[publishing] An open letter to Kindle enthusiasts and ebook activists

Hello there —

My name is Jay Lake. Many of my novels are published by Tor, a division of Macmillan, including the Mainspring series, and the Green series. Over the past few days, as the controversy between Amazon and Macmillan has unfolded, I’ve been paying a lot of attention to what the Kindle community is saying about the situation.

Many of you are very, very angry at the prospect of seeing ebook prices rise. Many of you are blaming Macmillan for corporate bullying, and I’ve seen a number of calls for personal or large scale boycotts of Macmillan titles. I’ve also seen a number of calls for Macmillan authors to move to another publisher, or accept responsibility for Macmillan’s supposed misdeeds.

I’d like to ask you to think about several things as you continue to respond to this situation. Perhaps by the time you read this an agreement will have been reached, and it will all seem moot. Still, this is worth discussion, because the underlying issues behind the dispute of the past few days are not going away.

First, every other one of the big six publishers wants and needs to do what Macmillan has done, simply to have continued viability. They’re struggling economically, have been for years. The idea in the Kindle community that Macmillan is playing some unique game here, and therefore should be punished via boycott in favor of the other five publishers among the big six, is almost certainly an error. Macmillan jumped into this issue first, which makes them either the bravest or the most foolish. But every single one of the rest of the big six is watching this very closely, and their own business needs and goals are very similar to Macmillan’s. If you as a reader are going to blame Macmillan, perhaps to the point of forgoing their titles, pretty soon you’re going to run out of trade fiction to read as the other publishers follow Macmillan, wherever this leads. This strikes me as an unfortunate perspective for a reader to adopt, as the majority of fiction published and the vast majority of ‘name’ authors published are from the big six.

Second, Amazon in their letter to the Kindle community cited the high end price point of Macmillan’s proposal, but didn’t cite the low end of $5.99 or talk about the dynamic pricing. This would include older books reaching that much lower pricing point and staying there, which means over time an increasingly large number of ebooks, and eventually most Macmillan titles except the very latest, would be priced well below $9.99.

That second point seems to be an important factor that’s being ignored in the outrage by the Kindle community. Many seem to assume that Macmillan is simply lying about lower prices, but why would they? That dynamic pricing model is exactly how print books are priced today, as they go from first release hardback to mass market paperback to backlist. The publisher knows how to manage that, the book buying public knows how it works. And they want your business as a book buyer, whether ebooks or print. Why would they lie about this?

So far as supposed corporate lying goes, note that Amazon was quick to inform you of the high side of the Macmillan proposal, but not of the part of the proposal that benefits you. That’s lying by omission, and it certainly fanned the rage of the Kindle community quite effectively. That’s a piece if corporate spin which has kept you from seeing the long term advantages to Kindle owners of what’s been proposed.

The $9.99 promise was from Amazon, not the publishers. As ebook sales grow in market share, that pricing expectation kills publisher’s margins. There’s a reason hardbacks aren’t priced like paperbacks, and fundamentally it’s so publishers can afford to put out the books in the first place. I know from watching your discussion group a lot of Kindle readers will say good riddance to the dead tree dinosaurs, and bring it on, but the big six is where a great deal of the good fiction you read every day comes from. If they gave up, you’d have a lot fewer good books from good authors. The indie press and the self-publishing world are important, but they don’t have the financial or administrative resources to publish big name authors, and provide the overall quality of editing and production that the trade press does. Not in sufficient volume to make up for the absence of the big six. Rooted as it is in older business models, the publishing industry simply has not yet produced a viable alternative to the current system. It probably will in time, but that’s not the case today.

Third, much of the anger I see is from people who assume that ebook prices are a rip-off because an ebook obviously costs much less than a print book. This is not true on the plain face of the facts. The actual physical costs of a print book — paper, printing, binding, packaging, warehousing, etc. — are less than 10% of the cover price, even in small volumes, and drop to less than a dollar per book for large volume titles such as bestsellers. [ETA: These numbers apply to the trade press. Independents can see physical costs up to the 20-30% range due to lower economies of scale, as well as production quality decisions.] The money that goes into a book is dominated by acquisition costs, editorial costs, production costs, layout and design, art, marketing and business overhead. Ebooks must bear all those same costs as print books.

This doesn’t pass the common sense test, I know. Frankly, much of publishing economics doesn’t pass the common sense test. I’ve been a pro for nearly ten years, and I’m constantly baffled by how things work. That doesn’t mean it’s not true, it just means that if you do care passionately about book pricing, there’s a lot to learn before you can understand the ins and outs of it.

People look at the physical object of a print book and see what they’re spending money on. But a book is really a story, whether it’s being delivered in printed pages, via audio, on a Kindle or other e-reader, or by an author standing up in a bookstore to read. And making those stories available costs money. Just as publishing economics are obscure and nonintuitive, even from the inside, so is the editorial process.

