more BS from Amazon

Dear KDP Author,

Just ahead of World War II, there was a radical invention that shook the foundations of book publishing. It was the paperback book. This was a time when movie tickets cost 10 or 20 cents, and books cost $2.50. The new paperback cost 25 cents – it was ten times cheaper. Readers loved the paperback and millions of copies were sold in just the first year.

With it being so inexpensive and with so many more people able to afford to buy and read books, you would think the literary establishment of the day would have celebrated the invention of the paperback, yes? Nope. Instead, they dug in and circled the wagons. They believed low cost paperbacks would destroy literary culture and harm the industry (not to mention their own bank accounts). Many bookstores refused to stock them, and the early paperback publishers had to use unconventional methods of distribution – places like newsstands and drugstores. The famous author George Orwell came out publicly and said about the new paperback format, if “publishers had any sense, they would combine against them and suppress them.” Yes, George Orwell was suggesting collusion.

Well… history doesn’t repeat itself, but it does rhyme.

Fast forward to today, and it’s the e-book’s turn to be opposed by the literary establishment. Amazon and Hachette – a big US publisher and part of a $10 billion media conglomerate – are in the middle of a business dispute about e-books. We want lower e-book prices. Hachette does not. Many e-books are being released at $14.99 and even $19.99. That is unjustifiably high for an e-book. With an e-book, there’s no printing, no over-printing, no need to forecast, no returns, no lost sales due to out of stock, no warehousing costs, no transportation costs, and there is no secondary market – e-books cannot be resold as used books. E-books can and should be less expensive.

Perhaps channeling Orwell’s decades old suggestion, Hachette has already been caught illegally colluding with its competitors to raise e-book prices. So far those parties have paid $166 million in penalties and restitution. Colluding with its competitors to raise prices wasn’t only illegal, it was also highly disrespectful to Hachette’s readers.

The fact is many established incumbents in the industry have taken the position that lower e-book prices will “devalue books” and hurt “Arts and Letters.” They’re wrong. Just as paperbacks did not destroy book culture despite being ten times cheaper, neither will e-books. On the contrary, paperbacks ended up rejuvenating the book industry and making it stronger. The same will happen with e-books.

Many inside the echo-chamber of the industry often draw the box too small. They think books only compete against books. But in reality, books compete against mobile games, television, movies, Facebook, blogs, free news sites and more. If we want a healthy reading culture, we have to work hard to be sure books actually are competitive against these other media types, and a big part of that is working hard to make books less expensive.

Moreover, e-books are highly price elastic. This means that when the price goes down, customers buy much more. We've quantified the price elasticity of e-books from repeated measurements across many titles. For every copy an e-book would sell at $14.99, it would sell 1.74 copies if priced at $9.99. So, for example, if customers would buy 100,000 copies of a particular e-book at $14.99, then customers would buy 174,000 copies of that same e-book at $9.99. Total revenue at $14.99 would be $1,499,000. Total revenue at $9.99 is $1,738,000. The important thing to note here is that the lower price is good for all parties involved: the customer is paying 33% less and the author is getting a royalty check 16% larger and being read by an audience that’s 74% larger. The pie is simply bigger.

But when a thing has been done a certain way for a long time, resisting change can be a reflexive instinct, and the powerful interests of the status quo are hard to move. It was never in George Orwell’s interest to suppress paperback books – he was wrong about that.

And despite what some would have you believe, authors are not united on this issue. When the Authors Guild recently wrote on this, they titled their post: “Amazon-Hachette Debate Yields Diverse Opinions Among Authors” (the comments to this post are worth a read).  A petition started by another group of authors and aimed at Hachette, titled “Stop Fighting Low Prices and Fair Wages,” garnered over 7,600 signatures.  And there are myriad articles and posts, by authors and readers alike, supporting us in our effort to keep prices low and build a healthy reading culture. Author David Gaughran’s recent interview is another piece worth reading.

We recognize that writers reasonably want to be left out of a dispute between large companies. Some have suggested that we “just talk.” We tried that. Hachette spent three months stonewalling and only grudgingly began to even acknowledge our concerns when we took action to reduce sales of their titles in our store. Since then Amazon has made three separate offers to Hachette to take authors out of the middle. We first suggested that we (Amazon and Hachette) jointly make author royalties whole during the term of the dispute. Then we suggested that authors receive 100% of all sales of their titles until this dispute is resolved. Then we suggested that we would return to normal business operations if Amazon and Hachette’s normal share of revenue went to a literacy charity. But Hachette, and their parent company Lagardere, have quickly and repeatedly dismissed these offers even though e-books represent 1% of their revenues and they could easily agree to do so. They believe they get leverage from keeping their authors in the middle.

We will never give up our fight for reasonable e-book prices. We know making books more affordable is good for book culture. We’d like your help. Please email Hachette and copy us.

Hachette CEO, Michael Pietsch: I HAVE REMOVED THIS EMAIL

Copy us at: readers-united@amazon.com

Please consider including these points:

- We have noted your illegal collusion. Please stop working so hard to overcharge for ebooks. They can and should be less expensive.
- Lowering e-book prices will help – not hurt – the reading culture, just like paperbacks did.
- Stop using your authors as leverage and accept one of Amazon’s offers to take them out of the middle.
- Especially if you’re an author yourself: Remind them that authors are not united on this issue.

Thanks for your support.

The Amazon Books Team

P.S. You can also find this letter at www.readersunited.com


MY FIRST RESPONSE

Dear Nathan:

If I am going to cc Amazon on an email to Michael Pietach, you will surely agree it is proper to cc Jeff Bezos directly.

Could you get me his functional Amazon address for that purpose?

And then send it to every KDP author as well? 

Or even just settle for sending us Russell Grandinetti's.

There are a lot of things you can do in a war.  Sending thousands of people the email address of a CEO of a major company shouldn't be one of them.

Every one of you should feel some measure of personal disgust to work for such a company.

This is not right.  You should be ashamed.  

Joshua Bilmes, President

JABberwocky Literary Agency, Inc.

