Apple’s disruption of the ebook market has nothing to do with the tablet

Posted by Mike Shatzkin on January 19, 2010 at 2:01 pm · Under Authors, General Trade Publishing, New Models, Print-On-Demand, Publishing, Supply-Chain, eBooks


If the reporting by Publishers Lunch today is accurate (and I’ve never known it not to be), publishers may have used the entry of Apple into the ebook arena as an opportunity to change the entire paradigm of ebook distribution for major books. And while the great excitement about Apple and ebooks has been based on hopes that the new Apple Tablet that the world expects to be announced next week will add a lot of new ebook consumers, the change in the sales protocols will probably have a much more profound impact on the ebook market than the device. Or at least that’s how it looks from here.

Sorry, I can’t link to this story because it is only in the subscriber version of Lunch and a link would just send you into a pay wall. If you’re paying, you’ve got the story in your email version of Lunch.

What Michael Cader reports in Lunch is that publishers have worked out agreement with Apple to switch from a “wholesale” model to an “agency” model for ebook sales. The wholesale model imitates the physical world: the publisher “sells” the “book” to an intermediary (could be a retailer like Amazon or BN or a wholesaler like Ingram) based on the publisher’s established retail price and a discount schedule. Then the purchaser will re-sell that ebook at whatever price they like. When publishers offered discounts that were the same as the physical world discounts, they partially subsidized retailers who wanted to offer much lower ebook prices to consumers.

The “agency” model is based on the idea that the publisher is selling to the consumer and, therefore, setting the price, and any “agent”, which would usually be a retailer but wouldn’t have to be, that creates that sale would get a “commission” from the publisher for doing so. Since Apple’s normal “take” at the App Store is 30% and discounts from publishers have normally been 50% off the established retail price, publishers can claw back margin even if they don’t get Apple to concede anything from the 30%.

So making this change, if it works, accomplishes three things for big publishers. The obvious two are that they gain a greater degree of control over ebook pricing than they ever had over print book pricing and they get to rewrite the supply chain splits of the consumer dollar.

But the third advantage for the big guys is the most devilish of all: they may gain a permanent edge over smaller players on ebook margins. That is one that, truth be known, was already playing out as Amazon used its leverage to reduce the share smaller publishers got from Kindle sales. But this could institutionalize it.

Cader reports that the conversations between Apple and publishers have, so far, been confined to the Big Six (Random House, HarperCollins, Hachette Book Group, Simon & Schuster, Penguin, and Macmillan.) Obviously, these are separate conversations and they might not all come up with the same splits. (One can only imagine how hard publishers are fighting for “most favored nation” clauses. What a nightmare it would be to find out two months from now that you’re paying 5 or 10 points more commission than your competitors!)

To say that this news leaves us with more questions than answers would be a major understatement.

How will this work, mechanically? Will the publishers actually serve the titles, or will Apple or the other consumer-connected entities making the sale? Well, of course, we don’t know, but Brian Murray of HarperCollins, extensively quoted by Cader and, after all, the publisher whose discussions with Amazon were the first to break in a Wall Street Journal story, has long championed the idea that publishers should maintain control of their files, not distribute them to many intermediaries. The agency concept fits neatly with that paradigm. On the other hand, one would presume that Apple has to serve what comes from the App Store and, certainly, that Amazon would have to deliver what went into a Kindle. So departures from executing a pure agency model should be expected. Call it a “virtual” agency model!

How will retailers not named Amazon react? Presumably this will make players like BN.com, Kobo, and others very happy because, with publisher-set pricing, they no longer have to lose money on every sale to compete with Amazon. On the other hand, retailers really like to control pricing; it’s one of the main weapons in their arsenal. And if Amazon doesn’t play along (yet another question), then these other retailers could have a temporary advantage because they’ll have hot titles that Amazon would not.

How widespread will be the implementation, across publishers and across lists? One has to assume that the hidden hand of the agent community is present in these decisions. For one thing, agents have been as concerned as big publishers with the market and pricing power being concentrated at Amazon and this tactic addresses that directly. Since big publishers are even more responsive to agents than they are to major accounts, that would suggest a) that all the Big Six will play and b) that they will implement this strategy across their lists. And, as Cader points out, having some books handled as Agency and others as Wholesale is a potential management nightmare.