If you don’t understand why it costs a lot of money to make a story into a book, go learn about it. You’ll be surprised at how many people work very hard to put that story in your hands, whatever your preferred format. And every one of those people has to eat, pay rent, and get through life, just like you do. That means they need to be paid, and that means the book costs money, regardless of the publishing format. Even disintermediation and 21st century publishing models need to account for those processes. Trust me, as an author, the last thing I want to do is deliver my manuscript directly into your hands. What Tor does for my book improves it immeasurably between my keyboarding fingers and your reading eyes.

This is a much more complex issue than Amazon’s $9.99 price promise. No one is out to rip you off, or anyone else. Why would I as an author or Macmillan as a publisher want to alienate you as a reader? When we lose you, we lose our audience, and ultimately our ability to make a living telling stories. I don’t know who’s right and who’s wrong about the underlying questions of pricing and distribution. Frankly, neither do Macmillan nor Amazon. Everyone is trying different models, different approaches. This is market innovation in process.

The only way you lose, Kindle readers, is when you turn away from the books and authors you love.


Jay Lake

67 thoughts on “[publishing] An open letter to Kindle enthusiasts and ebook activists

  1. Elliott says:


    I appreciate your taking the time to post your thoughts on this. I’ve been tracking the Amazon discussion as well. My only response to what you’ve written is that if money were the issue why would Macmillan shove a model down our throats that by their own admission, nets them less money? By keeping e-book prices high, Macmillan makes them look unattractive in the face of discount hardback prices. We can’t help but conclude that Macmillan would rather kill the ebook market to protect hardback sales.

    The big issue for many of us I think is that Macmillan has taken control away from a retailer. Amazon was paying Macmillan what they wanted for the ebook and then selling them at a loss in order to spur the growth of the ebook market as well as sales of their own Kindle. Macmillan feared a future “monopoly” by Amazon and wrested control of an independent retailer’s business from them. There are implications beyond the publishing industry in this.

    You’re right that we can’t boycott everyone. Who would want to even try. The point is to read books. I’m sure the rest of the publishers will follow suit as soon as possible and we as consumers of e-books will just have to grit our teeth and hope that they actually follow through with the variable pricing. The publishers know that if we don’t like the e-book price, we’ll just go buy the discounted hardcover or paperback and that’s exactly what they want to happen.

    As a consumer of literature I really don’t care about any of this but as a tech geek who loves his e-reader, I’m quite disappointed in how this is going.

  2. Eric Welch says:

    Posted this also on Scalzi’s site:

    1. Everyone is getting all worked up over the price point of $9.99 when most ebooks on Amazon were priced higher than that. Click on any Kindle category and do a price sort from high to low and you’ll see what I mean.

    2. Amazon will make MUCH more money under this agreement. See a financial analysis of why this is so at: http://paidcontent.org/article/419-in-amazon-vs.-macmillan-amazon-is-the-winner/ As noted below the authors will make less.

    3. I think this is all really the first salvo in a much larger war to destroy discounting of books. The publishers really hated the extreme discounting going on in the big-box stores last Christmas and they see this as a way to gain control over retail pricing. This action by MacMillan wold never have been possible before 2007 and the Leegin decision. See this legal analysis: http://paidcontent.org/article/419-in-amazon-vs.-macmillan-amazon-is-the-winner/

    4. Authors will make less under the new arrangement: A financial assessment by G Rumple shows why:

    Last Week: Amazon paid Macmillan 50% of the list price for the book in a wholesale agreement. So if the Book cost $25, Amazon paid $12.50 for it to Macmillan (which is THE ONLY PART THAT MATTERS to the Author), Amazon than sells it for $9.99 at a LOSS of $2.51. Scalzi got 10% of what was paid to Macmillan (not what Amazon sold it for, so the full $12.50) which is $1.25

    New Agent Model: Amazon doesn’t pay for the book, Macmillan puts it up for sale for $14.99. If it sells, Amazon gets 30% of $4.50 of the sale, and Macmillan keeps the other $10.49. So now Scalzi gets 10% of the $10.49 or $1.05 (and no I don’t think for one MOMENT that Macmillan is going to lower their profits/share by giving the author 10% of the $14.99, that would be crazy, but maybe this is what your arguing, if so, good luck with that).

    The author goes from making $1.25 to only making $1.05.

    5. Personally, as something who spends about $4,000 a year on books (please don’t rat me out to my wife…) I prefer the ebook format and I’ve taken big fat history tomes, sold them as used books, and bought the ebook version so I can read without breaking my wrists. I will gladly pay more than $10.00 for an ebook, if the price is 20-25% of the discounted hard cover price. (I buy ebooks from B&N, Kobo and Amazon for my nook, Kindle2, laptop, Droid and iTouch – I read a lot.) Otherwise, I’ll pass and read something else, or get it from the library. We are witnessing a transition to a new business model, something always painful for those concerned. They need to decide whether to take advantage of the new model or try to bend the old one to the new technology, a strategy that inevitably fails.

    Unfortunately, the publishers, because of leveraged buyouts and high debt loads, not to mention substantial physical infrastructure, have decided to focus on selling bestsellers as their model. This is bad for readers and writers.

