St. Martin’s Press

Back when my father, Leonard Shatzkin, was active with significant publishers — the quarter century following World War II — he observed that very few books actually took in less cash than they required. That is not to say that publishers saw most books as “profitable”. Indeed, they didn’t. They placed an overhead charge of 25% or 30% or more on each book so most looked unprofitable. But that didn’t change the fact that the cash expended to publish just about every book was less than the cash it brought back in.

The exceptions were usually attributable to a large commercial error, most commonly paying too much of an advance to the author or printing far more copies than were needed. But, absent that kind of mistake, just about every book brought back somewhat more revenue than it required to publish it.

This led Len to the conclusion that the best strategy for a publisher was to issue as many titles as the organizational structure would allow. That was a lesson he passed along to the next generation of publishing leadership that came under his influence. And the leading proponent of that business philosophy was Tom McCormack, who worked for Len at Doubleday in the late 1950s, then went on to Harper & Row before he ascended to the presidency of then-tiny St. Martin’s Press in 1969. Tom often credited the insight that publishing more books was the path to commercial success as a key component of the enormous growth he piloted at St. Martin’s over three decades.

(I checked in with Tom, who is long-retired as a publishing executive but a very active playwright, about how many books didn’t claw back the cash expended. He told me that his “non-confirmable recollection” is that the percentage that did at least get their money back ranged from 85% to 92%. He recalls “incredulity” from his counterparts in other houses, whom he believes simply couldn’t “wrap their minds around the meaning of the statistic: revenues minus disbursements.” He went on to tell me that this number “seemed effectively irrelevant to them. They had an overriding and deeply flawed notion of something they called title-profitability. They thought they were analyzing the profitability of a title with their ‘p&l’.”)

Despite the apparent immutability of the fact at the time that most titles brought in incremental margin, many publishers who were losing money would come to the opposite conclusion. They would decide they should cut their lists, pay more attention to the titles they published, and create more profits that way. I remember discussing the futility of that approach in the 1980s with my friend and client, Dick McCullough, who was at that time the head of sales at Wiley. When I observed that the publishing graveyard was littered with the bones of publishers who pursued cutting their lists as the path to profits, Dick said of their efforts to cut “yes, and very successfully too”.

I got another lesson about this reality in the late 1980s when a company I consulted to (Proteus Books) sued its distributor (Cherry Lane Music) for a failure of “due skill and competence” in the sales efforts for Proteus Books. One of Proteus’s expert witnesses was Arthur Stiles, who had been Sales Director at several companies, including Doubleday, Lippincott, and Harper & Row. Stiles confirmed that big and competent publishers routinely put out thousands of copies of titles in advance of publication, with extremely few failures in terms of getting the initial placements. He was testifying in a time that was still like what my father experienced: the industry’s title counts were growing, but so were the the number of bookstores in which they could be placed.

Those days are over. And, coupled with the ebook revolution, the implications of that are profound.

A few things happened to change the environment so that it became no longer true that even big publishers could get all the distribution they needed on every title to assure a positive return of cash.

1. The title output of the industry has grown enormously. In the 1960s, the total output of the industry was in the neighborhood of 10,000 titles a year. Now it is something more than 30 times that number published traditionally, with a multiple of that number being self-published. Each new book is competing against more new titles every two weeks than a book fifty years ago would have competed against in a year!

2. Nothing published ever dies. Fifty years ago, stores were smaller and, while there’s no easy way for me to measure this, I’d guess that the active backlist across publishers was probably no more than 25,000 titles. Superstore growth in the 1980s, the efficiency of Ingram as a national wholesaler, and computer systems that helped stores track their inventory and sales fueled backlist expansion. Even in the early 1990s, the total of truly competitive titles was probably in the low six figures. But then came Amazon’s unlimited shelf space and Ingram’s Lightning Print to deliver one copy at a time, and, even before ebooks, the competitive set of available titles had probably jumped to seven figures.

3. Bookstore shelf space is declining. Nobody who has been reading this blog needs much elaboration on that point.

What that means is that a list-cutting therapy that McCullough and I saw in the 1980s as suicidal and which McCormack explained repeatedly was folly is no longer crazy. (Oh, how I wish my dear departed Dad was around to discuss this with!) And the new conjecture in this blogpost is that the day might come when a publisher with an extensive backlist might decide that the most profitable path would be to hardly publish any new titles at all!