What will Amazon do? The question might be “what can Amazon do?” It is relatively easy for Amazon to pressure one publisher at a time, using their control of buy buttons and marketing recommendations. Nobody I know can say how extensive that kind of behavior is from them, but we know they engaged in a public spat with Hachette in the UK and threatened publishers a few years ago that they wouldn’t sell their POD books if they were at Lightning and not in Amazon’s own POD repository. And there are stories told privately — never publicly — of pressure tactics of a similar kind aimed quietly at particular recalcitrants at particular times. But if all the Big Six publishers do this with widespread support from the agent community, it is hard to see exactly what Amazon can do. Certainly, not having high profile titles available that are being sold at competing retailers for competing platforms would not be an acceptable situation, even for a fairly short time. But Amazon is resourceful and creative, they have a lot of power, and they are being faced with the first real threat to their marketplace power.

What does all this mean for enhanced ebooks? Frankly, if this works, I think publishers may find enhanced ebooks (except in very standardized ways such as I suggested in one, two, three blogposts many months ago) losing their allure. As I wrote last week, nobody has really invented an enhanced formula that has gained widespread public acceptance. The attraction of enhanced ebooks was their potential for keeping ebook prices up for branded authors. If the agency solution works, that mission might be accomplished with a lot less investment and risk, and delivering a product we know the public wants: books in the creative form that they have enjoyed for years.

Although I’m as excited as the next guy by the coming Apple Tablet, I really don’t think it will change the world for ebooks. It’s too big, too heavy, too expensive, and likely to be too consumptive of battery power to be a better ereader for most people than a Kindle, a Sony Reader, an iPhone, or one of the many other devices announced last week at CES. My own hunch is that the Tablet won’t be as powerful a catalyst for ebooks as the Kindle was or the iPhone has been. (That’s okay: year-on-year ebook sales are up 300% through November so they don’t actually need a lot of extra impetus…)

But Apple’s entry into the market, if it was the tool to get this Agency model off the ground, might have a very profound effect on the ebook world going into the future. I wonder if this is the last big disruption before Google Editions. And I the next thing to ponder, although we have a bit of time, if this will in any way disrupt that.

All of this just makes me glad that Michael Cader is one of my panelists on the Ebook Tipping Point panel next week at Digital Book World! And that I’ve got a powerful agent, Larry Kirshbaum, joining Michael, Ken Brooks, Evan Schnittman, and me on the stage for that discussion.


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  • mercedeslackey
    I’m a Tor author…and a Baen author and a Daw author and a Harlequin/Luna author. And right now I am thanking my own foresight for not having my eggs in one basket, and the Scheduling Gods for not having a new Tor release out.

    But people who do are getting hosed. WORSE, the folks with paperbacks, whether new releases or not, because to get that free shipping, people often add a PB to the HOT! NEW! HC they are buying.

    I hear a lot of calls for authors to do something else and somehow magically produce and publish, or at least sell, their own books. I do not, however, see a lot of calls for that from writers.

    Anyone wonder why that is? I can tell you, because I may be one of the few people commenting that actually HAS some small business experience. Having had, and failed, in a small business, there are a thousand things you must do that are invisible to the customer to keep a small business going.

    Here is why authors don’t go into the self (e- or real-book) publishing business.

    In order to HAVE a small business you MUST have the following:

    Clearance from where you live to run a small business on your premises. If you do not have this, buy or rent space from which to operate same. ($ to $$$) If the authorities find out you are operating a small business from your home (and they will) without this clearance, Very Bad Things can happen. Like fines ($$$$$)

    Small business insurance. ($$ to $$$$) If you do not have this and someone injuries himself or you have a flood or a fire, your homeowners will NOT cover you ($$$$$$$$$$$$$$$).

    Business licenses. Sometimes three, from city, county and state. ($)

    Business tax number.

    The ability to process credit card payments ($$. Yes, Virginia, they charge you). You can use PayPal, but that comes with its own set of fees and problems.

    Someone to separate your business accounting from your personal accounting. And someone to handle the business tax reporting. If this is you, this is time you won’t be using to write.

    A website ($ to $$$$). If you are setting up and maintaining, this is time you won’t be using to write.

    Someone to handle orders ($ to $$) After all you don’t want to ship product until you find out if the credit card/PayPal account is good. If this is you….yada.

    Someone to think of good ways to promote your books. If this is you….