    1. Jay says:

      Eric, FYI to point 4, our contracts specify a percentage, not a flat amount, which varies by format and channel. So Scalzi would get the same 10% regardless of the pricing. And thank you for the thoughtful response.

      1. Eric Welch says:

        I agree the 10% would remain the same but it’s 10% of the publisher’s revenue, not the retailer’s sale price, and under the new agency model the publisher’s revenue (as Macmillan has explicitly stated) would be less, hence the author’s revenue would also be less.

        Unless you contract is different than my wife’s. Her royalty with Scholastic is 3% of the net and is not linked in any way to the list price. Her children’s paperback sold 160,000 copies, listed at $3.99, was sold at a discount to schools as part of their Road to Reading programs for 50% off so she got about 6 cents per book. Do the math. Then Random House bought out Scholastic and because their reading program competed with Scholastics, they shut down the Scholastic program and shredded the remaining copies. The authors always get the short end.

  3. Ashavan Doyon says:

    Jay –

    I appreciate that you have continued posting in the threads despite some rude comments at you. For this I will forgive what I took as rude comments at the beginning of this affair… I’m sure you were angry… people could not buy your books and it was not because of anything you did… I get that.

    Here’s the thing. Price is important, and I get that. Books are not economical for me… frankly I read too fast. So price is very important to me. But that’s not why I’m pissed at Macmillan. I appreciate that you see it as Macmillan trying to properly value your work. But that’s not what I think it is at all. Macmillan is trying to drive people away from ebooks. Kill them, if it can. And the deal with Apple that restricts the ability of indy and self-published authors to price low… that’s just heinous and there’s no excuse for it. That too hurts writers.

    I understand your points about a dynamic price point. But I’d only accept that if pricing for ebooks followed through on that promise. Frequently even months and years after a book’s release, the paperback is less expensive than the ebook. A copy I have forever… that I can lend or sell or give away. And yet the ebook, even years after release is STILL usually at least as expensive as the paperback and frequently more expensive (when it is available at all).

    I don’t object to dynamic pricing (provided Macmillan actually follows through and includes titles that long ago went to paperback in its price revisions). What I object to here is the agency model, which, by design, suffocates competition. What I object to is the fact that the big publishers are seeking agreements that punish indy and self-published authors. What I object to, Jay, is that the publishers have a stated disinterest in ebooks existing at all (curiously they eagerly grab for the ebook rights so that the writer cannot enjoy digital success on their own).

    I understand Amazon’s actions have cost you, and probably continue to do so. But while you see them as the victim, I see you as a tool of Macmillan, used to try to persuade us that Macmillan is RAISING PRICES on books to benefit us. To benefit you. In reality, only Macmillan itself benefits. Ebook sales will drop at increased prices, never doubt, but they aren’t significant enough YET to really hurt Macmillan, who clearly would prefer they drop. Writers get paid on a lower price, as the list price will drop.

    Scalzi was right when he said that writers would mobilize their fans to object. You’ve succeeded for the most part. And those of us who aren’t thinking about the price, but whether under an agency model we’ll be able to afford books at all… we’re scratching our heads wondering why? Why are you shooting yourselves in the foot? It doesn’t matter how valuable the content of your book is… if it costs $15 on ebook, I won’t buy it. And I won’t buy the hardback either, unless it’s remaindered and I can get it for cheap.

    This isn’t an unwillingness to pay for books. It’s a reality… I’m a secretary during a recession. My kindle was a gift, I couldn’t really afford to drop $250 bucks on one myself. And yet… I spent far more on books in the months since I’ve had my kindle than I did previously. It was getting me to open my wallet again in part because the cost was low enough to justify the expense. Now the cost won’t be at Amazon, and since this is likely to expand to B&N and other major retailers, it won’t be reasonable elsewhere either.

    Most people will just go buy paper copies at retailers instead and curse about it. But that’s Macmillan really wants, isn’t it? To turn ebooks into a dead market.

    I’m sorry, Jay. But your reasoning is flawed. It fails to consider that Macmillan doesn’t care one whit about readers as their audience. They’ve never had to, we’re NOT their customer… the bookstores are. But apparently we soon will be. Maybe they’ll start listening to us. Because while Macmillan may want ebooks to go away, readers are wanting more ebooks. And we’ll leave the big six publishers to get them if we have to.

    1. Chris Billett says:

      I don’t have an opinion either way on this matter, as I’m fairly sure there is a bit of corporate asshatness on both sides, but to say Jay’s reasoning is flawed in the same paragraph as suggesting that publishers don’t care about readers is illogical to an extraordinary degree. Sure, publishers sell to bookstores, but no bookstore buy books that readers don’t want to read. Publishers aren’t stupid.

      Also, in response to the opinion elsewhere above that Amazon should have the right to set their price… well, simply put, I think they still do? I haven’t read all the information and may be completely wrong, but my understanding is that Macmillan are doing the exact same thing and setting *their* price. Amazon can choose to sell at a loss if market domination of the Kindle is that important to them.