The portfolio of any longstanding publisher today contains a lot of backlist which is pure profitable gold in the ebook era. Contracts often give publishers the rights to a book for the life of copyright if they continue to sell it. (I’ll confess here that there is a caveat to this point coming up in an italicized postscript below.) So a major publisher doing $600 million and up (of which there are six), almost certainly has triple-digit millions of sales in its backlist, which is increasingly shifting to digital. Even the most sober industry observers are seeing revenues exceeding 50% from ebooks in the next two or three years, which would mean that substantially more than half the units of these books are selling electronically.

So, let’s say you’ve got a company doing a billion dollars in annual revenue and barely eeking out a profit or perhaps even losing money. With a strategy of continuing to publish what you own as ebooks, you can see digital backlist revenue of $150 million, decaying by 10% a year, with gross margins giving you $100 million or more in cash flow. Offloading all the print operations for which you own rights to a distributor or competitor will provide incremental revenue as well. (You only need help for the offline print sales. Getting the online sales requires no operational capability.) You’d then need a minimal organization to do some marketing (not a lot), sign up and put out some additional titles that would be chosen for being risk-free (not a lot), and to handle the administration and royalty processing for your thousands of contracts. Five or ten million ought to cover those costs very handily.

Of course, the other thing you could do is sell your rights to that backlist. But I think it would require somebody to overpay in relation to your net discounted cash flow to make that attractive because the costs of keeping it all for yourself would be so minimal.

One hopes that today’s publishers are looking at the simple statistic Len and Tom authored: revenues minus disbursements by title. No doubt today’s biggest publishers are looking carefully at the performance of their copyrights in a way that sorts the new titles from the backlist. But doing so is only useful if they’re apportioning their costs properly across the title base. If they are, what is described in this post will be evident if and when it is true. In the meantime, careful focus on new title acquisitions and accepting that the healthiest way to manage for the future might be to reduce the commitment to new title development will have to replace the clear truths that guided smart publishing strategy for previous generations.

The history and analysis are all valid, but there is one big monkey wrench in this scenario I’ve sketched. There is a provision in the 1978 copyright law that allows authors to reclaim rights to their books after 35 years. Titles published in 1978 become eligible for reversion, called “recapture” apparently, starting in 2013. (With logic that is ironically typical of what Congress does when it touches copyright law, older titles are on a slower track for liberation.) Agents are planning for this; publishers will have to deal with it. I am given to understand that publishers can only retain these books for life of copyright by, in effect, reacquiring them. (Should be lots of fun!)

So, in fact, the backlist attrition might be faster than 10% (but it might not, because ebooks may create more readers for backlist than we had before as well.)

It is also true that many publishers have already been moving in the direction I suggest: pruning their new title counts and being particularly cautious with midlist. Of course, there was a conviction by many that list-pruning was a good strategy even before it actually was a good strategy, but the execution of it has been much more rigorous over the past decade.

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The title of “nicest person on the planet” is now open. The longtime incumbent, Ruth Cavin — also a veteran book editor who was known to many as the doyenne of mysteries — died early Sunday morning at the age of 92. She was still holding down a full time position as an editor with the Thomas Dunne Books imprint at St. Martin’s at her death.

What is unique about Ruth’s career is that she didn’t become an editor until she was past her 60th birthday and didn’t start her more than two decades at St. Martin’s until she was 70. She was sort of the Grandma Moses of mystery editors.

I had the very good fortune to have known Ruth all my life.

Ruth Brodie grew up in Pittsburgh where she first met my mother, Eleanor Oshry, when they went to kindergarten together. They were active together as schoolchildren in the YPSLs (Young People’s Socialist League, the youth arm of the political party that was led by Norman Thomas) and they both attended college locally at Carnegie Tech (now Carnegie-Mellon).

The story in the family is that when my father, Leonard Shatzkin, went out to Tech in 1938 to get his degree in printing, he had the phone number of two girls in his pocket: my Mom and Ruth. He called Mom first. She said she knew he had both numbers, so she kept him too busy from that point on to have time to call Ruth.

