyzable data?” LOL.

      • Barry Eisler

        Steven said, “Barry I’m waiting to hear why any indie author cares about the price of Hachette books on Amazon?”

        There was a ton of info on this just yesterday. I’ll include just links, no excerpts, because I know Mike prefers shorter comments. Apologies if I’m linking to anything you’re seen already,

        My thoughts:

        Hugh Howey:

        Passive Guy:

        Jeremy Greenfield at Digital Book World:

        The comments to the above posts are also informative.

        “I’d also like to know if you, Hugh and Joe all have the same exact Kindle contracts as all the other KDP authors or do you have some extra perks since you are Amazon’s prime promoters (pun not intended).”

        I can only speak for myself. I’ve signed nothing other than the standard KDP click-through license and am aware of no special treatment I’m otherwise receiving.

        Of course, it’s possible Amazon has somehow bribed me and others into all the advocacy I do on behalf of improving publishing. It’s possible everyone has ulterior motives, including Mike, including you (Mike and I danced this dance a few years ago on a list serv and I don’t think it shed any light on anything). But in general I find conversations are more productive when we focus more on the merits of our respective arguments than on the possible ulterior motives that might lurk behind them.

        “I really want to know if you’re contracts are the same as the really small KDP authors.”

        I guess if you think it’s relevant enough, you could try conducting a survey or something. For me, that would feel like an attempt to avoid the merits of the topic, but I’m not in a good position to evaluate your true motives and again, I’m more interested in on-point substance than in tangential speculation.

        “The blogging that the three of you do helps to promote your own book sales.”

        Steven, to make that claim, right after positioning yourself as one of the people who’s knowledgeable about publishing, is pretty amazing. For every novelist I know, every hour we spend blogging or otherwise on advocacy, and not on writing fiction, is costing us money. Our blogs don’t sell material numbers of our books; our books do that. To work on the former at the expense of the latter represents a financial loss, obviously so.

        So this time, your attempt to discern the true nefarious motive for our activism isn’t just speculative and largely pointless. It’s also… well, to use your word, ludicrous.

        “That’s what you should be talking about in your blogs; not bashing traditional publishing.”

        In my experience, establishments that feel under attack are never short of advice about all the more important things on which activists should focus.

        “But the comments that are just ludicrous and show no understanding of the business makes so many of the blogs seem foolish.”

        Well, I appreciate your concern. But to turn your questions around… why do you care about misfiring blogs seeming foolish? Shouldn’t you be more concerned about your own “sales machine,” which is what you’ve identified as a proper area of concern?

        “Why don’t you stand up and correct some of these comments?”

        Possibly because we don’t agree about whether there’s a mistake to correct? But regardless, unlike, say, the blog of the “Authors Guild,” all the blogs I link to above allow anyone to comment. If you think someone is mistaken, by all means, take a moment and point it out. As you have done at length, I know, and for which I salute you. I think the free exchange of ideas in which we’re all engaging can only ultimately benefit everyone. On that, at least, I hope we can agree.

      • Steven Zacharius

        Ok Barry, I asked a simple question about your KDP contract. No ulterior motive except for the three of you generally promoting most of what Amazon says. I think it’s a fair question since you constantly tear apart publishing contracts.
        Please give me a beak. You’re blogging and keeping your name out in front of all the indie authors doesn’t help sell books? It doesn’t help your exposure; and I’m not saying you shouldn’t be doing it. I think it’s a great marketing machine.
        Lastly I want to know if you really believe that the delay in shipping Hachette print books is because they didn’t ship inventory to Amazon on time? If you really think that’s the case, I’m done wasting my time on blogs. No rationale person could think that Hachette doesn’t have inventory on their books all of a sudden when negotiations broke down.

      • Barry Eisler

        Steven said, “Ok Barry, I asked a simple question about your KDP contract.”

        Actually, you asked quite a few questions. I think I responded to all of them (apologies, Mike, I’m trying to be brief but that was a lot of questions…).

        “No ulterior motive except for the three of you generally promoting most of what Amazon says.”

        Hah. As I said, I think it’s a bit silly and unproductive to try impugn motives in a discussion like this one, but obviously it’s up to you to pursue whatever line of questioning you think most useful. But at least have the integrity (or self-awareness) to acknowledge what you’re doing. For what possible reason other than “you’re being bribed” could you inquire about whether “you, Hugh and Joe all have the same exact Kindle contracts as all the other KDP authors or do you have some extra perks since you are Amazon’s prime promoters (pun not intended)”?

        Starting out at silly and proceeding to mealy-mouthed is not a positive development…

        “I think it’s a fair question since you constantly tear apart publishing contracts.”

        I’m a novelist and am supposed to have a good imagination… but I’m not sure what connection you see between “legacy publishing contracts contain all kinds of abusive provisions” (is that not true? Life of contract, twice-yearly payment, out-of-print clauses that include digital, non-competes… perhaps you believe those sorts of things *nurture* authors?), on the one hand, and “Amazon is bribing people who are trying to reform legacy publishing,” on the other.