      (I emphasise, I really don’t know if Macmillan had said Amazon can’t sell the product they purchase off them at a loss, so apologies if the above comment is misleading.)

      1. Ashavan Doyon says:

        Chris –

        absurd as it may seem, I do believe that publishers for many years have cared nothing for readers. Not that I think this is unusual for a corporation. Maybe I’m just anti-corporate.

        But yes, this agency agreement means EXACTLY that… Macmillan will be setting AMAZON’s price. That’s the objection, since they are sure to seek the same agreement at B&N and elsewhere. No competition for pricing. Just Macmillan setting an agency price. Amazon will NOT be able to take a loss or discount in any way. That disturbs me greatly.

        1. I see. In that case, they’re definitely in the wrong on that aspect. The way business works in most things is that publishers/suppliers/whoever set the ‘wholesale’ price (forgive me if I’m using the wrong terminology – I’m a technician, not a business owner!) and then retailers decide what mark-up they wish to make. That’s also how it should be, so if Macmillan want to sell to Amazon at $12.99 and then recommend Amazon sell at $15.99, whilst allowing them to sell at $9.99 if they wish, then fine. Anything more extreme than that certainly makes them as guilty as Amazon of corporate dickishness in my opinion. As I said, I haven’t gone over all the facts, but I have read many, many blog posts (including ones from friends and con-quaintences like Jay and Mary Robinette, who’s opinions I respect massively). I just can’t see a clear evil on either side.

          That said, I still think your anti-corporate thoughts are more anti-logic. They’re simply not shortsighted enough to actively ‘not give a shit’. They might not get it right all the time, in everyone’s opinion, but hey – have you been in the world long? That’s a pretty common trait.

  4. Scott Singleton says:


    Thanks for the post. It will be very interesting to see how all this plays out in the future…

    The issue from my perspective isn’t as much about ebook cost as it is about quality. I didn’t buy the Kindle to get cheap books. I love to read, and I love the immediate gratification of buying a book from a favorite author while drinking my coffee in my favorite lounge chair. I’m more than willing to pay hardback prices for this wonderful convenience… except the quality of editing and production that you say publishers provide doesn’t seem to apply to their ebooks. The quantity of formatting and punctuation errors in the ebooks I have purchased is astounding, and is far greater than any issues I’ve discovered when reading hardbacks. You state that “the money that goes into a book is dominated by acquisition costs, editorial costs, production costs, layout and design, art, marketing and business overhead. Ebooks must bear all those same costs as print books.” Ok, then I expect the same attention to detail during the ebook creation/conversion process. Frankly, I don’t see this happening. At this point, I feel $9.99 is more than fair until the quality of the ebook product is comparable to the hardback version of the book.

  5. Eric Welch says:

    Thought I would add the quote from the president of Macmillan admitting they would be making less money in the short run. “Sargent pointed out that the agency model allows Amazon ‘to make more money selling our books, not less. We would make less money in our dealings with Amazon under the new model. Our disagreement is not about short-term profitability but rather about the long-term viability and stability of the digital book market.'” Caleb Cain had this to say:””What’s perhaps most breathtaking about the Amazon-Macmillan dispute is how little, finally, is at stake: should the highest price of an e-book be $9.95 or $14.95? No one dreams any more that it’s going to be $28. What’s being fought over is control, and the reason control is being fought over so viciously is that the only way such massive cost savings are going to be achieved is by consolidation–by collapsing a few of the intermediary steps somewhere between the creation of a book and the reading of it. Will you some day download your e-books directly from Farrar, Straus & Giroux’s website? Will Amazon some day be the publisher of Jonathan Franzen’s novels? Some future between these two outcomes is more likely to happen, but precisely where the division will fall remains to be seen. Authors, in the meantime, had better ask their agents to negotiate their e-book royalties very carefully, seeing as how, while the titans rage, the financial analysts have already factored into their bottom lines the expectation that someone else will be eating our slice of the pie.”

    Cite: http://news.shelf-awareness.com/ar/theshelf/2010-02-01/amazon_vs_macmillan_ultimately_resolved.html

  6. Dianne says:

    I agree with Eric Welch’s post – except for spending $4,000 a year on books in point 5 🙂

    I am confused by your reply to his point 4. If you get a percentage, and your publisher is getting less under the agency model, then won’t your percentage be lower in dollar terms, as shown in the example given by Eric? Or are all authors renegotiating their percentage upwards to compensate?

    When I asked Scalzi about the calculations in Eric’s point 4, his response was, “My agent is very handy at overturning contractual boilerplate, and aside from that I sell pretty well, so I don’t want any of you to worry about how much I will make.” That sounds to me as though he is renegotiating his percentage.

    This brings me to my second concern. You say that publishers are “struggling economically, have been for years.” On the other hand, John Sargent says Macmillan “would make less money in our dealings with Amazon under the new model.”
    ( http://www.publishersmarketplace.com/lunch/macmillan_30jan10.html )

    Why, then, are they proposing a model under which they will make less money? And if authors are renegotiating their royalties upwards, the publishers will make less again. Won’t that mean they will be struggling even more?