(someone in the comments mentions that a jeff@amazon.com email address was given out, but it has been an open secret for years that this was Jeff Bezos' address once upon a very long time ago, but has long been staffed by customer service people.  It isn't his working email address, but rather the one you use to feel empowered when you complain.  The one Amazon gave out, to the best of my knowledge, is, and Hachette does not have a massive customer service staff like Amazon does.)

Battle of the Ebook Superstars

Haven't done a blog post in way too long…

On the subject of Hachette vs. Amazon of which too much has been written, let me make a few points:

When Amazon says that e-book sales will grow if only they are priced cheaper, I consider this to be bullshit.

John Scalzi is much more polite.  He disagrees by saying that he thinks it might well be a true statement for Amazon, but that it might not be true for everyone else, or for the broad publishing ecosystem in general, but that he has no reason to think Amazon is making up the numbers for Amazon.

I don't feel like being that polite.

Amazon's argument is essentially an updated variation of the famous "Laffer Curve" which Ronald Reagan used to justify the argument that lower taxes meant higher revenues.  Which if it is true at all is true only at certain high extremes of tax rates, because after a point you just can't keep getting more by charging less, whether it's e-books or government or chewing gum.   It also isn't accurate to say that you always get more by pricing something more expensively.  I don't believe e-books should all cost $29.99.  In pretty much any market, there is only so much demand to go around.  The number of readers is finite.  The number of books they have time to read is finite.  The budget they have for buying books is finite.  At the margins, you can occasionally pick up an added sale or get a little more money spent on books than on something else, but not forever or indefinitely.  As an example of this, look at all of the added casinos that have been built in the US with the argument that we'll keep the casino dollars here and people will spend more at casinos.  Nope; not forever.  Casinos are starting to close.  Tax revenues are starting to fall short.  You can't keep getting enough more revenue to support endless casinos by building more casinos, and you can't keep getting more e-book money by cutting e-book prices.

Here's a question which I'm asking Amazon right now, and can't wait for the answer:  What do their studies show about dropping prices from $14.99 to $12.99?  Or $12.99 to $10.99?  What is the exact magic that all e-books which are $14.99 should be $9.99?  Very few e-books by our clients have ever carried a $14.99 price tag, actually.

The marketplace should determine what the right price is for any given e-book based on lots of people competing to sell goods through lots of different places.  It shouldn't be set at $9.99 because Jeff Bezos has a divine revelation when the Kindle was launched that the price should be $9.99.

While I disagree with Amazon on certain things, I also admire them on others.

Their battle with Hachette has been waged much more skillfully and artfully than a few years ago when they were battling with Macmillan.  The Macmillan fight with the buy buttons removed was very aggressive and in-your-face and visible.  WIth Hachette, they've done all sorts of things to make it difficult to buy Hachette books, but they've never actually stopped anyone from buying them.  Yeah, you can't preorder them.  And no, you can't get them tomorrow.  But you can get them.  A good tactician learns from the battles of the past, and Amazon has learned its lessons well.

HarperCollins isn't my favorite publisher to deal with.  They are much more set in their territorial ways than other publishers.  But I am quite pleased to see that they now have a website that sells e-books direct to customers.  Publishers need to have that tool in reserve in order to strengthen their position when negotiating terms with Amazon, B&N, and their other big customers.

Here's my takeaway:  A healthy marketplace should determine e-book prices and compensation, and we don't have a healthy marketplace in e-books.  And both Hachette and Amazon are part of that unhealthy marketplace.  Amazon has too big a share of e-book sales, and the self-published authors who instinctively side with Amazon don't realize that this will not end well for them.  But Hachette is in a highly concentrated industry like the airline industry is, where all the big players tend ultimately to be very much alike, doing as little to compete as they can get away with.  Just like one airline seats by rows and another windows in, one publisher pays an export royalty based on a smaller percentage of cover price and another based on a higher percentage of net receipts.  Especially since not every publisher wants every book, we don't often have much choice on where we sell books to, just like we have little choice on how to sell an e-book if we don't sell it through Amazon.  It's not a healthy market, neither Hachette nor Amazon are 100% saint or 100% sinner, and however their battle plays out it still won't be a healthy market.  But there is one thing that we at JABberwocky have in common with Hachette and not with Amazon.  We are a "single play" company.  We make money by having people buy books, and only by having people buy books.  Not by selling them memberships.  Not by selling toasters.  Not by selling cloud computing services.  Hachette has more of an interest in having a healthy overall marketplace for books, while Amazon can survive very nicely without a prospering book industry, which is a much bigger thing than selling books through the Kindle store.

I Want You To Want Me, I Need You To Need Me

In the final of my current series of posts about the e-book business, we're going to talk about the food chain a little bit.

The average run-of-the-mill self-published e-book author is kind of at the bottom of the food chain.  This person goes on-line, accepts the terms of service, the KDP or Nook Press contract, and away they go.

We at JABberwocky, I must admit though I hate to do so, are not that much further up.  We get to be in something called the Kindle White Glove program for agents.  We represent many authors, we have the ability to put up books by multiple published authors, we have people we can talk to.

Above us, I'd probably put small publishers that may be able to provide a few thousand titles, that may have dedicated legal teams to negotiate with Amazon, that may have have a few core titles in a particular category that would be important for Amazon to sell.

Then you've got Open Road or Rosetta Books, dedicated e-book publishers with lots and lots of titles, backers with deep pockets, publishing players running them.  They have multiple major programs from multiple major authors or estates.

And then, the Big Five.

From my experience, I think that the fiercest advocates of self-publishing don't always recognize what it means to be toward the bottom of the food chain.

Let me explain a little bit, what it means:

The Kindle White Glove program goes only so far.  If there is a search algorithm that is screwed up that makes it hard for people to find our books, we have someone we can complain to directly, but this person will not generally do anything to overrule the computer.  Because we are in the White Glove program, our books are nominated for Kindle Daily Deals, but the odds that we will ever get one aren't very good, in part because there isn't a mechanism to explain why it might be particularly appropriate to have a KDD at a particular time.  We can complain about how royalty statements are formatted, and our concerns will be taken seriously, and addressed over a two or three year time frame, maybe.  Just like any KDP author, we'll get treated a little bit better if we do things with Amazon exclusively.  We sign the same KDP contract at the end of the day that anyone else does.