        “Please give me a break.”

        Not likely, if your points continue to be bizarre and increasingly disingenuous.

        “You’re blogging and keeping your name out in front of all the indie authors doesn’t help sell books?… I think it’s a great marketing machine.”

        For one so “knowledgeable” about publishing, you’re framing the argument in a remarkably simplistic and misleading way. Let me try again:

        I’m not saying I’ve never sold an additional book due to my advocacy of publishing reform. But if you believe that: (i) the number of people who follow this topic is material to my overall readership; (ii) the type of people who follow this topic is material to my overall readership; and (iii) a few more blog posts garners me more readers and earns me more money than writing and publishing *new stories*, I almost don’t know what to say to you.

        Let me try one more way: time is a finite resource. I can spend time advocating publishing reform, which might possibly garner me X new readers. Or I can spend that time writing a *new novel*, which will garner me far, far more readers, not to mention the additional income I’ll earn directly from the novel (which people *buy*) compared to my blog posts (which are *free*).

        I don’t know how anyone could fail to understand something so simple and obvious. You really believe I make more money from free blogging than I would if I spent all that time writing new paying stories? You’d have to be exceptionally blinded by the “I know he’s in this just for the money!” theory to believe something so patently insupportable as that.

        (You’d probably be on marginally firmer footing if you wanted to try to claim my political blogging “sells books” and is a “great marketing machine.” But there, too, I think it’s pretty apparent that I would be making more money if I blogged less and wrote new stories more.

        “Lastly I want to know if you really believe that the delay in shipping Hachette print books is because they didn’t ship inventory to Amazon on time?”

        Why don’t you track down someone who’s taken a position on this? I haven’t. Or is this some sort of litmus test, equivalent to the Russovian Pledge?

        Anyway, here’s hoping that when you said “lastly,” you meant it. I’d say our exchange has been more than adequate for anyone still reading to decide which arguments here are sensible and which are… less so.

      • Barry and Stephen, I think you ought to take it “outside”. This particular conversation has really outlived its usefulness for my blog audience.

      • Steven Zacharius

        Sorry mike.

      • Barry Eisler

        Will do, Mike. Time for me to get back to losing money by writing books instead of raking it in by posting here! 😀

      • Steven Zacharius

        So in other words you won’t comment on whether you think Hachette delivery slowed down shipments ? No opinion? It’s all over all the blogs that you copied my replies to. Why don’t you try giving an honest answer? No I don’t believe publishing contracts are abusive at all actually. But I’ve commented on all of the items before that you’ve mentioned.

      • SLNH

        Steve, media has consistently referred to Amazon delaying shipments. My answer has been Hatchette’s inability to turn orders around quickly as indicated by Michael Sulivan’s take on Amazon/Hatchette in Digital Book World’s “An Author’s Perspective back in May where Amazon provided order dates of April 21 – 29 and Hatchette expected shipping dates of May 2 through 10. That indicates a clear inability on Hatchette’s part to quickly turn around orders and ship rather than Amazon “holding back” books. All of this came out before the whole dustup.
        So while I may not know traditional publishing but I do know how to analyze data and until Hatchette provides order/invoice details of its own, that’s the data I will work from.

      • Right. Hachette suddenly developed an inability to fulfill Amazon’s orders. And isn’t ODD that it happened at the very moment that they were having a dispute. So Hachette slashed their own wrists in a plea for sympathy from the community in the dispute. Sure.

        I have this bridge you might be interested in…

      • SLNH

        No one said it was sudden. They appear to have an inability to turn orders around quickly which has probably always been an issue but since Amazon previously kept plenty of product on hand, it was never noticed. I wouldn’t have a problem with it if the media didn’t keep saying that Amazon was delaying shipments and instead stated that by keeping minimum stock on hand, shipping times were increased due to logistics.
        Since Michael Sullivan appears to be the first to bring this conflict out in the open, do you doubt his information? Can you show Hatchette is and has in the past turned orders around in a few days rather than a few weeks?
        Sounds to me you are already trying to sell me that bridge and I’m not buying.

      • Silly argument. Hachette’s business with Amazon is down and clearly Amazon is motivated to reduce it. Overcomplication is just deliberate obfuscation.

      • SLNH

        It’s only a silly argument if you are on the losing end and since you are not answering my questions, it appears you do not have a positive one for Hatchette on this.

      • Steven Zacharius

        You’re welcome to believe that but it is totally wrong. What possible reason would Hachette have to delay shipments to Amazon? Is this a conspiracy theory sort of thing….to make Amazon look evil? Give me a break. This is so clear cut that it’s ridiculous. This is just a negotiation tactic on Amazon’s part. Do you honestly thing that Hachette doesn’t have inventory on James Patterson? Please. You can ship books to one of Amazon’s warehouses the next day. They don’t need to be in every warehouse and even that would only take a few days at the max.

