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Julie Barrett is a freelance writer and photographer based in Plano, TX.

My Take on #Amazonfail

Fresh (almost) daily from Julie Barrett


Amazon is now in a pissing contest with Macmillan. Here's an interesting analysis at Laptop Magazine's blog.

So how does a publisher decide pricing on ebooks? Macmillan would like to use a sliding scale, sort of like what you see in bookstores. You want that book now, you pay more, just like you would with a hardcover. If you wait a few months for the paperback you pay less. They're looking at a similar scale for ebooks, with the high being around $15.99, but the lowest point being $5.99. (Read their statement here.)

Edit:
Amazon has released a statement.

I had spent a lot of time doing the math, but Tobias Buckell has done it so much better that I'm going to send you to his site for an explanation. Read it, then come back.

The thing is, a publisher still has those fixed costs no matter what format. And that math didn't appear to include any payment to the author. Oops. The publisher needs to recoup that cost. This is why I support a sliding sales price scale along the lines of what Mcmillan has proposed.

Under the advance arrangement that most commercial publishers use, the author gets an advance based on what the publisher expects to sell during the first print run. If the book earns out (recoups costs) then royalties kick in. So what happens with an e-book?

This is what I'd like to see. A publisher should - just like with a print book - figure out how many copies they need to sell to make their costs back. Once they start making a profit, they can lower the cost of the e-book and pay the author a royalty on each sale. There would still be a more traditional advance. If they don't offer an advance, there should be a sliding scale where the percentage to the author goes up after a certain number of sales. The distribution costs are minimal, and authors should still make a comparable amount per sale.

Yes, I'm an author. I'm a little biased that way. ;-)

What really muddies the waters is when a publisher has print and e-books. They have go figure out the total they expect to sell and price both editions accordingly. If, as a consumer, I can buy a hardback for $25 and an ebook for $10, I may go for the ebook. However, the publisher still has certain fixed costs to recoup. There's still a per unit price point that has to be maintained.

With a print book, they publisher has made back all their up-front costs before he first printing sells out. Further print runs in the same format means more profit to the publisher. Pre-publication costs are generally going to be lower for further editions. No one has to acquire the book or do developmental editing, for example. With ebooks, once all the initial costs are recouped there's just hosting/commisson fees. At this point the cost of the book can drop and revenues can be higher for both the publisher AND the author.

Take a look at the SFWA model contract for hardcover books. Scroll down to #7 and read about the royalty structure. Note that it escalates after a certain number of copies are sold. That's in recognition of the fact that there's more to be made at that point.

I support something similar for ebooks.

Yes, this is a new model, and pricing and royalty scales will be different. I also believe it's going to take some time for publishers to find the right price point.

But as long as Amazon and the publishers engage in these pissing contests, it's going to take longer to find the sweet spot. I lose as an author. You lose as a reader. Hey, I also lose as a reader.

Because of that I'm taking down my Amazon links. I'm not going to tell you to boycott Amazon. That's your decision. And I reserve the right to return the links once they stop acting like the 500 pound gorilla.

I hope this doesn't come across as whining. I promised myself I would do that, and have tried to be as rational as possible when explaining how all this works. Still, it's hard not to get emotional when I see another revenue stream get squeezed.

Thanks for reading.

More updates:
Charlie Stoss weighs in. C. E. Petit (he's an attorney) has some good stuff, too. And a very lucid explanation from Scott Westerfeld. (Damn, I have to get Leviathan.)
Tags: Publishing

Filed under: Publishing   Writing         
1/31/2010 4:28:33 PM
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