Let's talk about Kindle Daily Deals a bit.  

We recently arranged with Open Road for them to publish six of our Simon R. Green titles as part of a package that will include a Simon R. Green short story collection that will come out this summer.  Within a few weeks of Open Road taking over, they got a Kindle Daily Deal for Simon R. Green.  I couldn't have gotten that.  I have someone to talk to, my titles are in the running, but I don't have a realistic chance at this.  All the people that are higher up on the food chain than me have that chance.  Open Road probably provides slates of nominees for Daily Deals as do the big publishers, with dedicated talk-to-Amazon people at the publisher talking to dedicated talk-to-Open-Road people.  It wouldn't surprise me if there are more Daily Deal slots over the course of a year that go to people lower down on the food chain as examples, models, inspirations, whatever.  Kind of like not too many people actually win the lottery, but you want to have winners to get people to play.  I don't have the scope or the scale to seriously compete for one of only 365 Kindle Daily Deal slots over a year, and I'd have to compete with all the other literary agencies in the White Glove program.

Let's talk about contracts.

We are not sure what to do with Barnes & Noble.  As part of the transition from their PubIt program to their Nook Press program (and why is there a transition, anyway; what is the underlying advantage of making everyone migrate from one platform to another, which there has to be...) we notice, which we hadn't paid as much attention to when our e-book program first started up with PubIt, that B&N isn't as helpful on e-book territoriality in their Nook Press contract as other vendors are.  This is now important to us.  We have more books from our partner agency, Zeno, in the UK, where we may have rights to sell a book only in the US and Canada.  Maybe we'll want to do e-books only in the UK for authors who seem likely to sell something there but don't have a UK publisher.  No vendor promises absolutely for sure that they will sell books only in the territories we say to sell them in, but B&N promises less of an effort.  Not a commercially reasonable effort or a best effort, but not much of an effort at all.

Interestingly enough, if we move from a Nook Press contract to a publisher contract, they will agree to pay more attention contractually to territoriality.  And their price for doing so?  A smaller royalty rate than everyone else offers.  

There are other issues as well, maybe four or five things where B&N's Nook Press contract offers language that is inferior to other people in the e-book space.  I haven't fully joined the battle and am not sure where it will all shake out at the end, but I am 99.99% certain that we are having problems negotiating our contract that wouldn't exist for people higher up in the food chain.  I can't imagine that a Big Five publisher has to take a smaller royalty rate in order to have B&N respect territoriality.  Another of the clauses we are fighting about, I know we don't have the provision B&N wants from us in most of our contracts with Big Five publishers, so those Big Five publishers can't be agreeing to what B&N wants us to agree to.  If the publisher doesn't have it from us, they can't give it to B&N.

I had lunch with an editor this week.  I mentioned how our last couple of checks from Kobo were bigger than our last couple of checks from Apple.  In fact, we just got our biggest ever Kobo check.  Not big, but twice or more what we were getting from Kobo two years ago.  The Big Five publisher this editor works for is doing a much bigger percentage of their business with Apple. We think, this editor and I, that the difference is almost certainly a marketing difference.  The Big Five publisher can get books promoted in different places on the iBooks store where we cannot.  Impulse buyers can find their authors and titles more easily than they can find ours. 

We would like to sell our books via Google, but in order to do so we would have to set up entirely with self-serve via their on-line system without any human intervention.  I'm not willing to do that; I think I'm big enough and important enough that I should have someone to talk to.  Nook and Kobo don't have White Glove programs, but we do have people we can e-mail, and get responses from.  I am 100% certain that the Big Five publishers can talk to people at Google, while for me, selling books on Google is supposed to be as automated and inhumane a process as trying to get human help for using Blogger or Gmail.

And finally...

Rather quietly, Audible just announced that they are reducing royalty rates for self-published audio books done through their ACX program.  Audible is an Amazon company.

What leverage do the authors have?  None, really.

The bigger you are, the more attention you get.

The bigger you are, the more you can go "mano a mano" with the Amazon lawyers.

The bigger you are, the more marketing you can get.

And the bigger you are, the less likely it is that you'll be forced to take a cram-down on your royalty rates.

And there's a reason for this.  

Amazon and the Big Five publishers may argue with one another from time to time.  Amazon removed all the "Buy" buttons from Macmillan titles.  There was a time a few years ago when Penguin stopped providing new releases to Amazon, including things like a #1 bestselling Sookie Stackhouse title.  But at the end of the day, Amazon can get away for a short while not selling Brandon Sanderson's Words of Radiance when it comes out next week, but they can't go for an extended period of time not selling major #1 bestselling books from major authors.  Over time, there are lots of other places to buy e-books, but only one publisher in the US to sell Words of Radiance.  Amazon wasn't entirely incorrect to declare in a statement at the end of the Buy Button Battle with Macmillan to declare bitterly that Macmillan had a monopoly.  But for the JABberwocky e-book program, I don't really have a program if I'm not selling through Amazon somehow or other.  I might have a program without selling through B&N, but I don't have one not selling through Amazon.  

So what will we do if Amazon does ever do with Kindle royalties what it just did with ACX royalties? Will we all decamp to selling only on Kobo, B&N and Google? Will Hugh Howey use his self-publishing fortune to set up a site for selling e-books direct to consumers that will be an open platform for anyone wishing to sign the HHDP publishing agreement? Or do we just have to suck it up?

There is no guaranty, no tablets from Sinai, no fine print in the contract, no law, no nothing, that says that we shall always receive a 70% royalty as the sellers of independently published e-books.  There is more room for that rate to go down than for it to go up.  And if Amazon wants it to go down, the Big Five publisher that has a monopoly on selling Words of Radiance next week has a big advantage in holding the line over the agent that represents the book or the run-of-the-mill KDP published author.