      • SLNH

        It is evident that Amazon is keeping minimum stock on hand and I am not saying Hatchette is deliberately withholding stock from Amazon. I am suggesting that they have an inefficient fulfillment system. How else would you explain the delivery dates Hachette gave Michael Sullivan in response to the order dates Amazon supplied? They were 10 days to two weeks after the order dates. This information was supplied before this whole topic blew up in the media. Where has Hachette supplied information that they have a quick turnaround? Just because your company is able to turn orders around quickly does not mean theirs can.

      • Steven Zacharius

        Hachette knows how to ship books. Thru are a big 5 publisher. They also happen to handle our foreign distribution so I’m fully aware how they ship and have been in their warehouse. This is not about Hachette not being able to fulfill orders in the slightest bit. One person posts that on one site that supports kdp and it becomes fact. It is 100% incorrect.

      • SLNH

        This one person’s post was because he was concerned about what he was seeing happening with his books and trying to understand it. He was a Hachette author who was letting other Hachette authors know what he was seeing. The day after his emails went out to his fellow authors, this story broke so at that point and I believe currently, he has no hero/villain. He was just relaying information as he saw it. By the way, when was Digital Book World a site that supports KDP?

      • Steven Zacharius

        DBW certainly isn’t but it’s been talked about everywhere else a million times. Think about it. Do u really believe a company that size can’t manage to ship books to a local amazon warehouse no further than a day away? Do you really believe Hachette didn’t have books in inventory? This negotiation is way past this point now. That was all just amazon putting pressure on them.

      • SLNH

        Yes Amazon was putting pressure on them to get them to the bargaining table and yes they may have been inundated with a ton of small orders but you have not given any possible explanation for the delay of dates in articles published around May 16 before everyone’s PR machine started rolling. And just because a local warehouse is just a day away doesn’t mean that the logistics of receiving an order and sending it through all necessary channels before it is boxed and shipped takes a day and because since Hachette wouldn’t supply a copy of invoices to Michael or his agent and at that date, he had nothing to gain by lying, I will go by what he reported.

      • Steven Zacharius

        Okay go ahead and believe that if you prefer. No sense in trying to convince you that a publisher who is in the business of shipping NYT bestsellers with a specific on sale date all over the country actually does this every day of the week without a hiccup

      • SLNH

        We are not just talking NYT bestsellers but all of Hachette titles or are only the NYT bestsellers and their authors what matter? If that’s the case, I’ve lost the respect I’ve had for you in supporting your cause.

      • Steven Zacharius

        There’s no point in continuing this. I was using NYT books as an example because Patterson had delays in shipping. Believe what u want. But if you think a big publisher can’t ship small orders the same day; you don’t understand how publishers make their business run. Especially to an account the size of Amazon.

      • Elliot1234

        “I’m waiting to hear why any indie author cares about the price of Hachette books on Amazon?”

        Wait no longer. I am any indie author.

        I care about the ability of the retailer to set the retail price. Therefore, I care about all prices on Amazon, regardless of who produces the product.

        My concern stems from the conviction that the social benefit of markets is that they facilitate trade. Facilitating trade means delivering abundant and available goods at low prices.

        We can observe that retail price competition is an important driver of abundance, availability, and low prices. This retail competition flows back to the producers and provides incentive for them to compete in producing improved goods at lower costs. This results in a stronger industry and increased consumer welfare.

        So, I apply that general case to books, and care about prices of Hachette goods on Amazon in terms of who sets them.

        In particular, I care about retail book prices because I am a book producer. I observe Amazon has significant talent in growing market share when it can set retail price. So I care about prices of Hachette books on Amazon in terms of who sets retail price.

        So, that is why one instance of any indie author cares about Hachette prices on Amazon.

      • Jay

        Certainly Hachette has a right to price it’s books however it wants. The problem with this entire debate is that people making your argument simultaneously deny the right to Amazon to stock whatever they want at whatever terms they want.
        You cannot, with any intellectual honesty, wave the flag of freedom for Hachette to price its products as it pleases and then smack Amazon as “hurting authors” and being a bully for seeking to exercise exactly the same freedom – to stock its virtual shelves as it pleases, with goods it can purchase at prices it decides make sense.
        I agree Hachette can do what it wants, but so can Amazon. Yet this entire farcical debate has been studded with calls for government intervention and loud declarations of Amazon’s evil intent. And that is a bad joke.
        You cannot, with any degree of rationality, simultaneously bash Amazon for exercising the exact same rights as a corporation when you are defending the behavior from Hachette.
        Hachette can price its books how it wants. Amazon can buy whatever stock it wants for its store. Those two items are morally equivalent. If people don’t want to hear the defenses of Amazon, stop the constant efforts to portray this dispute as some kind of good guy/bad guy thing and let the two companies resolve it.