    The sure and certain knowledge that 4 out of 5 small businesses fail in the first 4 years.

    A day job, because at the end of 4 years, chances are you will need it.

    To sum up, here, to run a small business selling my own books, whether in e- or paper format, I would have to take the odds of 80% failure and the loss of at least 50% of my writing time.

    For the record, when our small (scrapbooking, brick and mortar) business failed, our end result was a loss of over $200k.

    Start a book business myself? That’s the sound of hysterical laughter you hear. Thanks, I think I’ll stab myself in the eye with a fork a few times instead.



  • Good post, Mercedes. The subtext to your comments is that the skills
    required to write a good book in no way qualify somebody to run a business.
    And publishing, as it happens, is a particularly complicated business.

    The self-publishing option makes much more sense for books whose authors are
    not primarily writers, but who are producing a book to support a business of
    consulting or speaking or providing services of some other kind. It is not a
    particularly good path, most of the time, for somebody who wants to make
    money selling books. That will change a bit when ebook only becomes
    financially viable which, for most things, it isn't yet.

    Mike
  • Indie authors are in the self-publishing business, and becoming increasingly capable/competent, with handling and overseeing the entire publishing/production process (I for one, am a one-person operation, and there are many others like myself).

    Indie publishing offers opportunities that traditional publishing does not, and those that establish a good foundation NOW, are likely to reap some rewards in future.
  • I imagine that authors that really figure out the self-publishing mechanics
    will find pretty quickly that they can sell services, or, at least, advice,
    to authors who can't figure it out or who haven't figured it out yet.

    Mike
  • Luis Alejandro Masanti
    In Argentina, it used to be that from the wholesale price:
    - the bookstore gets 30%
    - the distributor, 20%
    - the publiser, 40%
    - the author 10%

    If the total cost of sale is reduced to 30%... will the publisher share the earning with the author?

    In Argentina, it used to be that from the wholesale price:
    - the agency gets 30%
    - the publiser, 50%
    - the author 20%

    Sorry, daydreaming....
  • The real disruption will come from the younger generation learning how to hack the system and the devices to get their content for free just like has happened with the music industry. Ask any young turk when they last bought music and they will ponder a long time in responding. Why? They can't remember as it has been too long.
  • You may be right and it might be that certain niches and genres will stop
    being profitable because of that. We'll see.

    But I don't think so.

    Mike
  • todshuttleworth
    Mike - I am always impressed with your insights. Looking forward to DBW this week.
  • Thanks, Tod. You won't be disappointed. DBW is going to be a terrific show
    and we'll have a very big attendance.

    Mike
  • Guest
  • michaelmhughes
    I also strongly disagree with this: "My own hunch is that the Tablet won’t be as powerful a catalyst for ebooks as the Kindle was or the iPhone has been."

    I'm confident this will be as powerful a catalyst for ebooks as the original iPod was for music. You cite the following reasons: "It’s too big, too heavy, too expensive, and likely to be too consumptive of battery power to be a better ereader for most people than a Kindle, a Sony Reader, an iPhone, or one of the many other devices announced last week at CES."

    I'll address them, point-by-point:

    "Too big and too heavy." Really? Consumers aren't averse to carrying around a Kindle, a laptop, or a netbook. The tablet will serve as *all* of the above. The Kindle/Nook are very limited devices. The tablet will serve as a game machine, web/email device, video/music player, and an e-reader. Who wouldn't want one of those, even if it is slightly heavier, a bit costlier, and might not hold a batter charge as long as a dedicated e-reader? And then there's the inevitable "sexy" factor Apple always brings to its products. The current ereader devices will look instantly antiquated when held next to the tablet. No college kid will want to cart around Amazon or B&N's clunky ereaders when they can own a device that can do so much more than imitate printed books. Why look like your dodgy uncle with a plastic-encased, grayscale-only single-use device when you can look like a true 21st-century starship captain? And if all of your textbooks can fit on a device that you can play games on while bored in class, who would *not* want one?

    "Too Expensive." The original iPods were expensive, too. Ditto the iPhone. Early adopters will find the cash to own a tablet, and the herds will follow.

    "Too consumptive of battery power." Apple is certainly aware that this is a big factor in criticism of potential color/multi-use ereaders, and I suspect they have found a way to get around it, either with a way to read ebooks that is less consumptive or a better battery.