Much as I love the ability of any author to publish their own e-books, I am also self-aware of what I can and cannot do as a provider of e-books.  Heretical as it might seem to say this, I believe on the most holistic global level that the bigger publishers add value to the publication and sale of e-books, because they are bigger and have clout and can get marketing and go mano-a-mano with Amazon and Apple.  And I can say this and say at the same time that their royalty rates are too low; it's simple math that I don't believe the value they add is equal to the percentage they take.  It's also simple math that makes me want to stick with the JABberwocky e-book program, to give us leverage to get those royalties up and because globally I can do better across the full range of JABberwocky clients by offering e-books from a full range of our clients.  Individual results may vary.  Some authors are going to be better off being self-published.  The math may change, if publishers offer a higher royalty rate or if the big companies we deal with to sell e-books make it easier to do business with them just like the Big Five do. 

Prior posts on this subject from recent weeks:

Analyzing the Hugh Howey survey results

Marketing and e-books

evolution in action

So I think it's safe to say that the main beneficiary of the ongoing disappearing act at Borders has been Amazon or other internet outlets for buying books (and probably not borders.com as one of those!).

Nielsen Bookscan gives breakdowns on sales in retail/brick and mortar channels as against sales in discount & other which includes primarily Amazon and bn.com. (Target and K-Mart are also in that line but for the typical new release sf/f hardcover these outlets aren't a factor.)

So we can look at the breakdown on launch week for those two lines and see where books are being sold. This also separates out e-book sales. Whatever people are doing there, wherever they're buying e-books, we are able from this to look solely at market share for new books in print format.

January 2010, launch week for Simon Green's Good, Bad & The Uncanny
Retail market share 54%

March 2010, launch week for Elizabeth Moon's Oath of Fealty:
Retail market share 44%

April 2010, launch week for Charlaine Harris' Dead & Gone paperback
Retail market share 43%

May 2010, launch week for Charlaine Harris' Dead in the Familly
Retail market share 39%
[and this is a book that would have been competing with mass merchandisers like Target and K-Mart as well]

January 2011, launch week for Simon Green's Hard Day's Knight
Retail market share 54%

these are all books that came out before the Borders implosion, a January 2011 release like Simon's would have been the last one for

March 2011, launch week for Elizabeth Moon's Kings of the North
Retail market share 32%

April 2011, launch week for Jack Campbell's Dreadnaught
Retail market share 32%

April 2011, launch week for Charlaine Harris Dead in the Family paperback
Retail market share 40%

OK, if you want to you can poke holes left and right in the argument I'm making. The only direct year-over-year 450-Borders-operating-normally vs. 200-Borders-in-bankruptcy comparison I'm making is with Elizabeth Moon, and one comparison is a point, not even a line and hardly a definitive trend. It's an anecdote. I don't know exactly how many of the copies that sold a year ago sold at the 250 Borders that disappeared over the year following.

But I've been in the business for 25 years, and I consider the year-over-year drop in retail market share for Elizabeth Moon to be jaw-dropping. It's not like people couldn't buy cheaper hardcovers on Amazon a year ago. It's not like the economy's in dramatically different shape now than a year ago, it's pretty shitty in both instances. And somehow or other, brick-and-mortar booksellers are losing huge market share to internet, and I'd suspect that it's the biggest such drop in percentage terms since Amazon arrived in business fifteen years ago, almost has to be since if you lose 10% of your market share every year for fifteen years you don't have any business left to lose. And the one big difference between brick-and-mortar and Amazon now vs. last year is those 250 Borders that went up and vanished, and it just seems to me to be abundantly clear that most of those shoppers haven't decided to drive an extra mile to find a B&N.

Let's just say I'll keep an eye on this!

And if you're looking at this and wondering if/how Borders can come up with a plan to reorganize, I don't think you'd feel encouraged.

It Isn't Just Me

Somebody with a cold weather Kindle casualty clearly doing the Google thing, as this comment was just added to my post from two years ago...

I can sympathize with you on this topic. I left my 12 day old Kindle in the pocket of my car door for a few hours while the temperatures here were between 5 and 23. I thought about it at the end of the day and brought it inside. The next day when I turned it on, I had a screen similar to what you describe - top 2/3rds is wallpaper and the bottom 3rd is barcode-like. Amazon is being kind to replace it, but considering that I haven't even had this one 2 weeks, it shouldn't be having this problem.
By LDZPLN1 on Death of a Kindle on 12/7/10

...which makes me wonder again on whether or not to look into a class action suit that might force Amazon and other marketers of eInk devices to be more upfront about their limitations. In a day and age when everything we buy comes buried with warnings on things that are so very obvious, why don't these warn against the rather not so obvious?

news of the day

Borders announced it's earnings, or more exactly the size of its loss for the most recent quarter. Same store sales dropped 7%, not good, but not as steep as other recent reports, but would have been worse if not for an uptick in cafe sales.  Web site sales increased by big percentage but from small base.  They are closing a store in San Francisco near the Giants' ballpark, and are happy to have around a half dozen other leases for underperforming stores like this, DC store I blogged about a couple weeks ago etc. I haven't visited this SF store, may try on my layover heading back from WorldCon. And good or bad, Borders will open Build a Bear workshops in some of their stores. There is now also a two-tier Borders Rewards program, a paid program like the Barnes & Noble program which will offer more discounts, free shipping etc.  while also continuing the current free program.

In other store closing news, Barnes & Noble is closing its large flagship store opposite Lincoln Center on Manhattan's Upper West Side.  The store's original fifteen year lease is expiring, and rumors are the asking rent was at least doubling and maybe tripling. This is the 4th Manhattan BN to close in the face of larger rent in recent years.

On the eReader front, Samsung is introducing a reader into the UK market that will be sold via WH Smiths, which runs many travel stores that tend to be small and some much larger stores on malls and main streets, or "high street" in the local parlance.   Amazon is supposedly making an arrangement with Staples to start selling the Kindle.     

blatant linkage

My client Tim Akers took some time away from his work on Dead of Veridon to give us his thoughts on the Nook he got for Christmas. Click here and enjoy. And then you should enjoy Akers' debut novel The Heart of Veridon, which Library Journal has rightly hailed as a key title in the modern steampunk movement, and then reserve his forthcoming The Horns of Ruin. We've heard of sword and sorcery, or s&s, and now we add the third s of steampunk to create a fully-realized s&s&s fantasy which people are giong to be talking about come November.