    If struggling publishers are prepared to make less money, then there has to be a longer term agenda. That agenda is, of course, control. I can understand their chagrine at the discounting, but a model under which Amazon is the only one to make more money (at the expense of the readers) just confuses me no end.

    I’ve just seen a new comment by Chris Billett who says, “Amazon can choose to sell at a loss if market domination of the Kindle is that important to them.” Chris, the whole point of the Macmillan proposal is that Amazon will have *no* control over they price at which they sell ebooks. Amazon will only be agents, and the publishers will set the price readers pay. If other retailers are also forced to adopt the agency model, there will be *no* discounting by anyone, ever.

    If Macmillan can do this with ebooks, and all the major publishers follow suit, there will be no competition in the “name” ebook market. And if the publishers can do this with ebooks, what is to stop them from doing it with print books?

    A world in which the publishers have total control over the retail price of all “name” books is really scary.

    1. Hey Dianne,

      I actually addressed that error in the following post! I have to confess, the more I read, the more I think Macmillan are far less innocent in this than they seem to think.

  7. David Forbes says:

    Ashavan said, “…if it costs $15 on ebook, I won’t buy it. And I won’t buy the hardback either, unless it’s remaindered and I can get it for cheap.”

    Well, that’s *you.* That’s not everyone. You’re making the logical fallacy that your thinking/opinion/experience applies to everyone else, and it doesn’t. I buy tons of hardbacks every year. I think $15 for a brand-new ebook is fair and would gladly pay it for certain authors, but if you don’t want to pay it, then don’t buy it. That’s the point.

    The agency model proposed by Macmillan is designed for people like me who need to have a book when it’s first released pay more for it. Over time, the price gradually decreases to a point where you find it palatable. Or maybe not. There is nothing wrong with variable price points.

    1. Ashavan Doyon says:

      No I’m really not. I’m stating an opinion that I expect to apply only to me.

      Other people may buy $15 ebooks without a thought. That’s fine. But as a person who loves to read and who WON’T, I can and should fight for lower pricing.

      I’ve addressed that I have no problem with a variable pricing model. I have a problem with the agency model. I strongly disagree with the idea of the manufacturer setting the final end price for the consumer. It is, at its heart, anti-competitive. I would be against it even if I had the money to throw around to buy books at that price.

  8. Meran says:

    Like Eric, I read a lot (a LOT) and spend maybe more than he does (2 days ago I ordered $200 on bn.com). Unlike him I reread books I buy.
    I doubt any publisher is “trying to kill the ebook market”! Why fight so hard fir the rights and pricing structure then? Like it or not (I’m a “not”), ebooks are here to stay.
    I’m ~much more concerned that eventual non printing of hardcovers will come about. I read on computers in some form or other far too much as it happens now. Waiting for something to charge up so I can read another few chapters is just wrong. As would be holding a kindle over my bath water or passing the time in a docs waiting room. Most of my books don’t weigh all that much nor do they shine any lights in my eyes while reading them.
    I’ve learned a lot about the publishing world while reading about this latest quest for power/control. Macmillan is not trying to sell me anything but book products; Amazon sells everything from pjs to kitchen sinks. They started out as books… Are cars next? To my thinking, macmillan has the right if it, from that perspective alone.

  9. Thiago says:

    “Many seem to assume that Macmillan is simply lying about lower prices, but why would they?”
    Because their track record on lower ebook prices over time really isn’t the best one…

    1. Jay says:

      So you take it as given that a company can’t see the error of their strategy and change directions?

      1. You go on the evidence you have, Jay! I’d say that doesn’t look too rosey for them.

      2. Thiago says:

        No, but when I read the CEO of a company making a statement I tend to gauge my expectation of wether they plan to follow through with that statement based on their track record. Macmillan’s? Not good.

        I don’t deny Amazon yanking out the books was a pretty dickish move, and I plan to keep on buying physical copies of books since I understand authors are as caught in the crossfire here as readers. But as far as ebooks are concerned, Baen’s webscriptions just looks a whole lot better than they did before the weekend.

      3. Thiago says:

        Oops, sorry about that, didn’t see the reply button. Here, The part that really matters:

        No, but when I read a statement from the CEO of a company I tend to gauge my expectation of wether they plan to follow through with that statement based on their track record. Macmillan’s? Not good.

  10. Amazon pretty obviously made the biggest mistakes in the endeavor by pulling the books (the “nuclear” option) with no warning. Scalzi outlined several reasons why from a PR standpoint it was a mistake.

    That said, I think the jury is very much out on which model is better. Whether it’s Amazon using its market power to try to make something proprietary the de facto standard or Macmillan trying to use its market power to set both the wholesale AND retail price of books, neither inherently benefits consumers.

    I’m not trying to say “screw both sides, they both suck.” – both are businesses and they are doing exactly what businesses do when they are able. It would be like blaming an alligator for killing a duck. But when the barriers to entry (I’m applying the term more generally here than my Econ prof would have liked) are high enough and/or the market is immature enough, inefficiency happens and everyone except whoever has the upper hand at a given point in time suffers.