      • Amazon is unique. Nobody else controls a market share like they do. In previous, more enlightened, times, we would have recognized them for the “public utility” that they are in some spheres. It is not hypocritical to judge Amazon and Hachette (or Amazon and indie bookstores) on different scales. It is common sense.

      • SLNH

        And why do they control such a large market share? Contrary to media emphasis on cost alone, it also has selection, convenience, great customer service as well and has invested a great deal of money to achieve that. There are other major players out there such as Google and Apple that do not choose to emulate those characteristics yet you appear to want to punish Amazon for a quality product.

      • I have never suggested anything other than that Amazon’s market share is well earned. But it has one key component which should give anybody pause. They don’t have to make a living from the book business. The people IN the book business do. I’ll be writing more about that — and what might be doable about it — soon.

      • SLNH

        I have no problem with others offering up competition. I love books but I don’t see any signs of it happening soon.

      • Elliot1234

        I will be looking forward to that. I will probably look at it in the context of all the people who used to be elevator operators, telephone operators, music store employees, travel agents, commodity traders, stock brokers, Borders employees, and Kodak employees. We can add to that all the manufacturing jobs that have disappeared while output has increased, All those folks who used to make a living in some business. Nobody stopped for them. Think the trend will change?

      • Not sure how you think this responds to what I said. It doesn’t as far as I’m concerned.

      • Elliot1234

        They don’t have to make a living from the book business. The people IN the book business do. I’ll be writing more about that — and what might be doable about it — soon.

        You are going to write about people making a living in the book business. That is a buisness which may no longer afford them a living. I look at that in the context of other industries that went through the same. It is a continuing process. Never stops. We have been through it many times.

      • Being casual about the book business no longer being “an industry”, but just a “function” controlled by forces that are simply using it in pursuit of other objectives, is not a perspective that people in the business are likely to take. Inevitability isn’t absolute, it is relative, in time, in manner, and in degree. And it is something that people can legitimately take a position about, even if you don’t want to.

      • Elliot1234

        Well, it is an industry. We can observe that. And I agree any unbiased observer would consider it an industry. There are functions within that industry.

        I agree anyone can take any position they choose. Their is no legitimacy question. I encourage people to take well formulated positions.

        I also agree all the examples I gave differ, and those differences are functions of time. manner, and degree. Like publishing, they all had unique factors.

        But the common factor they all share is being overtaken by a new technology that upsets the previous industry order.

        I look forward to your article.

      • It’s up.

      • Elliot1234

        Damn, you’re fast.

      • Jay

        “I’d also like to know if you, Hugh and Joe all have the same exact Kindle contracts as all the other KDP authors or do you have some extra perks since you are Amazon’s prime promoters (pun not intended).”
        This is another example of selective application of information. It implies that there would be something wrong with Amazon giving special terms to higher-selling authors. That even if such contracts or terms exist, they have nothing to do with sales and are just bribes for friendly blog posts.
        Do Hachette authors all have the same contract? How about Kensington authors?
        There is a lot of hypocrisy floating around, that’s for sure.

      • Well, yeah, but it would be good to know if touts have vested interests, wouldn’t it?

      • SLNH

        Yet Barry already stated that he has the standard KDP contract.

      • Could be. I wouldn’t doubt his veracity. But I wonder if there’s an unearned advance that changes the calculus…

      • SLNH

        I haven’t followed all your blogs closely. Have you viewed Preston’s comments with the same skepticism?

      • The vested interests of published authors are pretty transparent. And the publishers. Aren’t they?

      • SLNH

        So, that would be a no?

      • I think this is the point where I say I’ve lost interest in engaging with you.

      • Steven Zacharius

        This has nothing to do with hypocrisy. I asked a straightforward question about three people who constantly promote KDP and have virtually nothing negative to say about them. I would think all the followers of their blogs would like to know as well.

      • Matt

        So indie authors and traditional published authors have no investment in their books? This is an outright lie, or disingenuous at best. I’d love to see the responses if you emailed all your authors and told them this.

        Both indie and traditional authors have shouldered a HUGE amount of risk and investment. They’ve invested the time, opportunity cost and material outlay in order to create a manuscript. In addition, self published authors take on the risk and investment of paying for editing, covers, marketing etc.

        You pass over all this risk and investment as if it was nothing. I’ll leave you with a quote from John Scalzi about what he thinks of publishers who do this: “to all of that, “f**k you,” is probably the politest thing to say in response.”

      • Steven Zacharius

        I was saying that Amazon doesn’t have an investment in the authors….not that the indie authors or traditionally published authors didn’t have an investment in their work. Obviously they do. I was saying that Amazon or any retailer doesn’t have to cover the cost of the advance a publisher pays the author.

      • Elliot1234

        And Amazon doesn’t have an investment in the widgets is sells. So what?