He mentions an article in the NY Times today by Randall Stross, an author on hi tech topics. I, like Stross, don't see the dedicated ebook reader as a lasting technology, that being said a lot of people are betting a lot of money that Randall and I are wrong. And Randall gives a lot of attention in his article to Amazon's notorious tendency to say lots without saying anything. The only problem here is that Amazon has actually sold a shitload of Kindles and I do see them all over the place. So Amazon might be coy on giving hard sales #s as a matter of policy or of habit, the iPad may be selling on a much quicker pace than the Kindle when it launched at the end of 2007, but they've still sold a lot of these suckers, they've sold a ton of books for people to read on these suckers, and Randall and I might be entirely correct that this isn't what people will be reading on in 20 years but certainly near term the Kindle is an important part of our lives. I'd have come across this article when I read the hard copy of the Sunday times, but I first saw courtesy of a tweet from Tobias Buckell, who is settling back from Gencon.

E-Reading

So the Father's Day advertising war for various e-book devices, including the Kindle, Nook and iPad, was followed by the after-Father's Day price war. B&N came out with a bare-bones Nook that sells for $149 but has only Wi-Fi access, i.e., no 3G or no downloading a book anywhere with a cell phone signal. The fully-equipped Nook was also given a price cut. Amazon immediately responded by dropping the price of the Kindle to $189. Borders was already starting to sell some e-book readers, including first shipments in time for Father's Day, for $149. They're now offering a $20 gift card with that, and double Borders R Reward bucks. Since you get $5 for $150, then buy this and a truffle ball and your net price for the Kobo eReader becomes $120.

One article I read says that B&N is now making more Nooks than Amazon is Kindles, so they seem to have some quiet success leveraging their store presence to sell the e-reading device. And Apple has sold over 3 million iPads in just a few months, even though it's impossible to actually buy one anyplace because they're in a perpetual state of being sold out. Nobody knows how many Kindles or Nooks have sold, but the combined total would be well up into seven figures.

In part, this is a natural thing in consumer electronics. As more and more are being made and purchased the component price goes down and the fixed costs are more easily leveraged and the price comes down.

But there's also more flexibility on the gadget price because of the switch in pricing on the e-books. Last year Amazon was paying $13 for a DEAD AND GONE e-book and selling it for $10, losing money every time out. This year, DEAD IN THE FAMILY is now publisher-set at $12.99, and Amazon gets to keep $3.90 of that. When you make $4 on every book instead of losing $3 you can price the gadget for less.

The Kindle is on Target

& today's eReader news, Amazon and Target have announced that Target will become the first brick-and-mortar retail outlet to be selling the Kindle. So Best Buy can get your Nookie and your Sony going, Target will have the Kindle, Borders will have a huge selection of the eReaders nobody else has heard of.

And I'll be very eager to hear what SciFi Fan Letter thinks of her new Kobo...

iPads for e-Inking

All kinds of nice photos and stuff I took at BEA and maybe I will have time to post more on the subject at some point.

One quick post I did want to make was about the array of eReaders that were on display at BEA. We could play with the Kobo, which is the new eReader that Borders will be selling, and the BeReader, and the Sony Reader, and at least one or two more.

The good news for Amazon is that nobody's been able to improve upon the Kindle in a total way even though all of these people have had plenty of chances to learn from the Kindle's mistakes.

The Kobo Reader is cheaper than the others, and the navigation wasn't bad, but it seemed a little slow going from one screen to another. It also felt cheap, without the same heft as the others. On balance, I do think this might be a good purchase if you want to go below the $150 price point on an eReader, but it's not a threat to the Kindle.

The Be, I didn't like that very much at all from a quick playing around with.

I finally played with the Sony Reader Daily Edition which is a slightly bigger screened reader. It had much better navigation for going from place to place in the sample May 17 Wall St. Journal which was installed on it, so that was better than the Kindle newspaper reading experience. But they still have a dreadfully unintuitive note-taking experience, and I still don't like the glare on the touch screen.

So, yeah, it's not like these are bad, but none of them are near good enough to overtake the market position that Amazon brings to the Kindle.

On the other hand, the Kindle and the Kobo and the Be and the Nook and the Sony -- they all look so 2008 to me. The e-Ink screens love bright sunshine, but anyplace else they look dingy and gray and have an overall unattractive appearance, the way all PC-based computers looked boring beige before Apple starting doing funky thinks with the Mac and Mac laptops. They all refresh pages much slower than my iPod Touch or an iPad. They all turn pages with a back button and a forward button, but for anything more complex the navigation is not intuitive or appealing or quick.

So the bad news for Amazon is that I don't think any eInk based eReader compares favorably to an iPad, other than maybe for battery life if you don't leave the wireless on your eReader. They cost less than an iPad, but that's it. The iPad isn't dedicated to doing this one thing, but as part of the many things an iPad can do, the iBooks application is fantastic. And then you can have a fantastic experience with the Marvel app, and then check your e-mail, show off your photos, so many other things. I've never been fond of having 3-in-1 office machines, but for this, I know just from playing around with it that I want to get an iPad and pay more for a machine that does many things than pay less for an eReader that does that very well. By 2008 standards.

& when the fog lifted...

So what did it mean to have Amazon's "buy" buttons removed for certain Macmillan titles?

I could do a really thorough Nielsen Bookscan research project and check 62 things, but I do have a day job so I'm limiting the investigation to books by my clients which I'd be checking anyway, though drilling down a little further into the numbers than I might do for just my ordinary Wednesday report card check.

When we looked over the Bookscan #s for Week #4 ending January 31, all of us at JABberwocky cried, because it was a kind of depressing week all the way around. Numbers on most things were down. And that had really nothing to do with the Macmillan/Amazon dispute. That started at the very end of the week, and since Bookscan gets the figures based on when books shipped, pretty much the entire effect of the disput would be seen in Week #5. And overall, Week #5 was a stronger week for the JABberwocky list than week #4 was.

So for the week when the full impact would have been felt...

For mass market paperbacks, the typical Brandon Sanderson book, the Mistborn series or Elantris, was on average down maybe 1 or 2 percentage points. The typical Charlaine Harris book, which are not Macmillan, was up maybe 1 or 2 percentage points. The Lost Fleet books were up or down but on balance a little up. No pattern to a Simon Green.