    All of this really ties into the ongoing battle/discussion that occurs with topics like “What is wrong with publishing” or “How can publish address the many challenges of the 12st century”. I think Jay’s comment from the post is key:

    “The indie press and the self-publishing world are important, but they don’t have the financial or administrative resources to publish big name authors, and provide the overall quality of editing and production that the trade press does. Not in sufficient volume to make up for the absence of the big six. Rooted as it is in older business models, the publishing industry simply has not yet produced a viable alternative to the current system. It probably will in time, but that’s not the case today.”

    The topic is far bigger than just this narrow conflict, but I would say that a viable alternative is closer than many might think. I don’t say this because I know what the alternative will be but because the breakdown of the traditional model is accelerating. Bookstores, publishers and authors are all being squeezed by new trends. Project the trends of the past five years out another five years and it’s not too pretty.

  11. Eric Welch says:

    I’ve been thinking a lot about this and pose the following questions:

    1. If the publishing houses are/were so concerned about the plight of independent bookstores, why didn’t they take this fight to Borders and Barnes & Noble when those behemoths began discounting in such a way it was destroying the independents?

    2. If, under the RIAA model, making copies and giving them away is destroying sales, why aren’t publisher concerned about the used book and library markets. One book gets read many many times, but the publisher gets paid only once? If a $30 book was available for $10 wouldn’t they sell many more copies to people who said, screw the library wait queue or used book, I’ll buy a new one. Sure the margin is smaller, but volume would make up the difference. That’s the model Wal-Mart is based on and they seem to be doing just fine.

    3. Why are MacMillan ebooks priced higher than older paperbacks?

    Personally, I think Amazon’s move was a brilliant strategy. They look like they are in the consumer’s court yet wind up making much more money under the agency model.

  12. Eric Welch says:

    The argument that ebooks have fixed costs like editorial, design, etc. is very true. It’s true for every product. That’s from the accountant’s point of view and is important ONLY if you sell ONE book. The more you sell, the more those costs become apportioned across all the books and those costs then can become insignificant on a per copy basis.

    Walmart, B&N, Borders, and all the other big stores understand this very well, especially Amazon. Fixed costs are reduced to insignificance with increases in volume. They gain the volume by reducing the price so they sell more. They did not get where they are today by raising the price. That’s what MacMillan doesn’t understand. They need to increase volume by lowering the price and they’ll make more money by selling more copies which in turn then pays the fixed costs.

    1. But Macmillan’s variable pricing strategy is intended to maximize volume with even lower end prices than Amazon offers now. Set a high release price to take advantage of initial demand, then tail that price off until it reaches $6, at which point your sale volume should be higher than if that ebook were still sitting at $10.

      Macmillan is presumably banking on this strategy resulting in greater overall profits than if the ebook were priced at $10 in perpetuity. Are they right? It’s impossible to know yet. But their model offers a lot more flexibility–and in turn, room for experimentation and adaptation–than Amazon’s fixed rate. I think it’s way, way too early in the ebook’s existence to get locked in at one arbitrary price.

    2. Jay says:

      Right, but ebooks don’t make it up on volume. Most titles in my genre sell in the low hundreds in ebooks at best, outside the standout bestsellers and evergreen titles. Lowering the price won’t help that much, the demand is tied to the author’s fan base.

      1. ART PARHAM says:

        Jay, I’m a 50+yr SF Fan and a Kindle owner. I’m sorry to say that I’m not familiar with your work but may have read some in passing and not remembered your name. Please believe me that low price or free will make for new readers! I have picked up several new authors because they had free or limited time offers mentioned on the Kindle Daily Post. I have discarded several books that after exam had topics or themes that I didn’t like, much as I would in a bookstore. Its harder with e-books since you don’t usually see even the covers. If you write a lot, giving away the first book of a series will get you fans for the next one. Back to the topic of your original post, I think that the real villian(sp?) of the piece was Jobs. Jacking up the price of e-books so the books for his new device would make more money. There is a reason that I’m writing this on a Dell and not a Mac = $ vs $$$.

    3. hellequin_jack says:

      The problem here is that “Walmart”ing books will most likely lead to less books and less non-star authors being carried.

    4. Deven says:

      Books are not all equal. Authors are not all equal. Lowering the price on an unknown author will not guarantee greater sales for that author’s work. Lowering the price on a best-selling author does not guarantee that the retailer’s, publisher’s or author’s profit will increase.
      To my mind what Amazon is doing, equating all ebooks as equal/equivalent product, is wrong headed. They don’t price all blue jeans the same. They don’t even price all butter beans the same. Yes, Amazon sells butter beans. So why are they wanting to price all ebooks the same?

      Maybe if they thought they could corner the market on butter bean containers (you know, jars and cans, the butter bean equivalent of the Kindle) they would try to force all the butter bean producers to conform to a single price point. And it would be just as wrong.