    Then there is the distribution model of iTunes and the iPhone/iPod Touch app store, which is working phenomenally well for both Apple and content providers. I would gladly pay a buck or two for an issue of a magazine, especially if it's as simple as it is to purchase a song or app -- I think this device will be particularly profitable for ailing mags and newspapers. Consumers are very comfortable with Apple's current model, which will ease the transition -- "Hey, why not read that new Dan Brown on this thing?" Instant user base, ease-of-purchase, "cool" factor -- these will all contribute to what I'm certain will be a game-changer for publishers. Which is why they're all clamoring to be onboard.

    The tablet will kill the Kindle, the Nook, the Sony device, and all other dedicated e-readers. Amazon, B&N, and the rest are aware of this -- witness Amazon's opening up the Kindle to developers. But it's already too late. As for the iPhone, which is steadily gaining ground in the world market, it will be cleverly tied to the tablet, so that any content used on one device will be shared with the other.

    I'll admit to being an Apple fanboy. But I'm also a writer, a gamer, a tech enthusiast, a big reader, and I follow the publishing industry very closely. Apple could have put a tablet out years ago, as Microsoft and others did, or created an Apple ereader device to compete with the others. But they are smart. They wait. All of the pieces are in place to make this thing "insanely great" -- a distribution model, the enthusiasm of publishers, a successful portable OS, and a consumer base that is appreciates style and is clamoring for this thing even before it has been announced.

    Just watch. Wednesday is only a few days away.
  • @michaelmhughes,

    Great comment! Yes, I also agree with you about this. Not only will Apple get the eReader movement gain even more speed and publicity/PR, the device will be so much more than just an eReader. Probably more or less a laptop without a keyboard and definitely a multi-media device.

    The only area which I think the dedicated e-readers could have a potential edge (but I hope not, it´s up to Apple...) is the screen. Most probably it will be back-lit on the iTablet and I think some consumers are ok with that (some even read eBooks on the iPhone...) but some won´t. Here is where the Kindle and similar devices still could have a nische.
  • There will be niches for people who want no backlighting; there will be
    niches for people that don't want to spend a grand; there will be niches for
    people that want their ereading on a device that fits in their pocket. And
    most of the people who buy Tablets will have many motivations other than
    ebooks compelling them to do it. I am wondering how many people who are so
    sure the Tablet will be a great catalyst for ebooks a) read ebooks
    themselves and b) have contemplated the relative adoption curves for a $1000
    device versus a device that is $300 or less. Particularly in a recession.

    We'll know by the end of the year.

    Mike
  • Michael, I didn't say the device would *fail*; I said it won't be a
    game-changer for ebooks. Because it is overkill for ebooks; much more
    functionality (and weight) than you need to read a book.

    I have no doubt that, to the extent that people do carry these Tablets
    around, they will some books on them. But for reading Dan Brown (the example
    you chose), the iPhone is a much more practical choice. The big screen is of
    no value and the extra weight will, I guarantee you, make a difference over
    the course of a long sit of narrative reading.

    I think you've made a great pitch for the Tablet, which I mostly buy. But
    the leap that something that's good for many things will be optimal for
    reading ebooks is not one I am making. I will be stunned and amazed and the
    first one to congratulate you on your prescience if the Tablet turns out to
    be, as you predict, "as powerful a catalyst for ebooks as the original iPod
    was for music."

    Mike
    --------------------
    Mike Shatzkin
    http://idealog.com/blog
    mike@idealog.com, 212-758-5670
    Founder & CEO
    The Idea Logical Company, Inc., http://idealog.com
    Co-founder: Filedby, Inc. http://filedby.com
    Conference Chair: Digital Book World http://digitalbookworld.com
  • michaelmhughes
    Mike -- the iPhone is not a practical ereader at all, despite the success of some content providers (I think that success is largely based on the novelty, and will drop off dramatically when the tablet becomes commonplace). The screen is too small for most people (me included), and certainly too small to replicate the full experience of reading an actual book. I've tried reading books on it, but just going from one page to another gets annoying very quickly. For an ereader to be successful, it needs to approximate the average printed page -- hence the screen sizes of the Kindle and Nook.

    I look forward to your congratulations :-)
  • You've got your personal experience and opinion; I've got mine. I always
    have my iPhone; I don't always have my Kindle (which I actually don't use
    anymore) or my laptop. If I end up owning a Tablet, I will not always have
    my tablet.

