HarperStudio blog

Kindle is certainly engendering a lot of confusion by billboarding the downloads of free ebooks as “sales.” That paradoxical scorekeeping was the lead for an article by Motoko Rich in The New York Times on Saturday that quoted a lot of people, some apparently disagreeing with each other, but none of them necessarily wrong.

There really are three separate questions to consider, which get elided in these conversations.

1. What is the impact of giving away ebooks as a promotional device, either to boost the word of mouth on the book being given away or to promote an author’s other titles?

2. What is the potential impact on the industry overall of ubiquitous giveaways of ebooks that would apparently have commercial value?

3. When ebooks are given away, how should that sale be “scored” in any measurement of the book’s popularity?

The answer to the first question appears, anecdotally but just about universally, to be that giving ebooks away boosts sales of that title and related titles. Rich’s piece sites numerous publishers attesting to that. She apparently found no publisher that is skeptical about whether giveaway promotions work or has seen the tactic fail. And that would confirm my experience: I don’t know of one.

But as we’ve noted before, this effect could change over time. We’re still in a period where ebooks are not an acceptable format to most book readers. That means the benefits of giving them away is not confined to the word-of-mouth from the recipients, it can result in a print book purchase by the very person you gave it to! As ebook reading becomes more popular, particularly if we go to a DRM-free universe, the impact of cannibalization from giveaways could grow dramatically from what it is now.

The second question is what is apparently paramount to David Young of Hachette (as quoted in the Rich piece) and is influencing the policies described at Penguin. As more and more ebooks are given away, it offers a wider array of choice to people who prefer to select from the free offerings and just never pay. For the last 15 years of his life, my father, Len Shatzkin, refused to buy anything except remainders. He shopped from several mail order catalogs and, if he was in a bookstore, shopped at the bargain tables. His position was that if publishers were going to be dumb enough to reliably give the books away six months or a year later, he’d just wait and choose his reading from among what had been marked down. With free ebook marketing the way it is today, sometimes you don’t even have to wait!

And that’s obviously what was on Young’s mind when he said the tactic was “illogical.” It is illogical if you take a long-term, industry-health view of the situation. It is totally logical if you’re trying for short-term advantage to break a new book or build a particular author, as most of the other authors and publishers were trying to say.

There was a long comment string on the HarperStudio blog about this question six or eight months ago. I said at the time that I figured that if these giveaways kept spreading, one of our more industrious web entrepreneurs would create an ebooksforfree.com site which would be a consumer directory to “free” offers at various publishers and web retailers, title by title.

It’s a classic Tragedy of the Commons. Each person giving away ebooks succeeds in their intentions to boost their sales, but everybody will pay for the overgrazing in the end.

The third question is a tricky one. It is worth noting that the App Store makes it very easy to for the consumer to decide whether to shop the free apps or the priced apps. I think Amazon is hurting themselves by not at least sorting their bestseller pages that way. And they don’t. Amazon says the Kindle bestseller listings change every hour: I just checked the Top 10 and found one 25 cent book, one book at a substantial price (higher than $9.99), and eight free. Some of the eight free were self-promoters like the lead in Rich’s story; some were public domain; some were multi-book authors from established publishers. But only one of the Top 10 was elected with votes paid for with dollars from the Kindle clientele, which is what I think most people looking at “best sellers” would be looking for.

This raises a question I don’t know the answer to and my way to do the research will be to see if somebody with knowledge posts a comment. Kindle reports to the USA Today Bestseller List. This is, as far as I know, the only reflection of ebook popularity in the public domain. It would be interesting to know if USA Today has a standard for that reporting. Of course, most of the “weight” of the USA Today list, quite properly, would be print sales so whatever Kindle reports might not move the needle much. Most sales today are still print sales. But we’re headed for a crazy world if the concept of what “sold best” is expanded to include what people were willing to take for free.

On the other hand, if you try to separate free from paid, you will still face the question of where to draw the line. If publishers sell a $20 hardcover as a $5 ebook, should those units count equally in determining bestseller status? How about a dollar? How about a penny?

A tip of the hat here to my sometimes colleague Brian O’Leary of Magellan Media, who hinted at what I have said at length in this piece in his brief turn in Rich’s article. Brian has done extensive research that tends to confirm what Rich’s interviews and my anecdotal information suggest: that giving away ebooks boost sales in the present marketplace. But Brian managed to bridge the enthusiasm of the giveaway marketers and the incredulity expressed by David Young with his observation that there was a risk that free reading could eventually “supplant paid reading.”

And that wouldn’t really be good for anybody.