But they all became friends and worked together on the Carnegic Tartan, the school paper, on which Ruth was a columnist, Dad eventually the editor, and Mom the managing editor.

I realize as I write this that I never asked Ruth exactly how she ended up in New York after college. What I do know is that between when the war ended, during which my Dad had been exempted from service because he was working on the Manhattan Project, and when my arrival could be anticipated (which would have been late in 1946), they thought he would be drafted. My parents organized a going-away party for him for which the guests were all married couples except for two single friends: Ruth and a young Business Week writer named Bram Cavin.

The families remained close, personally and professionally. When Dad started the Dolphin Books imprint at Doubleday, he was able to hire Bram as an editor. In the early 1960s, the Cavins with their young children, son Tony and twin daughters Emily and Nora, moved to Pleasantville near where we lived in Croton and we saw them increasingly often. They moved to Cleveland in about 1964 when Bram took a job as an editor with World Publishing and Ruth’s home was my stop the first night I was driving across the country to go to UCLA in 1965.

Ruth was not working full time then but was active in anti-war politics. She was also interested in whatever you were interested in. I remember in the late 60s when bands starting putting out “concept” albums sitting with her for an hour with the Moody Blues’ “Days of Future Passed”, talking about what was “different” about all this, or whether anything really was.

In the early 1970s, my father started The Two Continents Publishing Group, setting up a trade book distributor on what is now the PGW-NBN model before there really any prototypes. Dad hired Ruth as his first employee to do the publicity. She also sold the subsidiary rights. I got the entirely-too-inflated title of Director of Marketing which meant that I got credit for a lot of what Ruth did.

Her output was prodigious. She wrote all the catalog copy, edited or wrote press releases, flap copy, and rep information for what grew into many dozens of books a year. She called on all the book clubs and all the senior book reviewers. Meanwhile, she had written a couple of books. One was called “Dinners for Beginners”. Another was on inter-urban rail transportation, mostly in the midwest, called “Trolleys.”

And, I must stress, it would be an understatement to say she had a smile on her face every day. Ruth had a smile on her face every minute. Nothing flustered or annoyed her. When you knew her well, you knew she had smiled her way through some pretty significant annoyances. She had a mastectomy in 1941. (She told me about two years ago that she now thinks she didn’t have cancer; that the diagnosis was a mistake.) She had a pacemaker installed in the late 1960s. I’ll bet that very few people who knew her had any idea about either of these things.

When the Shatzkins sold out of Two Continents in 1979, Ruth was 61 but definitely not done working. She was looking for new worlds to conquer. She managed to get a job at Walker and Company, a family-owned independent publisher that did a lot of mysteries. And thus did Ruth become a mystery editor.

Among the people she worked with at Walker were Philip Turner, who went on to work at Random House, Kodansha, and Sterling, and David Sobel, later at Wiley and Holt. I had an exchange with David yesterday in which he said, tongue only partly in cheek, that Ruth taught him everything he knows.

Ruth would teach you without it feeling like teaching. Every conversation was with an equal; every relationship was collegial. Her respect for other people was universal and deep and entirely genuine.

Tom Dunne was the man who “discovered” Ruth (when she was 70) for his imprint but he had support for the idea from then-CEO Tom McCormack. McCormack (another Doubleday alumnus originally recruited by my father) told me that he had a previous good experience with Joan Kahn, a mystery editor who had been retired by Harper at age 65 and then gave St. Martin’s ten great years.

Ruth started five years older and gave them more than 20!

The enormous productivity that my family and I saw in Ruth at Two Continents continued to be her reputation at St. Martin’s. I heard over the years that she routinely acquired, edited, and put into production more books than anybody. Since I pitched a few and sold her a couple over that time, I can tell you that she did all that without stinting on any part of the job from first contact through contract and editing and launch. Working with her was a positive experience for every author I know who did it.

With greater diligence since my Mom died in 2007, I’d see Ruth every few months outside the holiday season. We’d have lunch. She’d come along to see my nephew A.J. Shively in a play. I took her downtown a couple of times to get new hearing aids. I could see her decline. The scoliosis in her spine had her bent over so her back was nearly parallel to the ground. That meant she couldn’t breathe. We’d have to stop 3 times on the one block walk from her office to the restaurant she frequented.