But when we drill down one step, there's a breakdown on Bookscan between "Retail" and "Discount and Other," which includes the major internet web sites as well as places like Costco, Target and BJs. For most books, the "Discount and Other" line therefore just means "internet" because the books aren't available at the discount stores. So for Elantris, the Retail line is up 7%, and the Discount line is -67%. So it looks like this was a disaster for Elantris? Well, yes and no. For the typical mass market paperback, which Amazon does not discount, internet sales are relatively smaller than for hardcovers -- and for boxed sets -- where people go on-line to seek out the discount. It's possible that the Macmillan/Amazon dispute cost 25-35 copies in sales.

And we do see some real damage when we look at the boxed set numbers for Brandon's Mistborn trilogy. Sales on these can weight very heavily toward the internet, because the same 3 books that Amazon won't discount singly get a very sweet discount when purchased in the box. For its entire lifetime, Mistborn in paperback has 18% of its copies sold on-line, 17% and 20% for the next two books in the series. The boxed set has sold 35% of its copies on-line. And for that boxed set, retail sales were down 8% from the week before -- and the boxed set was down 45%. Then again, the last week, the boxed set had been down 38% retail/30% discount because fewer of those sell as we get further away from the holiday and gift card season. If I compare -8 to -45 that's a lot, -45 to -30 not so much, but I think it's safe to say that the boxed set had a big hit.

And what about the hardcovers? Well, The Gathering Storm was down -4% retail, -50% internet. The total drop in sales was only 15%, and that's not an atypical drop for a book that's been out for three months, but we may be looking at 150 or 200 fewer copies. We may be looking at fewer copies for Warbreaker.

Halo novels? The mass market of Cole Protocol by Tobias Buckell was -3% retail, -37% discount, -19% "non-traditional" which are supermarkets and drug stores and airport newsstands, and for this book the discount line may include Target or other non-internet discounters. The trade paperback is -9% retail, -31% internet. But this isn't very significant, because the internet sales are a very small portion of the total, as an example 10% of the lifetime sales for the Cole Protocol trade paperback. So even though these books are selling very nicely, and even though the percentage differences are huge, the actual number of copies represented is no more than 10 or 20 lost sales.

But where we really see a major impact is for those books where a few copies are making a big difference, and the balance on retail vs. internet sales is more pronounced.

As an example, Michael Schiefelbein's first "Victor" hardcover for St. Martin's was Vampire Transgression, and sold 26% of its total copies on the internet. The new book Vampire Maker is just out. This isn't a big bestselling book. The series sells steadily in trade paperback and has for many years, but when it loses -72% internet vs. -26% retail, that takes this new book that needs to sell decently to hold its shelf space and you might be losing 8 copies, but that's a significant percentage of the total number of copies that might have otherwise sold last week. Jeri Westerson's Veil of Lies trade paperback was +32% retail, and down 81% on the internet, and might have lost one-third of its total sale last week. Her new hardcover might have lost half or more of its total sale. Jeri's building an audience for her historical mysteries and like Michael Schiefelbein selling steadily. For these authors, even when we're only talking a few copies, we're talking something significant.

So what does it all mean? The Amazon/Macmillan dispute clearly did cost some sales, perhaps even in the hundreds of copies for The Gathering Storm, though even that may have been only 7% of the total number of copies sold last week. For authors lower down on the totem pole, we might be looking at 5 or 6 copies sold, but that could have been half of the expected number, so it's less significant one way but very significant the other. Some of those sales might just get pushed back into the current week. Some of them might have gone to marketplace sales, and in that case if some of the lower-priced marketplace copies were grabbed up last week thus skewing toward higher-priced marketplace copies now, there may be a slight long-term switch in the next two months where people buy a new book instead of a marketplace copy. Other than for authors whose books were going on sale last week or the week before, the blips are probably survivable. For both Macmillan and Amazon, the dispute was attention-getting but any losses to either probably insignificant against what both sides saw as their potential gains in fighting the battle in public.

Planned Outcome?

For all the sturm and drung over Amazon's battle with Macmillan...

Amazon has been paying most publishers for e-book content based on the publisher's list price for said content, while charging a price chosen by Amazon. If Macmillan sets the list price to match the print edition, and Amazon pays a 30% royalty, we might have a $25 list price, and Amazon pays the publisher $7.50 out of $9.99 Amazon Kindle price. That leaves $2.49 for Amazon to enjoy. And if Amazon is paying the biggest content providers a bigger royalty, maybe not even $2.49.

Macmillan now establishes a $14.99 list price, and Amazon gets to keep 30% of that as Macmillan's agent for this sale. Suddenly, Amazon goes from getting $2.49 or less to getting $4.50.

Places, everyone? Are you ready for your close-ups?? Lights, camera, action, and then a few days later "Cut!"

Maybe from a very long term perspective Amazon would still prefer to sell the e-book for $9.99 so there's a bigger gap between the $25 print edition which Amazon sells at discount for $16.75, which makes the Kindle more attractive. But all the long term perspective aside, how angry can you be when your big customer forces you to take $4.50 instead of $2.49?

The E-Book Revolution

So, the iPad! While I type in one window, I'm watching the keynote speech on the Apple web site.

Though I used the Kindle for over a year, I'm not the hugest fan of it. It allowed me to do things I couldn't do before, and I loved it for that. But it didn't allow me to do many of them very well. I could read a manuscript without carrying it around but not in cold weather and take notes on the same device but not easily and the relay to the author was cumbersome. I could read the Washington Post every day without schlepping into Manhattan to buy a hard copy, but the reading experience wasn't very good. I liked the Sony Reader less, because the note-taking interface was cumbersome and the glare on the screen distracting to me. And the Nook was surprisingly bad to me for how much learning curve should have been curved.

I've never been a big laptop fan. They're portable, but not fun. When I live-blogged the Oscars last year, I had to sit at a desk instead of perch in my recliner because it's just too cumbersome to sit with a laptop in a recliner.