      • Steven Zacharius

        Apparently you are 100% behind Amazon and all of their practices for some reason. You don’t want to listen to what I say and I have first hand experience in dealing with them as a publisher. Because Amazon doesn’t have an investment in the author, they don’t care about the author. They put the file up and don’t care if it sells 4 copies or 40,000. It doesn’t cost them anything. You do all the work putting it up for them. You wrote the book, designed the cover and entered the metadata. The publisher on the other hand who has paid an advance and spent many hours editing a book and marketing it, has an investment in that book and wants to try and insure that the book performs well. It’s a totally different perspective. One who cares and one who has nothing to lose.

  • Elliot1234

    It does not attempt to take into account, or even acknowledge, that publishers and their authors are dependent on other channels besides Amazon.

    Why should it? New business models ignore the dependencies of the old. The people who depend on the old channels lose market share to the new models and then leave the market. Nobody notices.

    • Why? Because it is trying to persuade people who get benefit from what they ignore. It makes the arguments worthless.

      • Elliot1234

        Price elasticity is not a function of the source of someone’s benefiits. It exists regardless of the source of their benefits. It exists even if people ignore it. Those people will be gone, and price elasticity will remain.

  • Ron Martínez

    Mike, one point of clarification: Jeff Bezos’s email address has been public for a very long time. That he receives and acts upon customer emails is often cited as a measure of responsiveness to customer needs (and it is, really). See Brad Stone on this, for example.

    The call to flood either mailbox is, of course, another matter.

    • Thanks for that, Ron. It’s a distinction that makes a difference.

  • Elliot1234

    I should probably be more specific about Caro.

    I doubt we will see people taking the same path Caro took. But we will see products rivaling his bio of LBJ. Other authors will take another path to the same kind of product.

    And I’d add that Caro is a superb author who has made significant contributions. I use him as an example simply because the quality of his product.

    [This didn’t slot into the thread where I thought it would, so it probably makes little sense here. Sorry.]

    • Dean

      What is an example of a self-published high-quality work of non-fiction that rivals Robert Caro’s work on LBJ?

      • Elliot1234

        I don’t know. What? It took Caro thirty years. We might have to step back a bit and wait. The Kindle and KDP are only a few years old.

        I’d also note fiction dominates eBooks for both publishers and independents. eReading software is currently primitive. It’s primitive compared to this blog software. I don’t expect much movement in eBook nonfiction until eReading software can rival the utility of a paper non-fiction book.

        For example, I would never read an econ book with ereading software. Graphs suck. Tables are terrible. It’s hard to go backwards. Hard to mark pages. Notes function is awful.

        So, pull up a chair and watch the game. There are great things to come.

      • You can be pretty damn sure there isn’t one. And if there ever is, everybody will know.

      • Elliot1234

        I agree. That would be pretty damn unlikely. Independent authors, commerce, and technology became a matarial force about 2010. So, it would be highly unliklely they could produce in four years what took Caro thirty years.

        On the bright side, that leaves 26 years left when one can say no indpeendent rivals Caro.

        But, who knows? Perhaps the first independent to rival Caro’s work will be Caro.

      • Date it from whenever you want. There are still two, and ONLY two, varieties of successful self-publisher. And although it is impossible to prove, it would seem (and a key advocate for self-publishing with whom I’ve talked privately agrees) that the successful self-publishers mostly launched themselves before the DoJ diluted agency and erased the firm line between branded book prices and indies. Not conclusive in any way, but at least as conclusive as any suggestion that indie publishers will overwhelm the establishment at any point.

      • Elliot1234

        OK. Let’s stick with 2010. Then we can come back in 2040 and see if independents have matched Caro’s 30 years of work from 1982 to 2012.

        Nobody will overwhelm the establishment. The establishment will always be with us. It will simply have different incumbents and ways of doing things.. The old incumbents will slip silently away and be fondly remembered like we recall our old Kodak Instamatics,

        Indpendents have to realize they are now part of the publishing industry, and it is probably time to realize how they are changing it. I look forward to the time when some new batch of writers mounts the barricades calling Howey and Konrath the establishment. And by then, nobody will remember the Instamatic. But for now, it’s time to just welcome market share, link arms, and sing along with Kumbayah….

      • I have no problem with acknowledging a very small and vibrant new sector of the publishing economy. How much it will grow and how far it will spread beyond its initial roots is a legitimate matter for conjecture. But it’s a bit soon to declare that the phenomenon — as a a commercially-meaningful component of the industry — will spread far beyond its initial niches. I think the hype far exceeds the potential. Let’s remember that many indie crusaders are basically saying to many published authors: “throw off your chains and do it yourself.” I don’t want to name names (although sometimes you do), but that kind of advice is, frankly, crazy talk.

      • Elliot1234

        I agree about the vibrant sector. Simple observation leads to acknowledgement.

        The future is always a matter of conjecture, and he past is always a good guide to behavior. We have seen that when it is possible to produce goods at a lower costs, entrepreneurs and innovators take advantage of the opportunity. Then those lower cost goods tend to drive out the higher cost goods.