Her memory, which, for names, had been sliding for years, started showing other lapses. I’d always ask her about her job. She always had a determination to keep it; the time she spent in the office with her colleagues was precious to her. A couple of years ago, she told me a bit abashedly that her company had insisted she stop taking the bus down from Grand Central to the office and provided her with a cab and then a car to take her back at the end of the day. (This was at the time that Bram was in a home near the White Plains train station, and Ruth stopped and saw him every evening on the way home.) A year or so ago, she said there was a plan afoot to have her work at home sometimes because the travel to the office was exhausting her. But she loved being with her colleagues. And she revered her boss, Tom Dunne, who really was the one who gave her this magnificent post-retirement-age career.

I had a conversation with St. Martin’s Publisher Sally Richardson (Dunne’s boss) about Ruth at a party for Al Silverman’s book three years ago. Sally was saying that she was working on making sure Ruth got a decent winter coat; she was so frugal and unconcerned with her own comfort that Sally had to, more or less, do it for her.

I told a few people at Macmillan that I wanted to acknowledge them publicly on Ruth’s behalf for the extraordinary sensitivity and generosity they showed her over the last months, perhaps even years, of her life. Although Tom McCormack made the point that they had learned that a “no age limit” policy made sense through their experience decades ago with Joan Kahn, that policy would not have obliged them to give her the extra support and reduced expectations that she must have required in the recent past.

They did that because they loved her, which was an inevitable consequence of knowing her well, so that isn’t extraordinary. But the fact that the company, particularly a company of the size of Macmillan, treated her better than many families would, is both rare and worthy of commendation. From this lifelong friend of Ruth’s, thanks very much.

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I was extremely fortunate in my “choice” of parents. I had both admiration and affection for them, and I always had a great time just shooting the bull with my dad, Leonard Shatzkin. He was a real visionary about the publishing business and was also very witty and cogent. A great deal of what passes for my insight is really just a recycling of his.

He died in May of 2002. Until the last six months or so of his life when the heart failure that killed him so weakened him that he couldn’t really think anymore, he was still working hard on what he always considered to be the most important commercial challenge for book publishers: how to manage the inventory in retail locations. In fact, he was developing a system he hoped to commercialize as a solution for independent stores. I didn’t want to say “what independent stores?” to him back then, even though it was already obvious to me that their existence was seriously threatened. Dad had shaped his view of publishing during the 1950s, when the industry was near the front end of what was nearly half-a-century of unfettered growth.

That period of growth was over by 2000, and those of us who were trying to measure the trajectory of digital change in the early 2000s couldn’t avoid seeing it. Dad might have seen it 10 or 20 years earlier, but he was intellectually and emotionally incapable of accepting it in the last few years of his life. In fact, while taking control of the inventory in independent bookstores had been the key to the growth Dad fostered at Doubleday in the 1950s and in building the Collier Books imprint, which he created, for what we now call Macmillan I in the 1960s, it didn’t present the same level of opportunity in the 2000s. He had been right for many years about this, but he wasn’t anymore.

Another immutable truth in my father’s picture of book publishing which also turned out not to be permanent was his belief that book publishers should just keep expanding their lists, pretty much without limits. When Dad launched Collier Books by doing 600 titles a year in 1962, the entire industry only produced about 10,000 titles. In Dad’s time, it was probably true that most books big houses did contributed to profits, so the more titles you did, the more profits you made. Tom McCormack, who was a protege of Dad’s in the late 1950s and then went on to a long and successful career as CEO of St. Martin’s Press (now part of Macmillan II), attributed much of his success and St. Martin’s to Tom’s own recycling of Dad’s insight.

There is this beast in publishing known as the “title P&L.” The “title P&L” proceeds from the mistaken premise that titles, standing alone, deliver profits or make losses. In fact, that’s not true, because a substantial chunk of a publishing house’s costs are not title-specific; some costs are not really attributable in any sensible way.

The way “title P&L”s normally work is that “overhead” — rent, salaries, etc. — is figured as a percentage of sales (which, if you look back to last year, is, indeed, a calculable number across any company.) By “distributing” the unattributable costs that way, the logic says, you make sure that each book covers its “share” of the costs of keeping the doors open. But, as McCormack pointed out many times over his career, the rent didn’t go up because he signed a new title and it was nonsensical to charge each title, let alone each sale, for the rent.

