Print Protectionism Rules The Day…For Now

So Amazon came out with a statement a week ago detailing its position on ebook prices and, not insignificantly, it’s belief that authors are being short changed on royalties by publishers. Not surprisingly, it was met with a collective shrug by the mainstream industry, if not outright contempt. One thing this has done, however, is bring the belief that publishers’ actions on ebooks are all about protecting print out of the implied shadows. Here’s a variety of quotes from various sources critical of Amazon in response to their statement. Read on:

“Amazon doesn’t quantify what lower e-book prices would mean for sales of physical copies of the same books. Authors who work with traditional publishers like Hachette tend to make more, per copy, from hardcover sales than from e-books. If cheaper e-books draw people away from hardcovers, that could hurt these authors financially.”

“If lower e-book prices were to eventually destroy the market for physical books entirely—or even shrink it enough so that it wouldn’t make financial sense for traditional booksellers to publish them—that would help Amazon consolidate its power, which would ultimately be dangerous for authors.”

Literary agent Brian DeFiore in The New Yorker

“Lower e-book prices aren’t necessarily the best thing for writers. We get a percentage of the price as a royalty. You also have to take into consideration the price of the hardcover. Yes, it’s cheap to make a digital book but it’s expensive to present a book in hardcover.”

Roxana Robinson, Authors Guild President in Wall Street Journal

“Amazon’s assumptions don’t include, for example, that publishers and authors might have a legitimate reason for not wanting the gulf between eBook and physical hardcover pricing to be so large that brick and mortar retailers suffer, narrowing the number of venues into which books can sell.”

John Scalzi from his blog

“It is true that ebooks live in a world where they compete with other media. It is also true that the they live in a world which includes print, also an important component of a publisher’s and an author’s economic world. This analysis is very short on measurements of the impact on print sales of lower ebook prices.”

Michael Shatzkin from his blog

“Their figures consider a world of ebooks only. Their “total pie” is really just a piece of the pie. But publishers and authors are looking to maximize revenue across all formats. “Total revenue” on an ebook is only part of the “total revenue” for a new release book, and the hardcover edition still generates substantially more revenue per unit.”

Michael Cader from Publishers Lunch via Joe Konrath

“Even if ebook prices are the focal point of the dispute, that does not mean (Hachette) should not be looking at the effect across their total business, and their total account base.”

Michael Cader from Joe Konrath’s blog

What do all these have in common? The belief that the ebook is not only inextricably tied to print, but must, in some way, be handicapped to shield the older, more expensive and inefficient model. So what we’ve got here is the key issue in modern publishing, do you believe that digital must necessarily be hamstrung in some way to the benefit of print?

If you’re a Patterson or King or someone who gets the benefits of large numbers of hardcover sales in physical bookstores, that answer seems to be a resounding yes. But if you’re not one of those very select few, the question becomes much more difficult to answer. How does it benefit the midlist author or the debut author to have your ebook prices placed higher to support brick and mortar hardcover sales that benefit a much smaller number of superstar writers almost exclusively, and very likely, not you? As for the indie authors, it clearly doesn’t seem to benefit you to link print and digital in this way at all.

There appears to be two schools of thought on this. One is that print must be protected from lower priced ebooks because they will hurt physical stores, shelf space will decline and Amazon will reign hellfire over the industry forever and ever, which will result in damage to all authors in the long run. This is a call for all but the publishers and most fortunate authors to sacrifice in order to preserve an ecosystem that doesn’t really help them. You must sacrifice now in order to prop up a network where, unless you’re extremely fortunate, you must sacrifice in perpetuity, essentially.

The second school of thought is that ebook prices must necessarily be higher (and royalties lower) because the revenue generated pays for the totality of the book. This line of thought is that profits from ebooks aren’t really profits at all but a portion of the total revenue of a book that includes high print expenses that must be paid. This is a call for authors to sacrifice on ebooks to pay for the publishers’ print expenses even though they’re already being paid for that with a royalty structure on print that was designed and implemented to cover all the costs of bringing the book to market. You’re basically donating 75% or so of your digital proceeds after the retailer’s cut to your publisher for generating and uploading an epub file.

Either way, the presumption is that ebooks can’t be allowed to grow independently of print. They must either be restricted to prevent the erosion of print sales or a large portion of their revenue must be siphoned off to pay for the print infrastructure. There is also the assumption baked into this that the future of bookstores depends on the continued furtherance of $25 or $30 hardcovers. Also that any contraction in the print market (and conversely any unchecked growth in ebooks) will lead to Amazon consolidating even more power. Both assumptions rest on the belief that ebook and print revenue exist in the same continuum as hardcover and paperback revenue did in the past.

Here’s the thing about that, paperbacks didn’t undercut hardcovers because they were windowed. Windowing doesn’t work with digital. So the only means they see to prevent hardcover sales erosions is to actively lessen the sales of ebooks. Presumably, I would think, once the hardcover cycle runs it’s course, the high ebook price should come down to old mass market paperback levels, if not less, but that’s not really what we’re seeing.

All of this rests on the belief that digital sales can be essentially capped at 30-35% of the industry. And further, that print, particularly pricey hardcovers, won’t erode anyway due to other factors irrespective of ebooks or that the large and growing segment of the industry that simply doesn’t care about the hardcover/bookstore ecosystem they’re essentially locked out of won’t undermine the higher ebook prices to the point that publishers lose out on both print and digital sales.

Protecting physical bookstores is also a tenuous ideal from this two-pronged perspective. One, ecommerce is not going away. In fact, same day delivery is being rolled out by multiple players, not just Amazon. That has nothing to do with the price of ebooks but a more existential question on the nature of consumer shopping choices. Two, print on demand technology will become better, cheaper and more pervasive, possibly even resulting in kiosks that have the potential to do some of the same things Redbox did to video stores. When was the last time you visited one of those?