        Note the recent calls for government action to save the incumbents and their business model. This is not a sign of confidence in the ability of the incumbents to stand in the market.

        Each year we hear how independents have hit a paper ceiling, and each year their market share increases. That’s what matters.

        Is there a reason to think market share has stopped growing? If so, then don’t worry about it.

        It doesn’t matter what independents are saying. Nor do I care if they are crazy. Good for them. Who cares? Crazy people go do something else. So do incumbents who can’t compete. What matters is economics, technology, sales, and market share.

      • I don’t know where you got the straw man that people keep predicting that indies will stop gaining share! That isn’t bloody likely. But the growth has, by my observation, slowed dramatically from what it was two or three years ago. No doubt that is because the overall ebook market is growing much more slowly than the supply of offerings. You’re the expert on supply and demand so you know what to tell each new self-publisher to expect! Right?

      • Elliot1234

        For several years, the supporters of traditional publishing told us consumers would reject the Tsunami of Swill. They told us consumers would reject independent books because of poor editing, inconsistent formatting, and excessive use of adverbs. They told us consumers would choose the curating skills of English majors at publishing houses over the independent books.

        Some, like Steve Zacharious, saids it was so bad that his ideal world would have independents segregated from other books on Amazon.

        But they have been wrong. Very wrong. Even the ones who scored coveted column inches in the Guardian.

        But, let’s rejoice in our agreement that independents will increase market share. I agree it isn’t very likely their market share will fall.

        And since market share is a zero sum game and must add up to 100%, if independents gain market share, who loses it? Somebody has to lose it. Publishers?

        And what has slowed dramatically? The annual increase in market share percentage points, or the rate of market share growth? The rate will obviously fall. That’s how the math works when things start at zero.

        But the rate of market share increase can fall, while the increase in sales and market share percentage points increases.

        I agree I am an expert at supply and demand. So I would tell each new self-publisher the same thing I would tell each new traditional author. Low cost independent books retailed through Amazon or similar outlets will drive high cost published books from the market.

      • Steven Zacharius

        So why hasn’t that happened? Why are the NYT bestsellers just about all traditionally published authors are “normal” prices? I thought the high priced books would drive them out of the market. The reason they are the big sellers is that people are willing to pay for these names that they’re familiar with. They’ve become big selling writers for a reason.

      • Elliot1234

        It is happening. Look at the Amazon lists. It’s been happening for a few years.

        Every point of self-published market share has come from publishers. The low priced books are driving the others out.

        People are willing to pay for the big names. But they are also buying more and more self-published books.

        Have some patience. It’s moving along at a pretty good clip.

      • Steven Zacharius

        There is absolutely no indication of what you’re saying Elliot. It could be people are just hoarding cheap ebooks for $.99 to $1.99. We don’t know. But ebook sales over traditional books have held steady now. The rapid rise is over but then so is the increasing sale of dedicated e-readers. Maybe we’ll get a nice bump again from the larger iPhone when it’s released in another couple of months. And I never said they weren’t buying indie books. If they’re cheap enough, why not pay 2.00 for them. Not much to loose. But is that a better deal than when the traditional publisher’s NYT bestselling author comes out in mass market and then the ebook price is suddenly being discounted to 4.79? When you can buy Patterson, King, the big romance writers for 4.79…..people are buying them.

      • Elliot1234

        But ebook sales over traditional books have held steady now.

        Do those eBook sales include independents on Amazon KDP?

        I don’t care why consumers are buying independent books. Hoarding? Who cares? .

        And the published bestsellers? Maybe they pile them up in stack next to the bed. Is that hoarding? Do those sales count? Who cares?

        It doesn’t matter why they buy. All that matters is they do. That applies to both independents and publishers’ bestsellers.

        We can see there are all kinds of consumer behaviors, and we can see their aggregate expression is taking market share from publishers and giving it to independents.

        People are definitely buying the bestsellers. But that market share independents are taking comes from somewhere. It really doesn’t matter what published books it comes from.

        Remember, independent market share started at zero just a few years back.

      • In the context of the overall book business, the indie market share is small; almost certainly less than 5 percent. I know Hugh Howey believes and attempts to prove otherwise, but it is only significant in specific segments of what is a much bigger business than indies give it credit for being.

      • Elliot1234

        Sorry. I’m afraid replies got lost or I got lost in replies. So this might be a duplicate.

        We agree it isn’t likely that independents will stop gaining market share. Market share is a zero-sum game. It always adds up to 100%. So who is losing market share? Publishers?

        So let it be written, so let it be done.

      • Publishers’ market-share losses will slow substantially (they probably already have) for the same reason that ebook market share gains at the expense of print have slowed down. They take place primarily in specific genres or types of books, and their penetration there has reached such a high level that there’s not much room for more growth.

      • Elliot1234

        I agree the market share independents have taken from publishers is weighted in certain categories.

        Almost all markets that have seen technological innovation saw it start in one sector and spread to others.