Dad had a very succinct and persuasive way to explain the folly of the “title P&L” logic. What he suggested is that every house do a recalculation of their overall P&L at the end of each year. To do it, they should take out every title that failed to earn back the overhead charge (usually somewhere between 35% and 45%) because those had, by the internal logic, “lost money.” Surely, if you take out all the titles that lost money, you would see your overall calculation of profits rise. Right?

But it never does, it always falls. Why is that? Because most of the titles deemed to have lost money by “title P&L” logic actually made a contribution to overhead. That is, the direct revenues attributable to that title were greater than the direct expenses charged to it; they just weren’t sufficient to be scored as profitable when the overhead tax was deducted. But if you subtract all the books that earned 6% or 10% or 19% or 34% margin on sales, you subtract actual dollar contributions to overhead and profit.

Important point: overhead and profit are both produced by gross margin on sales. When enough margin has been generated to cover all the overheads, the margin becomes profit. So titles don’t earn profits or losses, they contribute more money or less to overhead and, in some cases, actually don’t recover their direct costs. The titles that don’t recover their costs clearly have lost money; all other titles contribute to overhead and, if it is covered, to profits, but they aren’t, strictly speaking, profitable in and of themselves.

All that was true in Dad’s day and is still true today. What has changed (I think; I haven’t actually done the analysis with a real house’s numbers) is that the percentage of titles that don’t even recover their direct costs is rising. It is actually getting harder and harder to publish new titles successfully, even if the standard of success is lowered to “recovered all costs” from “delivered its pro rata contribution to overhead.”

That’s because each title published today is facing a much more challenging commercial environment than each title published two, three, four, or five decades ago. Each title competes with more titles in the marketplace and more new titles coming into the marketplace: print-on-demand and online used books have snared a great deal of market share that used to be available only to new titles and backlist kept alive in print-run quantities by publishers. And, for the past 10 years, each new title is coming into a marketplace that has less shelf space available for books overall than it had for the last title.

So the “keep publishing more and more” paradigm that Dad believed in and that McCormack credited with St. Martin’s growth may not actually work anymore. In fact, any sentient publisher today would have to look at their output regularly to recalibrate what new title publishing is actually profitable. I expect that analysts in every major house are slicing and dicing their lists, trying to figure out whether they can discern — by level of advance or subject matter or by imprint or editor or agent — which bets will return the cash invested and bring profit to the house.

We can assume those analyses are being done, but can we assume they’re being done right? Without any inside view of the details (and I don’t have one), we’ll assume (hope) that the crude application of a single overhead percentage to each title is not the standard for analysis. If it is, the house doing that will almost certainly be led to erroneous conclusions, just as Dad and Tom pointed out they were if they saw a book that contributed 30% margin as “unprofitable” and would think they’d be better off not publishing it.

The big publisher of 2010 has another problem besides the reality that new titles are harder and harder to launch to any standard of acceptable return. They also have to feed a machine built to handle a certain volume of printed books when the decline of print book sales is being accelerated by the shift to digital. The additional margins in digital (which are being produced as long as prices can be maintained) are not very helpful if they need to be diverted to pay for warehouse space, field sales forces, and higher unit printing costs because there is less print “throughput” to support them.

Big publishing management is aware of this challenge; it is part of what drives up the value (and prices) of big brand franchise authors. The big authors are still the fastest way to guarantee the volume of print output and sales necessary to fill those volume-guarantee contracts with the printers, absorb the warehouse space, and cover the cost of calling on accounts that sell print only. And look at the irony. With less volume, unit costs per book go up, which reduces total gross margin. And if warehouse and sales organization costs are fixed (they aren’t but it is hard to adjust them quickly, the way you can cut a press run or a marketing spend), then the percentage of sales they will consume will go up. So much for calculations of overhead as a percentage!

The big variable publishers have to deal with today is marketing cost. The most common rationale for list-cutting is that it will allow a greater amount of marketing attention to the books that are published. But that articulation actually begs the question, because marketing resources are variable. If you add more, you increase the overhead nut you have to cover before you get to profits. And if you reduce those resources, then you’ll be chasing your tail trying to put more marketing effort behind each title.