    Going back and forth between devices is nice (you seemed impressed with the
    potential interaction between Tablet and iPhone) but a) Amazon has already
    done it (Kindle device, iPhone, and PC so far, all synched) and b) Google
    Editions is working on a cloud distribution model which will provide total
    interoperability with any device that has a web browser.

    I really don't understand your complaint about the page-turning. Pages on an
    iPhone turn with a tap of your index finger (except in an old ScrollMotion
    book I have that insists on a swiping motion; don't know if they've changed
    that.) You can read a book on an iPhone with no table and one hand. You
    can't do that with a Kindle. You can't do that with a netbook. You probably
    won't be able to do that with a Tablet.

    Ebooks have been read on large screens forever. Before the Kindle, by far
    the lion's share of ebooks were read on laptops and desktop computers. But
    Kindle made the ebook category explode, and iPhone added a lot of fuel to
    the fire. I certainly don't think the Tablet will be *bad* for ebooks, but
    they aren't going to change the game.

    And this is out of my depth but somebody who *is *a technologist (I'm not)
    reminds me that every attempt to make Tablet computing work so far has
    failed. That doesn't mean Apple won't succeed, but it does mean that we've
    heard excitement about the concept in the past but the public has not gone
    along. So far.

    Mike
  • EricE
    > somebody who *is *a technologist (I'm not) reminds me that every attempt to make Tablet computing work so far has failed

    That's because previous "tablets" were designed by technologists. They were just Windows laptops jammed in a tablet form factor. The iPad is nothing like that. It's not a general purpose device - it neither attempts nor desires to be all things to all people.

    Where it has features and deficiencies, they serve a purpose and that purpose is to deliver an amazing user experience. It's tailored for the form factor - it's not "just an oversized iPod touch" any more than it's a MacBook Pro slimmed down into a tablet form factor. It's it's own device, with elements that are unique to it. That's what will make the iPad a run away success while the previous efforts were spectacular failures.

    And yes, some consider me an Apple fanboi - but I am an Apple fanboi because of the products they produce, not just because they come from Apple. If Apple suddenly lost their mind and started creating crappy products like they did in the 90's, I'd drop them just like I did in the 90's - and the majority of current Apple users are probably in the same boat. Claiming Apple is successfully just because "their Apple" is a copout and irrational desire to not want to give Apple credit for creating truly useful products.
  • We'll see. I will be an early iPad person (even though I am a Windows guy on
    PC) because I have to find out for myself on this one. But I think the
    bigger the machine is, the more a full-function keyboard becomes a
    necessity. I know this will have an outboard, but that cuts down on
    portability, which is partly the point. I don't (and won't) spend much time
    watching videos (if I did, I'd see the value immediately.

    What I would say is the big difference between now and before is the amount
    of video available and the quality of the experience on ubiquitous broadband
    connections. That could be more than enough, even before we get to Apple's
    vaunted design skills. Perhaps the rumored HP tablet will do well too.

    Mike
  • Guest
  • Guest
  • Eleanor, I am not seeing what you're seeing and I think part of what you're
    saying is just wrong.

    The data you report on the bottom says sales in Q102 were $1.55 million and
    sales (in blue, as you mention) for Q309 are $46.5 million. That is a
    multiple of THIRTY times.

    And I question the distinction you make between wholesale sales and retail
    sales. It is true that in print books, you "sell" the book to the wholesaler
    who might have it a year later and send it back to you. But in ebook
    distribution, the wholesaler doesn't buy and carry inventory. They simply
    replicate the file they have when they make a sale to a retailer (which only
    happens when the retailer itself has made a sale to a consumer.) There is no
    inventory investment and there is no difference between the sales to
    wholesalers and the sales to retailers and the sales to consumers.

    The questions you ask about what it costs, etc. are all worthy of
    consideration but have nothing to do with the growth of the market. Which
    has been extremely robust after a dip that these graphs show took place from
    2002 to 2005, approximately. Since THEN, the growth has been a lot MORE than
    30 times!

    Mike
  • Guest
  • Guest
  • I'll have a blogpost on that article up tomorrow. I sometimes work with
    Brian O'Leary.