        Four things happen. First, ambitious market producers look at those sectors, and realize they can also do things cheaper with the existing technology. So they do it.

        Second, technology producers ask why the other sectors are lagging. Then they improve technology to be more suitable for those sectors. For example, eReading software is poor for non-fiction. We can expect that it will change..

        Third, consumers like the new low prices and technology, and create a demand for both that the above two categories of suppliers exploit.

        Fourth, ambitious retailers and producers join in price competition against incumbents and other low cost players.

        Market that expanded due to technological change moved through the status you identify for books today. At the time, people told us the change can’t continue into other sectors. Then it does.

        Books are following the same path as other markets. In each of those markets, incumbents told us they were too vital to be eliminated. In each case they were wrong.

        And what do I tell each new self-publisher? The same thing I tell each new traditional author. Good luck!

  • Peter Turner

    Mike, I’ve never said this to a blogger before, but you should turn off your comments feature. It’ll add years to your life.

    • I don’t have actually have clear evidence of this, but I believe the comments section is considered value-added by many of my readers. It is sometimes a bit tedious. But at least in the case of *this* post, it has remained civil and constructive. I actually thought there was an argument made about why indies would want big publishers to sell ebooks for less that I hadn’t thought of and which made sense. Of course, the substance of it — we can put print and bookstores out of business faster — is not one that is likely to be as popular as “lower prices for consumers!” but at least it was honest and at least it wasn’t crazy.

      • Peter Turner

        Point taken. I also think any discussion that shines a light on widely diverse motivations of readers and authors is well-worthwhile.

  • The answer is easy. Have the publishers open their own bookstores and sell directly at the prices they want to charge then do the marketing and spend the money to drive the customer. Then let the reader decide to pay a lot or not.

    But they aren’t going to do that. They’re going to continue to whine about their former monopoly and their colluded system of gatekeeping being obliterated, instead of actually doing something about it.

    Let it go Mike. It’s over. Amazon won. A million Mike Shatzkin arguments aren’t going to change anything. It’s time to play the new game. The game where authors have control, and earn the lion’s share for their work, and where they have the rights to their stories and mostly… where they aren’t told whether or not their work is good enough (gatekept). That model is dead.

    • Steven Zacharius

      Things change. That is a constant.

    • Steven Zacharius

      When did publishers ever have a monopoly? There used to be thousands of independent bookstores and several chains. It wasn’t just one huge chain. We had Borders too. How do these misleading comments keep getting spread? Accounts were always able to discount the price of printed books. WalMart has always done this, so has Target and so have the “clubs”. The clubs in particular work at very low profit margins. Publishers aren’t retailers. Most of us have deliberately not tried to compete with our retailing or wholesaling partners. Amazon now has several large publishing imprints and is competing directly with publishers. They’ve done it with other industries as well…..diapers, shoes, etc…. But don’t count the other retailers out yet. WalMart is a giant. So is Apple, Google and Alibaba is much larger than even Amazon. Things change rapidly in business.

      • If you wanted to get a book published before Amazon, how did you have to go about it? You were forced to go through a traditional publisher who owned all the connections to bookstores. Not to mention you had to apply for the opportunity to be picked by someone who deemed your book was good enough to be published. Traditional publishers have colluded to keep their business of paper in tact with high prices since Gutenberg invented the printing press. The problem is for them, now everyone has the opportunity to go around them.

        I hope other retailers get in the game. I have always said that Google could compete instantly with a KDP like system… overnight. Competition is good for the author and the reader. But bad for you know who. I’m fine with this. I’ll take the opportunity given by Amazon over the outdated practice of robbing authors out of the lion’s share of profits for their content and giving up the rights to their work any day.

      • Steven Zacharius

        Since when have publishers ever COLLUDED to keep print books high now too? I must have missed that lawsuit. And yes you had to wait to get chosen by a publisher because they have a filtering process of trying to accept those books that they feel are the best to be published. That’s why we are in business, to choose the books that we think will be commercial to sell.
        Amazon is not publishing on KDP.. They are distributing. They don’t filter out the good from the garbage. They just throw it out online and sees if there will be any sales. They don’t care if it sold 10 copies like the majority of most self published books or if it becomes a big hit. Their costs were almost nothing. They didn’t pay an advance and don’t have an investment in the author.

      • Keep your head in the sand Steven. It’s working so well for your industry. Good luck!

      • Steven Zacharius

        I will place a lot of value on your reply Jim. I take it that you must know a lot about traditional publishing since you dismissed my comments so freely.

      • SLNH

        But we know that publishers often miss recognizing potential blockbuster bestsellers. Everyone knows J.K. Nothing’s story but there are others such as Tom Clancy’s Hunt for Red October. From Wikipedia “Clancy had not been able to place the novel with any traditional publishers, but had a good relationship with the press from writing articles in their Proceedings of the Naval Institute. To his surprise the press accepted the manuscript and sent a small advance. ” Or John Grisham’s “A Time to Kill” rejected 28 times yet Kim Kardashian’s “Selfish” will be published by Rizzoli next year.