The analysis of how to cut has to be done; it is pure insanity for publishers to keep cranking out new titles if they are losing on many of them. Some of the ones they lose on have the potential to be big but just don’t make it; some aren’t even seen to have that potential. But the ultimate answer is not in how or how much a publisher can reduce title output, but in how they focus it. That’s the secret to reducing marketing costs and it is something we will certainly explore in another post someday.

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Michael Cader did a brilliant analysis of Thursday’s New York Times piece on ebook pricing, published exclusively for paid subscribers to Publishers Lunch. The Times piece’s shortcoming was that it tended to sensationalize the news that the prices the public will pay for current brand-name ebooks will be going up. If you observe the book business for fun, you can perhaps afford not to have access to content like Michael’s analysis. But if you’re in it for a living and you want to seriously keep up with what’s going on, I suggest you save $20 somehow on other publications each month and reinvest it in a Publishers Marketplace membership. I am not the only blogger moved to make this suggestion by this piece.

I am working under the rash assumption that Cader will not sue me for quoting his remarks without regard to fair use limitations (particularly after the commercial in that first paragraph.) Of course, I do my best to add some Shatzkin Files value to my quotes and paraphrases as well.

Michael’s overall point, as I read it (and these are my words, not his): “we in the business know what’s going on with ebook pricing; apparently reporters outside the business do not. And therefore a great deal of misunderstanding is circulated among the book-buying public and it behooves the trade publishing community to get the word out to make sure that the public understands what’s really behind what they pay for ebooks.”

His device to illustrate this point is to describe some common misunderstandings fostered by the Times piece — all of which are real misunderstandings and none of which are just convenient straw horses — and knock them down.

Frankly, it is only the overall point on which I’m not sure I agree. I am not convinced it makes much difference whether we push the “truth” out or not. Amazon’s recent “concession” statement over the Macmillan dust-up tried to channel potential consumer anger at Macmillan and away from them. That’s an effort that is bound to fail. Everybody who buys from Amazon knows that they’re buying from Amazon. On the other hand, “Macmillan” is not an active book imprint at the moment in the United States. The books the corporation called Macmillan puts out are under the imprints St. Martin’s, Farrar Straus, and Holt, and their subsidiary imprints. My wife found the Macmillan Dictionary for Children online and that book is published by Simon & Schuster! So good luck to Amazon trying to get the consumer to punish a corporate entity whose name isn’t on the cover of its books.

But the myths Cader describes are ubiquitous misunderstandings and they were clearly promoted in the Times piece. As Michael describes them (in italics):

* $9.99 never was the top e-book price; people pay more than that every day.

The Times piece makes a big deal out of consumer expectations of the $9.99 price. Cader points out that recent data from the ebook retailer Kobo described at Digital Book World — which shows that at Kobo they sell as many books for more than $9.99 as they do for exactly $9.99 — and Amazon’s own data undercut that notion. Cader says surveys of Amazon data have shown that 30% of the SKUs are priced higher than $9.99.

I have been told directly by a responsible person at Amazon that 4% of the titles they sell are deep-discounted to $9.99 and those represent 25% of the total sales. Of the other 75% of the sales, many (most) are less than $9.99 without necessarily deep-discounting, according to Cader, 30% are more. I have personally bought many Kindle books for more than $9.99 and some for more than $14.99.

But what I’d see as the biggest fallacy in this whole “customer expectations” meme was not mentioned by Cader. So far we have a relatively small percentage of book readers who have ever purchased an ebook at all! General consumer expectations can not be set by a sliver of the group who are early adapters. In fact, publishers are being smart precisely because they are tackling this consumer pricing problem before the market really does become general and a large population of book readers do have experience with the current price structure.

* The implicit, false promise of cheap e-books was made by the people who profit, at very nice margins, from selling the devices, not from publishers.

This is true for the $9.99 books offered by Amazon and Sony and, now, Barnes & Noble. Other etailers, like Kobo or B&N before the Nook, were offering that same price to keep up with (keep down with?) Amazon. But the central point is right. Amazon created the expectation of $9.99 pricing to sell readers; publishers didn’t create it to sell books!

The two companies most likely to save publishers from an Amazon stranglehold on their future general readership, Apple and Google, would also place “margin from ebook sales” very low on their list of objectives for participation in the ebook supply chain.