  13. Jay, I appreciate your wading into the tar pits of the Amazon forum! I would encourage you not to downplay the impact of ebook sales, because using the “low hundreds” argument in an artificial pricing arrangement is chicken and egg. IF the prices were lower and more in line with their perceived value and their share of production costs, you’d sell thousands. Because major publishers are protecting hardcover sales, they naturally are not promoting ebooks. I think it’s the wrong strategy, but I’m not sitting there looking at their profit sheets.

    I don’t blame you, I’d stick with my employer through thick and thin, and if I signed a new deal I’d say “Fine with whatever.” But there’s also some joy in having more control of my own fate. I believe in the long run I will be compensated far more via this route. Don’t worry, though, I am urging everyone not to punish or boycott writers!

  14. IreneD says:

    Thanks for this post, Jay. You make a very good point about the other major publishers following in Macmillan’s steps soon. Maybe very soon! I’ve read today that the parent corporation of HarperCollins, News Corp, intends to “sit down … again and renegotiate” with Amazon their ebook agreement. And that they like better “the Apple deal”!

    See: http://gizmodo.com/5462724/another-blow-in-the-great-amazonapple-publishing-war-harpercollins

    1. Jay says:

      Yes, Irene. Thank you! I was just now blogging the news about HarperCollins. Right now, Amazon’s silence on this whole business is really hurting them.

  15. Eric Welch says:

    For those who care, The Fossil Hunter: Dinosaurs, Evolution, and the Woman Whose Discoveries Changed the World, reviewed in the Times and published by Macmillan is for sale on Amazon for $17.82. It’a available for the Kindle at $14.82. The price for the nook at B&N is $9.99, the hardcover is $23.08, so it appears Macmillan books are indeed available on Amazon.

    1. Jay says:

      Just checked. My stuff’s not back up.

      1. Eric Welch says:

        Did you try this morning? I see many of your titles – in paper anyway. One nice thing about this whole debate is I’ve discovered authors I had never heard of before and I’d like to read some of your stuff.

        So here are my choices this morning

        Green: $9.99 nook digital at B&N
        $9.99 paper at AMZ
        Audible download $9.98 (I prepay)

        Death of a Starship $8.95 B&N
        $9.95 at AMZ
        both paper only

        Trial of Flowers $12.78 at B&N
        $10.17 at AMZ
        both paper only

        Engagement av only at B&N for 7.19

        Which should I buy as a good introduction to your work, and from an author’s financial standpoint, do you have a preference where I buy. Frankly, I prefer to buy the digital or audio because that’s just my personal preference. But, I will go with your recommendation.

        1. Jay says:

          Hi, Eric. And thanks, btw.

          Depending on your taste, really. Death of a Starship is fairly classic space opera – guys flying around in spaceships chasing aliens, with a big dose of politics. Trial of Flowers is a very weird book, with lots of sex and violence and strangeness. Green is a fantasy about a girl assassin. Starship is probably the easiest intro of the three to my work. But the Green audiobook is deeply awesome…

          Does that help?

          1. Eric Welch says:

            Yes, thanks Jay. I’ll order Green. I love audiobooks and I’ll start listening in a few minutes. The Audible model of allowing people to prepay $229 for 24 credits bringing titles down to $9.96 or something is an interesting model. I love it and you can refill the credits anytime you want. Not sure of the economics of it. My sympathies are always with the author (my wife writes children’s books having had quite a few published so I know how little remuneration author’s get and we also have a paper-only micro-publishing business,) but I also want as free a market as possible and the agency model Macmillan proposes seems to tie the hands of the retailer, but I understand and appreciate both sides. That’s what makes it so frigging difficult.

        2. Eric Welch says:

          Forgive me, the Amazon copies are still not available, but the book is available new from several Amazon stores. Would that make a difference to you in your financial equation on what book I should buy? Amazon probably doesn’t care since they get a substantial commission on every book sold through the Amazon stores. They win under the new Macmillan model and otherwise.

          1. Jay says:

            Hi, Eric. Financially, it doesn’t matter to me personally. I’m paid on the wholesale distribution, which doesn’t factor in the outlet. (There are some exceptions to this in my contract, but they don’t matter here.) Like most writers, I like to support indie bookstores/sellers when I can, so if that affects your thinking (ie, through the third party ‘buy’ button), go for it. And thank you again.

            1. Eric Welch says:

              Now that you have me going in my schizophrenic mode, I hate Amazon as a publisher, love it as a reader, my wife could care less as an author. As a micropublisher we lose money on every book that Amazon sells. Our titles list for $10.95 trade paperback, AMZ collects a 55% commission and we have to pay shipping to them. They sell them usually at full list last time I looked. Ironically, the only way we make money is when we sell them to the author at a 50% discount for her to resell. We could care less what she sells them for and ironically, she makes more money that way too as we pay her a 10% royalty on the invoice price, i.e. our revenue, whereas if she sells them she makes 50%. I’d love to get them available as a n ebook, since we’d save tons of money on shipping and the ANZ royalty/payment to us would be much, much higher, but getting them into ebook format is often easier said than done, especially if you are’t too html expert.