      • Absolutely. Happens all the time. And it *should *happen less with digital marketing and no-inventory selling capability. We’ll see if it does.

      • Elliot1234

        Consumers couldn’t absorb an unlimited stream of paper books at prices necessary to produce them. The economics of the market demanded supply be limited.

        It’s not much different than with any other product. The supply delivered to market is always constrained by the demand for the product and the cost of production.

        What we refer to as the gatekeepers were simply a mechanism to fill the limited number of slots the market could absorb at prices that delivered a profit to producers.

      • Andy

        Yes. But what happens now that the gatekeepers are no longer needed? Anarchy. Chaos. Ha. I have a feeling good books will still find a large audience. It is not like the gatekeepers were any better than anyone else at picking out great literature. Perhaps they are better at marketing marginal literature. People know what they like and like to tell people what they like. And now they can tell anyone and everyone. I have a blogger friend who has a 100k rabid followers. if she wrote a book tomorrow all she has to do is annocune it on Facebook, self publish on Amazon and would prbably sell 50k copies. On her own. With zero help from anyone on this thread. Crazy huh?

      • Elliot1234

        Yes. But what happens now that the gatekeepers are no longer needed? Anarchy. Chaos. Ha.

        The same dynamics prevail, but the costs of bringing a book to consumers have fallen dramatically. So many more books become available to consumers.

  • Jeffrey Capshew

    Great column, Mike, hitting the bulls-eye as usual.

  • francesgrimble

    As a
    self-publisher for more than 20 years, I am completely fed up with the concept
    that I should work for peanuts so other people with better-paid, secure jobs with
    health benefits and a subsidized cafeteria can get my books really cheap
    or free while they natter about “readers’ rights.” Let alone so that huge
    corporations can dominate the publishing market—well, even more than they do
    already. As a self-publisher of printed books, I think the e-book market is
    currently too dangerous to be in–especially with contracts like Amazon’s that
    they can change at will. As a self-publisher of niche nonfiction books with
    cover prices from $42 to $75, I know that some niches are so small that you
    could throw my entire inventory on a table (well, OK, a lot of tables) out on
    the sidewalk at $1 per book and few more readers would be interested than they
    are at the current prices. And most people read depressingly few books anyway. But
    as a historian, I will nitpick that there were paperbacks in the 19th
    century. Many books were available as a bundle of unbound signatures.
    People who wanted to preserve them for their personal libraries had them bound.
    People who wanted to read them less expensively left them unbound and lent them
    around till they were so beat up their best use was as kindling—the infamous “novels
    in yellow paper covers.” Something like a nice hefty volume of moral advice
    was, of course, more worthy of preservation.

    • You’ve chosen a very tough career.

      • francesgrimble

        I worked in publishing for 10 years before I started my own business. Things were easier before readers started expecting everything to be free or nearly so. They’re still easier for me in that I don’t publish e-books. People at least expect to pay something for ink and paper; they expect to pay nothing for bits. Also, although the average person has never had any idea of the labor and expense involved in writing and producing a book, things were easier before every blogger on the trivia of their own daily life decided that their work was the equal of professional work and expertise, and since they didn’t expect pay no one else should.

  • John Andrews

    The publisher of one of my books (non-fiction, and 15 yeas ago) brought out a hardback for $80 and a paperback for $40 (that was a lot of money for two boards). Today they offer the paperback and a Kindle edition for $40. Few copies of the Kindle edition have been sold but it did make it easy for someone to produce a free ‘edition’ for the pirate Torrent sites. As an author, and more importantly as a consumer, this makes me sceptical of publishers’ pricing and distribution arrangements. They obviously have to try and defend their corner, and they may think the world owes them a living, but arguing they are acting in the interests of authors and/or consumers is ingenuous.

    • Generalizing from the behavior of one publisher or even ten is what I’d call dangerous. Doesn’t sound like yours was too realistic.

  • Adam Rothberg

    Due to vacation I’m a little late to this discussion, and it is entirely tangential to the main point, but do want to correct that here in the U.S. Pocket Books launched the mass market paperback in June 1939 and has long been viewed as “America’s first paperback publisher.”

    • Thanks, Adam. You’re right about that. I didn’t get into the pre-war history because it was commercially small and it didn’t really have any impact on the point I was trying to make comparing ebooks to print. But your company history and company pride are correct. I appreciate you correcting my record.

      • Adam Rothberg

        And thanks back at ya, Mike! Interestingly, and I admit I have no idea of how this compares to the overall market at that time, by 1943 Pocket was selling 33 million copies, (per some historical publicity material). And other publishers had taken up the format by then, too.

      • Thanks, Adam. That certainly seems like a lot of books. Maybe mass-market had more traction before the war’s end than I had thought!