I have no complaints about my iPod Touch. I read manuscripts quickly, in colder weather than the Kindle. The limiting factor is whether I have to wear gloves or not outside, which is a much lower temperature than when the Kindle started to degrade. I can take notes fairly easily and send them to my clients right from the device. And it plays music. And shows off photos. And does video. And has a calculator. And when I'm traveling and curled up with it in my hotel room with wireless, I can lose hours to surfing the web just like when I'm at home.

So Apple seems to get it. You have a kind of giant iPod Touch, and Steve Jobs demonstrates it sitting in a comfly leather chair which is exactly the place that I might envision perching with it. It has a dedicated iBook reader. I can pay a fairly reasonably priced $14.95/month to AT&T to have a limited amount of wireless access, or $30/month for as much as I please. All the time, or for thoee trips when I can't hook up my Touch into the hotel wireless?

So I like the idea of the device, but time will tell how the actuality of it works.

Now, what does this mean for publishing?

Fun Times!

In either a good or a not so good kind of way.

Publishers are not fond of Amazon's control over pricing and terms of sale for the Kindle. Apple is willing to give the publisher more pricing power. This led to a dispute over the weekend with Amazon not selling titles by Macmillan USA, which includes Tor, St. Martins, Farrar Strauss, Holt and other imprints, in a dispute over the sales arrangements. And then maybe backing down and agreeing Macmillan could price its own books. I say maybe, because the seeming concession may have come with conditions we don't know about. These kinds of things happen. Not that long ago Costco pulled Coke products from their stores in a pricing dispute. Amazon UK has had some big publisher disputes. Apple is Apple, but Amazon sells a lot of physical books that are still 90% of publisher revenue. But Amazon isn't the only internet store in town. If I were Borders, I'd have done an e-mail blast right away with promo code AMZN24 to say "hey, can't buy [bestselling Macmillan title here], we'll sell it to you and give an extra 10% off your entire order."

I do think Macmillan's position in the matter (CEO letter here) is the better one, which may be why Amazon ended up seeming to cede. The world is full of variable pricing for the same thing at different times and different places, from bargain matinees vs. Saturday night at the movies, the paperback vs. the hardcover, the last-minute fare deal vs. the prepaid reservation vs. the regular rate. Just because Amazon woke up one morning and decided a bestselling e-book should cost $9.99 doesn't mean an e-book should forever cost $9.99 or less.

Also making things interesting... the Amazon iPod Kindle application will work on the iPad. I do my manuscript reading using Stanza, which is now owned by Amazon, and that will work on the iPad. Will Amazon continue to want to add value to Apple's iPad even while Apple is trying to squirrel in on Amazon's e-book business? Then again, how will the Apple Pages application work on the iPad? When I use Pages on my iMac, I can do track change and comments right in a manuscript, export to Word, and send away to a client. Will I be able to do that on an iPad? And will anyone care what Amazon does or does not do to support the iPad when they can iBook?

As I said, Fun Times. I think there's a lot of potential in the iPad, but I think the arrival of Apple as a major player in e-book retail is going to lead to a lot more shoving matches like what we've seen between Amazon and Macmillan as all of the different e-tailers and the publishers all jockey for position.

Our client Tobias Buckell is among those who've done particularly good commenting on the Amazon/Macmillan dispute.

In the midst of this, JABberwocky is starting to explore how it can best enter the e-book world. We've spoken in recent weeks with people at Amazon, BN.com and Rosetta Books and are starting to think seriously about all of this. Lots of interesting questions. Do we go with a third party vendor like Rosetta or eReads? Do we become our own eReads? Depending on that, where do the costs of cover art and scanning/converting reside? How much upside do you trade to reduce the investment in those costs? Do you go one way for some books and another way for others?

Those are just the back-end decisions. At the front-end of what we actually show to the world... Since Simon Green has the most enticing out of print backlist do we start out with a single author-based promotable program and see what happens? Or do we look for original content, short story collections perhaps, from half a dozen top authors and make that the launch? Or go with that, and the top two dozen other backlist titles? Or make our entry with 100 books or 250 all at once? Feel free to vote!

And we'll start to explore these questions just as Apple, Amazon and the other publishers jockey for position. With as many as 40 different e-book reading devices scheduled for a big unveil over the course of 2010. With different permutations of format, exclusivity, cross-compatibility, etc. etc.

Me & My Kindle

I'd give the Kindle 3 slithy toads.

This seems a good day to write about the Kindle. I boarded a crowded Amtrak train to head down for a Charlaine Harris signing in Newark, DE, and while I was reading my Kindle I noticed a man across the aisle reading a Sony Reader. Whatever is the world coming to?

So first, why do I have a Kindle, and not a Sony Reader? Well, I am a Mac person. The Sony Reader requires you buy stuff at the Sony Store, and they haven't made it easy to sync purchases on a Mac. I tried once to see if I could go to Sony's web site and at least check out the offerings and didn't even find that very easy to do. The Kindle, you don't even need a computer since you can shop wirelessly from within the Kindle. It also offered a feature that I found very tempting, that you could email your .doc files to your Kindle and have them show up there wirelessly for a ten cent fee. Some people think it's silly to pay to send your own files to yourself, but I can compose an e-mail with attachment much more quickly than I can grab a USB cable, connect some other gadget with my computer, and drag and drop a file. If you really want to save the ten cents, you can e-mail the file back to your computer and do the USB connection. The Kindle also offers newspaper subscriptions. A good newspaper is hard to find, so the idea of being able to get at some of the few good newspapers that are left was tempting. So those two things were to me the killer apps. If the Kindle had been in stock I would probably have ordered one well before I did, but I had to overcome my reluctance to buy with no idea when I would receive. As it turned out, I ordered just in time to have my backorder arrive several weeks later when they finally had enough to keep it in stock, so I ended up having mine around zero days sooner than if I'd waited. Oh well.