Are publishers going to withhold books from these kiosks? Will they demand near-hardcover prices for the trade paperback products they produce? Are they also going to demand higher prices for print books sold online? All of these elements will eventually erode bookstore sales and if publishers’ interests rely on protecting those stores, then these acts would be totally consistent with the higher ebook price strategy. It also means that publishers would be intentionally harming virtually every new publishing technology that increases efficiency, lowers prices to readers and increases sales in favor of their one preferred sales channel and format. One that, it can’t be understated, makes books more expensive, more inconvenient for readers to buy and less lucrative for writers overall.

If you’re James Patterson, Stephen King or Douglas Preston, these strategies may make some sort of sense in the immediate term. If you’re any of Hachette or any other large publisher’s thousands of non superstar authors, however, this doesn’t make a whole lot of long-term sense. Remember, you’re not just making less money on a contracting print market, you’re covering the publishers’ revenue declines in that respect through lower ebook royalties. The only way declining hardcover sales and rising ebook sales harms these authors is if the publishers are saddling you with a much-too-small cut of ebook proceeds. Amazon is right in this respect. If publishers were paying writers fairly on ebooks, then you stand to make more money on more sales at cheaper prices for readers. Their strategy is going to make you less money on fewer sales at higher prices to readers. The fact that there’s one single non-superstar writer who signed on to that Authors United letter is another illustration that, much like politics, dogma can and does lead some people to make choices that run counter to their own economic self interest.

Also consider, much like ebooks, independent authors will jump all over POD kiosks and the opportunities they bring. After all, when you’re looking at a physical store ecosystem that actively discriminates against you, protecting their margins or even their very existence is likely a non-factor in your choices if not a potential negative to you to do so. This is something bookstores would do well to keep in mind. Continuing to block, ignore or alienate indies is creating an entire giant class of increasingly successful writers who are ambivalent to your problems if not outright hostile to you. You might want to knock that off.

Basically, this strategy that the big publishing houses are engaging in is not in the best interests of readers or the vast majority of authors. The concern that Amazon will dominate everything is a very real one, but this isn’t a particularly practical way of dealing with that. I want a diverse ecosystem as well but asking me to sacrifice to the benefit of organizations that aren’t willing to do so in return isn’t going to work for me. Amazon’s market force is a different problem in need of a solution as innovative as the ones Amazon has used to gain that position. I think it’s fairly safe to say any such innovative competition is not going to be any more friendly to the publishers’ 20th century business strategy.

Let’s say I self publish a few books and my sales take off. A publisher comes to me with an offer. Ignore for a moment that the advances being offered barely cover a few weeks worth of sales in some cases, let alone life of the book. Let’s say I sign it anyway. That offer would require me to pull currently good selling material from the market for months in some cases. When they do return, my ebooks are now two or three times the price, the share of which I receive is less that what I was making per book on my own. I’m locked out of doing anything about it. I’m also hoping that bookstores stock my books in a way that generates sales rather than just another title on just another shelf and that declining physical sales doesn’t cost me even more money. I can’t get my books into libraries without the crazy high prices and restrictive terms publishers impose on them. I can’t take advantage of POD opportunities without my publisher’s approval and even then only on terms they set. On top of that, I have little means of having a viable route to rights reversions should everything go south. I have to hope I get lucky enough to generate hardcover sales (if I even get a hardcover print run) at a high enough volume that my next contract can get more favorable terms or a bigger advance, if there’s a next contract at all. The icing on this particular cake is that my material that was finding a foothold on my own may now be stagnant and trapped with that publisher for at least 35 years unless I can afford a good lawyer and a drawn out legal battle to get my rights back. And all because my publisher chose to emphasize its most difficult, expensive and inefficient product line for a litany of reasons that have little to nothing to do with benefitting me. Why would I sign that? Why would anyone?

I’m of the opinion that, if I were to sign on with a publisher to handle my print business, I absolutely do not want that same entity to also be in control of my digital business. They will almost inevitably do just as these publishers are, handicapping the digital to prop up the print. What should be happening here is another round of disintermediation, this time separating the print and digital products entirely. Focus on finding a way to maximize print that doesn’t involve sacrificing digital. That could mean exploiting POD technology and finding ways to actually cut the cost of physical books to readers (and bookstores), not raise the cost of ebooks. Can it be done? Maybe, maybe not. But what you won’t be doing is handicapping the emerging market that customers’ dollars are flowing toward. $30 hardcovers of mainstream genre fiction is not a long-term growth market, just as $20 compact discs weren’t for the music industry and multi-thousand dollar print ads weren’t for the newspaper industry. Their respective businesses may have been dependent on those things at one point, and they may have seemed reasonable at the time, but they weren’t a strength, instead a major weakness making them extremely vulnerable to technological change and shifting consumer habits.

The music business lost nearly half of its CD sales revenue in a just few years. Newspapers lost near half of their print ad revenue in just a few years. Sometime in 2025, will this paragraph be finished off by saying book publishers lost nearly half of their print revenue in just a few years? Those other two businesses refused to adapt, engaging in protectionist strategies under the mistaken belief that digital alternatives would top out at a lesser market share and the physical product would still retain primacy. Sound familiar?

Ask yourself this: if I sign on with a publisher whose entire strategy is to use digital to support the furtherance of print, what happens to me if print drops precipitously anyway, as there is clear precedent for? How you answer that question may well determine which writers still have a career a decade from now.

Dan Meadows is a writer living on the banks of the Chesapeake Bay. Follow him on Twitter @watershedchron

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