This is absolutely the last post you will see promoting Digital Book World 2010, which is on this Tuesday and Wednesday at the New York Sheraton and which is turning out to exceed my fondest hopes when we started out planning it this summer. But we have a panel on the very subject of this post called “Ebook challenges: competing with free and getting the timing right.” Brian O’Leary is moderating, and the panelists include agent Robert Gottlieb of the Trident Group; marketing director Mindy Stockfield of Hyperion (which published Chris Anderson’s book “Free”); ebook retailer Kobo’s VP Michael Tamblyn, and Steve Ross, who has been a publisher at both Random House and HarperCollins. There’s another panel on “Ebook pricing: what should they cost and why?” which includes the head of Penguin’s ebook publishing efforts, Tim McCall.  I enjoy having The New York Times stamp the topics we selected last August as “current” 72 hours before our show begins, even if just implicitly.

If you like this blog, I know you’ll enjoy Digital Book World. I hope to see you there.

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A great conversation broke out on the blog for Bob Miller’s new Harper imprint, HarperStudio

I realized after I wrote a response that it summarized what might be useful thinking for publishers wrestling with the revenue potential of ebooks because it presents a frame, a way to think about it.  Because it starts at the beginning.

In the long run, money goes to scarcity. Another way of saying it goes to “value.”

I love booksellers, and I look for any way possible to support them (including allowing returns, although I think I’d go to an affadavit model for shared markdown instead in this day and age…). But I don’t see how a “bookstore” is any different from an “affiliate” when they sell an ebook. The book is actually being provided by a white-labeled archive. The bookseller doesn’t necessarily touch it. In the medium term, there will be only a small markup for retailers selling ebooks because they simply don’t add enough value selling them. In the physical world, where they pay the rent, lug the boxes around, and deal all day long with John Q Public, they earn a bigger piece of the pie.

Just like the web makes us all publlishers, in the ebook world we’ll all be booksellers too. Actually, in the Amazon (and BN.com) affiliate world, most of us are booksellers already! A “bookstore” will have aggregations of “books” by subject, but you can bet your bippy that ESPN.com (for example) will have an ebook “store” that they link to from stories, etc. all the time.

Decisions about price aren’t about fairness or equity, they’re about the market. I want to read books on my device. I choose a) from what’s available, b) what I like, and c) considering the price. I remember when I first got this ebook habit nearly 10 years ago, I paid $28 for an ebook bio of Grover Cleveland because (a) was very limited, so (b) got down near zero, and I was wanted to read something so I yielded on (c).

The ebook world is going to change enormously over the next several years. We’re still in a great period of proliferation: of formats, titles, concepts for the books, retailers, retailing “styles”, readers and devices. The Kindle and iPhone have a kind of dominance in the tiny market we have now; they may or may not be number one in what will be a much larger market three or five years from now.

One thing that concerns me (on behalf of publishers and authors, of which I is one) is the proliferation of “free” offers. It will shortly be possible for people to have a large (a) and a manageable (b) choosing among things for which the answer to (c) is zero. That will be when every publisher, untethered from cost in a promotional giveaway, starts using the “free” device all the time. Seth Godin or Michael Cader will create the website for ebooksforfree.com (I haven’t checked whether the URL is available) and get the publishers to POST their promotions on it. (Maybe they’ll get them to pay.) And I’ll shop there and won’t have any time to read purchased ebooks because I won’t get through all the free ones.

So my advice on pricing is “watch what’s out there.” EVERY DAY. And don’t think you need to stick with the same ebook price tomorrow that you had yesterday (yes, I know the problems of changing data in everybody’s system — start sussing that out.) Monitor the free offers. Know what the books most competitive with yours cost. Don’t impose a “strategy” until you’ve learned a lot through activity. Because the facts around the strategy will change before you implement it.

Two other important points to keep in mind.

1. Ebook distribution responsibility within the publishing houses has been the province of digerati. It needs to move to the sales department. When all the phone and device companies have their own app stores, and all the various developers have their own version of a book (the Stanza version and the Scrollmotion version will look quite different…), you will have to WORK the accounts. You’ll have to fight for merchandising and make decisions about coop spending. And you need to do that in conjunction with your p-book sales strategy. This is a big change that has to be made soon.

2. As Cader loves to point out, this isn’t 1% of the business yet. It’s peanuts. You can do whatever you want. You can’t get rich or go broke whether you price the ebook 50% too high or 50% too low. Try everything. You’ll never have a cheaper opportunity to experiment.

Since I wrote this, the cogent and canny Kassia has posted on the same subject. We agree a lot.

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