I find the reading experience on the Kindle to be excellent, and at the end of the day that's probably one of the most important things. The electric paper technology is crisp and readable, and walking around in very bright DC sunlight a few weeks ago I had no problem at all. There is one problem the Kindle shares with a physical book. Since there is no backlight, it cannot be read in darkness. And in dim light, it is more like reading a gray newspaper than a coated white paper like an issue of Variety. You don't have as much contrast. But unlike the newspaper, I can adjust the size upward to compensate, so I got far more Kindle reading of the Washington Post on Kindle done walking over the Queensboro Bridge at night relying on street lights than if I had been reading the physical paper. There is one area where the newspaper has an advantage over either a book or a Kindle. I can read a newspaper in a light rain or drizzle since it doesn't matter if it gets a little wet; I'll be throwing it out soon enough anyway. But the Kindle is an electronic gadget, and rain and electronic gadgets are not a good match. Today, I had to balance whether it was better to read more newspaper (printed NY Times) on the train ride down which I could then deposit in the newspaper recycling bins, or to read more Kindle (Washington Post & Wall St. Journal) on the train and save all my newspaper for the rainy outdoor parts.

On balance, the Kindle might be too good a reading experience. The screen kind of draws you in a little hypnotically, and I find when I am walking that I give more of my attention to it than a physical newspaper where I almost have to look up when I turn the page. Agent run over by car when crossing street against light, Kindle in hand.

Mr. Sony Reader on the Amtrak train and I spoke only briefly as we were pulling in to my stop. It did seem the Sony Reader has a better interface to change the type size. You press something on the bottom of the screen, and it's done. The Kindle requires you to press a "size" button on the keyboard, then move a cursor to the desired size, then press an enter button.

But the Kindle isn't Mac friendly on the audio front. You can play audio on the Kindle, but you can't set the Kindle up to get Audible content without first having access to a PC. Once you have set it up on the PC you're good to go without a PC, but it's annoying that I'd have to rely on the courtesy of strangers (or a friend) to let me have at their PC and download the audio manager first.0

The wireless and the newspaper subscriptions are every bit as wonderful as I had hoped. Late last night I e-mailed a Jim Hines manuscript to my Kindle, it showed up there while I was on the train, along with the Wall St. Journal and the Washington Post. No paper, mom! When I was in DC, I was able to buy a Kindle NY Times for seventy-five cents instead of a print version for $1.25. Less paper to carry around, save a few pennies. The Washington Post costs at least $3.50 for the Sunday edition in Manhattan, for $10 I get it for the whole month. There are some sacrifices. The Post on the Kindle comes with no pictures at all, the NY Times with maybe half a dozen, and the Wall Street Journal with a sampling of their line drawing portraits. There aren't charts or tables or box scores. The NY Times includes its baseball roundup with brief lines or two on the out of town games, the Washington Post does not. You don't get to look at the ads, and sometimes I like looking at the ads. You don't get the funnies. The Kindle can show illustrations (you can e-mail your JPGs to it), but it's used sparingly in the newspaper subscriptions. But you pretty much get the entire article text of the paper, front page to back. Parts of the paper read a little quicker, parts a little slower, and on balance I don't know if I'm better or worse off time-wise. I know I'm worse off to the extent that I'll spend a lot more time with the Washington Post each day than with the NY Post or Newsday or Daily News which I just can't abide paying for any more. If you're at the beginning or end of an article you can go back with two presses to a list of sections, a list of articles, or to the article list for a particular section, but this option isn't present in the middle of an article. I wish it was, when I'm 400 words into a 1000 word article and ready to move on. Some words with an accent, you get something like an HTML tag for the accent instead of the accented letter.

Manuscript reading is good, and there's a full keyboard so if I want to take a note while I'm reading so I can share my thoughts with the author I can start typing a note in two presses. But one big but. All those notes go into a single "My Clippings" file. If I switch back and forth from one manuscript to another, the notes will be mingled in this file. To separate out the notes for a particular manuscript or author, you've no choice but to grab out the USB cable, move that My Clippings file on to your computer, and cut and paste and separate them out. I would be much happier if the notes or annotations I might make to one thing could be separated on the Kindle. Second big kind-of but. Because you can change the type size the concept of page #s is alien to the Kindle. If I e-mail a manuscript the page #s disappear, and in some instances the chapter #s may. Or may not, I guess it depends on whether the chapter #s are typed in or updated via some kind of insert page # marker? Instead, the Kindle gives you a "location, " with each location representing around 15-18 words I think. So in "My Clippings" I will have a note that some character does some foolish thing at "Location 2383-2395." Do I make my note longer to give full context so the author can find the place I am talking about, or do I have the Kindle and original Word file that i e-mailed to the Kindle side-by-side so I can dig up a page # to give the author to help with finding where a revision is needed? Will someone set up a unifying standard so that Word, Pages, neoOffice, the Kindle, the Sony Reader will all agree on some replacement for the page #?

The back of the Kindle has a clip of some sort that fits into an indentation on the cover, and which does somehow hold the KIndle in place as you tilt it different ways in the course of reading it. But, you have to tilt the Kindle up a bit to access the on-off switch and the wireless on-off (battery life goes down a lot if you leave the wireless on when you don't need it), and that act can sometimes dislodge the clip mechanism. Can those switches be put someplace where you don't need to tilt the Kindle? The Kindle also comes with a cover, but it's easy to open the Kindle from the wrong side and again risk dislodging the clip mechanism. The cover should come with some writing of some sort so you can tell the front cover from the back and top from the bottom without having to remember that the space with the power cord, USB outlet and earphone jack should be on the bottom left when reading. Maybe they're worried this would make the Kindle a theft magnet? Hence the anonymous cover tha looks almost little like a diary or an organizer, so they're not putting "Kindle, valuable, steal me" in big letters? If so, they can take the Mad Magazine approach and put a fake book cover on it?

I'm not sure the battery life even with the wireless off is as long as they say. This is not an uncommon thing with gadgets. But is this just my imagination? I haven't drained the battery since the instructions say it will last longer being charged often than being drained and recharged. Is it because I read or skim a newspaper very thoroughly and turn many more pages than the usual person? On the other hand, I read in the smallest size and thus turn fewer pages than somebody reading in large type.

There is rudimentary web access that I've tried only once. Worked OK, nothing to write home about, may get better w/subsequent iterations.

So it's not perfect, but it does a lot of things right and fewer wrong, I think.

And I am not known as an early adapter. If I am finding the Kindle to often be better than a newspaper or magazine on dead trees, are we finally at the cusp of the e-book revolution? I do know more of my clients have gotten e-mails regarding e-book unavailability since the Kindle came out than before.