If the market really could stabilize with three or more reliable paths to the general ebook consumer, with price competition among the content,  but not price-competition driven by external forces, it would be one of the most important strategic accomplishments of the current generation of publishing management, to whatever degree their policies enabled it to happen.

* Brand-new ebooks sold at $9.99 are generally sold at a loss by the retailer.

And, as Cader goes on to point out, this is led by a retailer with a $50 billion market cap with an implicit expectation that it will drive smaller retailers out of the game. Publishers are taking the steps they are explicitly to encourage a more diverse marketplace. So, Mr. and Ms. Consumer, whose side are you on?

* People who can afford an ereading device can afford all proposed ebook prices.

Cader is making the point that conscientious reporters should make put price complaints into context. I’d personally dwell more on the “dog bites man” aspect of reporting that people favor lower prices. Has anybody ever found a consumer who favored higher prices? Has anybody ever found anybody who would prefer to pay more for anything they buy? From here it would seem that all reports of what people say they want to pay or say they would pay in some hypothetical circumstances are pretty much meaningless. Michael says “put them in context.” I really wonder whether this kind of senselessly speculative commentary ought to be reported at all!

* Publishers are lowering [my emphasis] their ebook prices.

Cader captures the massive irony of what is going on here with this one. From reading this piece or from reading Amazon’s note to Macmillan, you’d get the impression that “greedy” publishers are “raising” ebook prices. That’s not actually the case. The publishers going to the Agency model are actually reducing their price per unit sold; they’re just insisting that booksellers not sell those books as loss leaders. As Cader put it, “we in the trade know that publishers are preparing to lower their ebook prices by 50 percent or more, and reduce their own profit margins. But customers don’t; they hear that publishers are raising prices.”

* The new “top price” is going to be $12.99 more often than not.

The public reporting is that the Agency-priced books from Apple will be $12.99 and $14.99, with no additional detail. Cader seems to know that most, or at least a large number, of those books will be at the lower of those two prices. Undoubtedly, some people will refuse a book they want to read on a device they paid over $200 for because of a $5 difference in price ($14.99) from their prior expectation ($9.99). But somewhat fewer will be reluctant at $12.99, which is where the price will apparently be a great deal of the time. Certainly, nobody writing for a newspaper knows the future balance between those two price points.

* Surveys show many people will pay more than $9.99 for ebooks.

Cader points out (and my personal repeated experience confirms) that people often do pay more than $9.99 now, even according to the stats we’ve seen. But what he doesn’t point out, so I will, is that those stats are stacked!  Amazon prices all the hottest and most desireable books at $9.99, and therefore so does Kobo and other Amazon competitors. So the clustering of consumer purchasing around that price is largely driven by the appeal of the product at that price point.

That is: people bought the book, not the price!

* Goldman Sachs says ebook prices are not the biggest factor in purchasing a device–but expensive devices are an obstacle.

This is from a survey that Cader has seen and I have not. But the point is that portability is the main benefit consumers see in ebook devices, with price running second and ease of purchase nearly even with price as a perceived benefit. Ebook purchase decisions are not made on price alone.

What this data also would tell us is that ebook reading is going to spread because the price of devices is coming down and the circulation of ebook-able devices, smartphones and iPads, is increasing regardless of dedicated reader prices.

* Publishers have rewarded and honored early ereader adopters with a lot of free book giveaways, and some very inexpensive price promotions.

Much has been made in other places (not in the Times piece and not in Cader’s report) of the fact that the Kindle “bestseller list” contains a lot of free or almost-free books. Some of those are public domain titles, but many are not. Those that aren’t are provided by publishers as promotions, usually an offer of an older book by a multi-title author who has a new one just out. Does any retailer billboard the publishers who “have made books available for you for free?” Not that I’ve ever seen.

I do believe that the price of content will be driven down over time because of the laws of supply and demand. The amount of content being made available every day is staggering. However, the established publishing companies still have pretty much a monopoly position on curating and branding it. Curating and branding save consumers an enormous amount of time and effort; that’s why they are willing to pay for them. Publishers and the authors whose brands they are enhancing and maxmizing are operating in an increasingly competitive world, but they are both totally sensible and totally unremarkable in trying to maximize the rewards for their efforts.

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