    What does it mean if ebook sales are 5% and there has been a 300% growth in
    sales? It means they were 1.67% last year at this time and, if that rate of
    growth is maintained, they'd be 15% next year and 45% the year after. I
    don't expect the rate of growth to sustain itself to 45% in two years, but
    if you think the two numbers you gave me are insignificant, I think you're
    wrong.

    And stop confusing yourself with the "wholesalers." All that means is that
    they're capturing the wholesale PRICE, or the price the publishers collect
    from the store or wholesaler. One common error is to double that price to
    calculate a "retail value", since nobody is actually collecting a 100%
    markup and, in fact, Amazon and others are selling to the consumer for LESS
    than the publisher is getting. But when IDPF reports "wholesale" numbers,
    that's what they mean. There isn't any wholesaler out there sitting on
    inventory that might get returned. And it isn't about sales to consumers
    that weren't made yet.

    Mike
  • Guest
  • Eleanor, the post is up.

    If by "referencing wholesale channels" you're referring back to IDPF stats,
    just take on board that what they really mean is "referencing wholesale
    PRICING". They are including all digital sales made by pubishers within the
    universe they are polling, not just those sales to wholesalers like Ingram
    or Content Reserve. They would be including sales to retailers (Kindle and
    BN) that didn't go through those wholesalers as well.

    I have to appeal to Michael Smith of IDPF to change the wording from
    "wholesale channels" to "at wholesale prices" to eliminate the inevitable
    confusion which, despite what you say, I believe has ensnared you.

    Mike
  • Steve
    Eleanor,

    If I'm not confused, there's an arithmetic error in your analysis of the 2002-2009 data. A 30-fold increase is 3,000 percent. 300 percent represents a 3 fold increase.

    -Steve
  • Guest
  • Eleanor,

    I really just couldn't make it through your reply. I will extend the
    courtesy of not deleting it. Perhaps it will be more accessible to somebody
    else. Others can decide whether what I said or what you said makes more
    sense to them.

    Mike
  • Guest
  • Guest
  • Not sure what chart you're citing, but I'm pretty sure that the tripling was
    year over year in November, not going back seven years.

    And while I agree that the wholesale price to retail price conversion is a
    leap too far (few sell at double the wholesale price), I think the
    comparisons are apples to apples.

    And if the figures IDPF reports are "dollars", then the unit price of what
    is selling is not really relevant. In fact, the lower the unit price, the
    more units are being sold so the unit growth might be even higher.

    As for the sample, I believe several of the biggest publishers are included,
    but that's a good question for IDPF.

    Mike
  • As usual - great post. Thanks! Look forward to seeing how this plays out regarding royalty payments.
  • Liz, royalties are the next battleground. Amazon's announcement of paying
    70% today is a shot in that battle.

    Mike
  • Guest
  • Eleanor, I got that. Those requirements are not really onerous. I was
    actually a bit surprised that some window of exclusivity to Amazon wasn't
    part of the requirement. Pretty restrained of them...

    Mike
  • Charles Levine
    Great column. However I am willing to place a wager against the following statement: "My own hunch is that the Tablet won’t be as powerful a catalyst for ebooks as the Kindle was or the iPhone has been."

    Besides the enormous fan base that iTunes has, if the iTablet can deliver a great reading, viewing, and surfing experience, all in one device--which I am confident it will do, though it may take iteration 2 or 3--I foresee it generating lots of excitement and readers.

    Also, won't any special deals that Apple makes with big publishers be
    subject to legal challenge, just as B&N's special p-book deals once were?
  • Charles, we'll see about the Tablet. My sense is too big, too heavy, too
    consumptive of battery power for a lot of ebook use. I might want a Tablet,
    but I bet I keep reading books on my iPhone.

    And the deal that publishers are making with Apple are LESS favorable to the
    vendor than the deals they're now making. That's the point. It isn't that
    AMZN or BN will *want* the Apple deal; it is that publishers will say, "what
    Apple got is the new deal. Will you accept it? Or does Apple get to sell the
    new big bestseller while you watch?"

    Mike
  • Charles Levine
    I meant legal challenge by smaller publishers who won't get the same deal with Apple.
  • Thanks for the clarification, Charles, but I'm not sure that's a point that
    can be litigated. As I pointed out in the post, there's no guarantee when
    Big Six Publisher A negotiates her deal that she's getting the same terms as
    Big Six Publisher B. Everybody's making their own deal. But IANAL.

