Price of Bits

End of last week Amazon pulled all of Macmillans books off their website and the Kindle store to try and bully the book publisher to let them sell ebooks at a lower price of $9.99. Moments later, they caved and all the books were back, some with higher prices.

Macmillan’s argument was that they should be able to sell bits – as in ones and zeros – at the same price as they sell hardbacks.

Amazon’s argument, I presume, was that they – both Amazon and Macmillan – can make more money by selling the ebook version at a lower price. Shifting physical goods costs money, shifting bits across the Internet doesn’t.

There are three loser in the case when Amazon makes a decision to sell bits for cheaper:

1. The company who prints the book and later has to collect unsold copies of books and pulp them.

2. Climate chance deniers are angry at less trees being torn down.

3. And book publishers autonomy suffers.

Of course, Macmillan only cares about the latter. They want to feel like they’re in charge. They don’t want the bookstore to have the control over what they themselves used to be able to control.

As a bystander, it looks a lot like when Tesco/Asda/Sainsbury’s dictate milk producers at what price they’ll need to sell them milk. Undercutting their actual cost-of-production prices thus making it necessary for governments and the EU to subsidise farming.

Only that… the difference here is that book publisher don’t write books, they publish them. Writers write books. And at no point in this argument between Macmillan and Amazon is anyone asking ‘what do the authors think of this’. Why? Because they’ve been messed about for long enough and they don’t have a voice when it comes to Big Business.

Sure, the top 10 authors make a fair bit of money. The rest don’t. If John Graham-Cumming makes $1.30 per copy of The Geek Atlas sold, all you can think of is to ask where does the rest disappear. It’s the same thing with artists and bands, they make about 6 per cent of the selling price of a CD or a song. No wonder why piracy is rife. Or was, until some figured out that people want easy access to music and that can be paid for with advertising and gigs.

Interestingly, John also says in his tweet that he makes $1.96 per sold ebook. For maths illiterates amongst my readers, whom there are none, that’s more than the hard copy.

(I’m only using him as an example as I knew the numbers. You should run and buy his book, it’s great. I’ve bought a copy for myself and two to give as gifts. By the way, that link is an affiliate link, if you use it, I’ll make a bit of money. In fact, I’ll probably make more than John does from that purchase. That’s how strange the whole setup is.)

OK. I’ve been rambling on a bit without a clear goal.

Why can’t Macmillan allow Amazon to set the price? I’ve got a hunch that, they, Amazon, know far better what sells and at what price than anyone in the room.

They are scared and insulted. That’s probably why.

Selling bits

There is a lot that has to be said for perceived value of a product. Just ask people reading newspapers; paper copy of the same news is valued at £1, digital copy is valued at zero pounds.

When watching the iPad announcement, I made an argument that the average price for an iPad app is going to be more than the average price of an iPhone app. Let’s pull couple of numbers out of the hat: average price of indie software for Apple platforms:

Macintosh: $20
iPad: $5 (for apps that are made to work on just that platform)
iPhone: $1

My reasoning behind this is that it’s easier for a consumer to justify paying more for a product that runs on a faster, larger device. Perceived value.

By far, most ebooks (that are NOT in public domain and many of the ones that are) are DRM protected, therefore can only be viewed on the device they were bought for and cannot be lent to friend. Yes, you can only read a book on the paper it was printed on (pretty good DRM) but no-one is going to tell you not to lend it to your friend.

As I’m limited in this way when buying a book, I don’t think I should be paying as much for an ebook as I pay for a hardcopy. I value the art that has gone into writing the book as much, but as a product, an ebook offers a lower value* because of the limitations it imposes on me.

So, what changed. I’m pretty sure Amazon is quite anxious of what Apple is going to do with their iBook Store. Biggest reason for them to worry about is whether Apple is actually going to pull Amazon’s Kindle app for the iPhone of of the App Store and thus no longer be able tosell books for that device. I think this would be classed as anticompetitive behaviour and it wouldn’t go down well with the courts, from Apples point of view. Amazon would win, but everyone would suffer. I also think that we’re close to seeing whether Apple still thinks it’s in the hardware business rather than starting to show signs of wanting to make money with software and content.

Amazon, on the other hand, should concentrate on it’s ‘we’re a bookstore’ business. Not to forget about Kindle completely but to make sure they stay competitive in the ebooks market. I have no doubt they wouldn’t, this case with Macmillan just shows it. They’re not selling quite that many Kindle’s that they could stop selling lots of books to read on them.

Book publishers, like record companies, will need to find ways of staying relevant as more and more books are being published with out them. They need to find and nurture talent.

Most of all, this is an interesting time for authors. There’s a million ways for a book to be published. It used to be that the hardest part was to get noticed by a publisher, now, if you can get noticed by your audience, you can actually make it. I predict that with in a few months, there’s going to be iPhone OS (for both iPhone and iPad) developers who have a plug’n play – or plug’n publish – solution for you to sell your book on these devices. In my previous post I mentioned iSites, that allows you to publish your social media content and blog through an app. It’s trivial to do this for a book. Just wait and be ready.

Ending note

This was a bit of a brain dump. So many companies have vested interests and legacy to hold on to that it really annoys me when I feel that progress is being stifled or slowed down. The paradigm has changed a long time ago but many still feel like holding on to the past. Everybody needs to really think ‘what business am I in’ and not try to have foot in the door to other contradicting areas. I guess I need to keep that in mind myself as well. What am I good at, get better at it and do it.

* Must be said that in many cases, especially for textbooks and manuals, an ebook can offer more value with it’s lower footprint and the fact that I can read it on-screen with the work I’m doing.

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