    Mike
  • Mike, I think Amazon's 70% Kindle royalty program is the one thing they CAN do and reinforces your point that this is all about sales dynamics rather than hardware.

    Interestingly, by creating parity in agency commission with Apple's app store it does, to a degree, make it a hardware showdown. Apple will win marketshare because they're selling a multi-purpose device w/great software. And Amazon will retain a considerable chunk based on a much lower price point.

    I still think, though, that none of this bodes well for publishers. The cost structures of the big six are still based on an industrial/analogue model that simply has to compress as marketing and distribution become increasingly digital. I still see "middlemen" in the future, but far leaner and more networked.
  • Guest
  • Mark, I think Amazon is less hardware dependent than Apple and Apple is less
    content-sales dependent than Amazon.

    Amazon already has a reader for iPhones; that will port to the new Tablet.
    So you'll be able to read Kindles on a Tablet just like you do on an iPhone
    now. But Apple is selling the Tablet for much more than ereading; in fact,
    they probably agree with me (but not with hopeful publishers) that the
    Tablet won't end up being that much of an ebook device.

    I think the Big Six buy themselves a little time with this new "agency"
    model which gives them some control of end-user pricing and perhaps better
    margins. But now their vulnerability, which Amazon is showing, is the
    penurious stance they have taken to ebook royalties for authors. 25% of net,
    which one company (at least) wants to reduce to 20% of net, simply won't cut
    it. And Amazon's policy change underscores that.

    Mike
    --------------------
    Mike Shatzkin
    http://idealog.com/blog
    mike@idealog.com, 212-758-5670
    Founder & CEO
    The Idea Logical Company, Inc., http://idealog.com
    Co-founder: Filedby, Inc. http://filedby.com
    Conference Chair: Digital Book World http://digitalbookworld.com
  • I have to agree with Mike that I don't share the opinion that the Tablet will be a "tipping point " for eBooks. What I find personally and from customers is that many prefer a single-use, e-ink device. Enhanced eBooks are also not attractive for the typically voracious ebook reader.

    Is iTunes an attractive proposition for publishers? In my experience again, most small and medium size houses are so damn confused about eBooks in general and blindsided by the Google settlement, that developments such as the agency model just add further to the indecision. The funding isnt there for most to convert to bulky i-phone apps for each title.

    I think all parties need to realise thet the vast majority of readers just want to read un-complicated, good books/eBooks and are more than willing to pay a reasonable price to do so. Adding more formats and a new ereader every week probably doesn't help their confusion!
    Overall, It's going take a while for the whole eBook birthing process to mature. Publishers will adapt, some will fail - the same as any other business in transition. Once it does settle down, hopefully more people will be reading more books which is a good thing, irrespective of format, device etc.
  • Gareth, I think "in the long run" you're certainly right but, in the shorter
    run, we're going to have a lot of hardware, platform, and retail competitors
    duking it out with competing offerings that aren't all interoperable or
    compatible. And you put your finger on something; that kind of market favors
    the big publishers who have the staffs and capital to cope with a fragmented
    marketplace. I am actually ruminating right now on a blog post on that
    theme.

    Mike
  • Steve
    As to enhanced ebooks, I think the pundits are looking down the wrong end of the telescope. Interactive multimedia content on e-readers won't come from "ehnancing" traditional books. It will come as the creative community revisits the classic "text adventure" genre and subsequent developments of story-based role-playing game content and learns how to optimize that style of presentation for e-readers and market it to the reading public.

    -Steve
  • Steve, the kind of enhanced ebook you are positing is just one flavor from a
    wide selection. Some "enhancement" will have to do with deeper and richer
    text, not multi-media or interactivity at all. There is a very wide range of
    possibility here, and that's why I think it will take a long time to explore
    it all and get a real read on what will work commercially. I wouldn't want
    to hazard an opinion on that, except that I don't think anybody has come up
    with a winning formula yet.

    Mike
  • This is a battle about pricing as much as it is about standing up to Amazon.

    Hachette has been standing up to Amazon the longest and hardest and other publishers are finally seeing the opportunity to rally together against the threat of Amazon dominance. Hachette, like Amazon, sees itself first and foremost as a distributor (this after all is the company's origin in France). So, distribution is the core focus and mission in the business and it is distribution-led.

    Hachette like any publisher likes to control the marketing mix but Place and Price are of paramount importance and in that arena Amazon is undoubtedly Hachette’s biggest threat.

    It is good to see the big groups clubbing together to take control of ebook pricing and perceived value and to prevent Amazon from amassing more power.

    As for the iTablet, I agree Mike, positioning is not clear. The device is undoubtedly entering a very crowded computing place where convenience and value added will drive the mobile future. The problem is where does it fit in between phone and net book? But Apple is undoubtedly visionary and they must be seeing something I can not. That probably is quality content, great enhanced content, tactile user experience and one click purchasing convenience. Let's wait and see. Exciting times!
  • Stephen, I take the point that "standing up to Amazon" isn't entirely about
    price, but it is, at the moment, *largely* about price. So I'm not sure I am
    seeing the distinction you are making here.

    And I am sure the Tablet will succeed; I don't for a minute question Apple's
    vision. I just don't think it will be a game-changer for ereading (although
    I'm sure many of its owners will use it for that purpose, it won't be the
    primary one.) The device has a lot of other utility.

    Mike
  • I agree 100% with ampressmen's comment, "So what publishers actually want is access to the iTunes store's massive customer base that rivals Amazon.com as an ecommerce sales platform with all its credit card data and ease of purchase, it sounds like. Fascinating. The tablet is just a side show."

    Speaking as a publisher of ebook titles, that's what I want most. Apple's clout as a potential ebook reseller, iTunes for ebooks, and I don't care what devices they are selling to, whether it's their tablet, iPhone, IPod touch, or the next thing in ereading software for the Mac. (As it is my own ebook reading device is my iPhone.)

    Can't wait for Digital Book World next week.
  • Cecilia, I've never seen any hard data about how well books sell in the
    iTunes store, although I know O'Reilly Media reports that it is a very
    robust outlet for them. So far, I haven't seen it as a good place to shop
    for books from a merchandising perspective.

    Thanks for the plug for Digital Book World. Ticket sales are robust; it
    appears that you and I are not alone in looking forward to it!

    Mike
  • The trouble with the books I've gotten from the current iTunes model is that each book loads to my phone as a separate app. That's a royal pain, to put it mildly. But each MP3 I buy doesn't have to load as a separate app. I'm hoping they'll launch something that works as well for ebooks as iTunes does for MP3s. I don't even think most people realize there are books for sale through iTunes now, and it isn't transparent how traditional publishers should go about trying to make their books into apps and getting them sold there.
  • Quite correct that merchandising books in the App Store isn't easy or very
    consumer-friendly. I know O'Reilly Media has had great success selling books
    as Apps; I'm not sure I know another book publisher who says they have and
    O'R has a pretty computer-friendly clientele.

    Mike
  • Guest
  • Umm, IDPF sales figures and "300% increase" and all that are dollar volume of sales from a certain subset of wholesale outlets. So by definition it doesn't include any free books which don't generate any dollars of sales. See http://www.idpf.org/doc_library/industrystats.htm
  • Thanks for clearing that up!

    Mike
  • I really take your point about the need to get a bit deeper into the IDPF
    "sales" numbers to make sure they *are* actually sales that are showing this
    doubling, tripling uptick. I may be guilty of eliding reality here, along
    with a lot of other commentators. We need to learn more...

    Mike
  • Totally agree with your point about the opportunity being ripe for convergent media and the need and time to tempt readers away from "free" ebooks
  • So what publishers actually want is access to the iTunes store's massive customer base that rivals Amazon.com as an ecommerce sales platform with all its credit card data and ease of purchase, it sounds like. Fascinating. The tablet is just a side show.

    The question remains whether the big publishers, who have shown time and again how little they understand consumers, can really pull this off. Sounds an awful lot like various music industry efforts to gain the digital upper hand (ie Pressplay and musicnet), though with Apple's help in this case.

    ps the ongoing antitrust lawsuit over the aforementioned music label download sites is based in part on "most favored nation" clauses.
  • How much of the equation has to do with publishers getting access to all
    those iTunes customers and how much of it has to do with making it clear
    that they have an alternative path to the public that doesn't have to go
    through Amazon is something that we won't know for sure and is probably
    perceived slightly differently by each negotiator.

    And I'm sure many people really believe the Tablet device will be a
    game-changing ereader. I'm just not one of them.

    Mike
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