              My wife’s position is bound to the publisher since so much of her sales are to schools and marketing to them individually would be a true nightmare.

              It’s a bizarre world.

              1. ART PARHAM says:

                Eric, putting a MS Word into unencrypted Kindle format only takes about 5 min with the Mobipocket reader which is a free download. The .mobi files that the Mobipocket reader uses are readable by the Kindle with no modification whatever. Don’t be scared about the lack of DRM. See Eric Flint’s many remarks about that on Baen’s website.

            2. Eric Welch says:

              To get an idea how the world is changing take a look at this. http://bit.ly/boYcrm

  16. Mike Scott says:

    While Amazon have behaved worse than Macmillan, it is both bad behaviour and bad business (and illegal in some jurisdictions) for Macmillan to be telling Amazon what retail price to sell their ebooks for. Macmillan are perfectly entitled to charge Amazon whatever they want as a wholesale price, but if Amazon want to make a loss on each sale, then that’s Amazon’s decision.

    1. This is what I was trying to say yesterday, and exactly the point that stops me being completely in support of what Macmillan and their authors are saying. I don’t really see it as disputable, either, although most seem to think it ignorable for some reason.

  17. SK says:

    The publisher doesn’t care about readers OR writers. They care about the bottom line. They want money in their pockets and they don’t gain it by doing anything but growing fat and corpulent on the blood and sweat of artists. Profit is truly the ONLY goal of the corporation. And the artist, as usual, gets ripped off, and the reader, as usual in this culture, gets fed cardboard crap stuffed down their throats because big business has a stranglehold on the world and people have to go out of their way to find anything truly good or worth reading.

    10%!??! Really? Is that what your effort is really worth, authors?!? And the 3% number I heard for educational books… talk about a rip-off! Publishers have been milking artists for years. Who does the REAL work in bringing a reader a story? Did Homer have to pay his agent? I don’t think so!

    The wide-open marketplace is a fantastic opportunity for writers and creative people. Unfortunately, most of us are so busy creating, we aren’t taking advantage of it. Instead, we’re shuffling along, submitting our work to “real” publishers like good little sheeple because that’s how it’s done, or because we think there’s some sort of prestige (or we’ll make more money??) going with a “real” publisher.

    It’s not true. It’s ESPECIALLY not true with ebooks.

    Someone mentioned getting 6 cents each for a book that sold 160,000 copies. What is that, something like $9,500? I can go through an indie epub (or self pub) and get up to 50% (100% if I do it myself) and make that much on a 3.99 book if I sold 5000 copies of my ebook with an indie pub or 2500 copies of my self-pubbed book. Which isn’t an outrageous number, if you’re a good author. I personally sold over 10,000 copies of my own ebooks last year.

    As far as I’m concerned, McMillan can price their ebooks at $100 each. The higher ebook prices go, the more my reasonably priced $4, $5 and $6 ebooks are going to seem to readers. Impulse buy, much? 🙂

    And if authors are going to continue to prostitute themselves to the “big 6” for dreams of grandeur or out of stupidity… hey, that’s their choice.

    But you don’t have to. McMillan and other publishers are running scared because they know that writers, like musicians before them, are going to wake up and start realizing – hey! I don’t need you as a middle man! I can do this myself and make MORE than I would have with you! McMillan is desperately trying to hold onto their profits (and those pesky authors that come with them) that’s all.

    Bottom line.

  18. Elyn says:

    Just to look at things a little differently…

    Nintendo, APPLE, Playstation, and X-Box products have basically “price fixed” at every retailer and we accept it. Why aren’t there more complaints about that?

    If Wal-Mart had ceased to sell a favorite consumer product because they didn’t like a *proposal* from a manufacturer, wouldn’t most consumers be screaming about how evil they are and standing out front with signs to boycott?

    Amazon has basically adopted a bullying technique by withdrawing every MacMillan product from sale in an effort to cause financial harm. And, while MacMillan posted to its own industry, Amazon spun it directly to the consumers without all of the information. If Amazon truly cared about me as a consumer, it would not have pulled the books at all; thereby punishing me from the right to buy the book as part of their Amazon shopping experience.

    Amazon’s technique in handling this is one that I’d expect from Wal-Mart.

    I’m not saying either party is right or that this hasn’t been a long time coming. However, this stand-off can only serve to benefit smaller publishers who can’t afford the revenue loss of an Amazon dispute and usually have to accept Amazon’s terms.

  19. Well, let me be the first to address the elephant in the room. Macmillan’s ebook prices don’t have to go up because the costs to produce an ebook are high and fixed. Their ebook prices have to go up because Macmillan’s overheads (like those of any big, mainstream publisher) are high and fixed, and the bills have to be paid regardless of whether Macmillan is selling ebooks or hard copies.

    As I said in my own recent post on the matter, if it really takes a small platoon of publishing pros to create a Kindle book, how is it that authors such as myself, JA Konrath and plenty of others are doing it ourselves, in our homes, using consumer-grade computers, in a matter of hours? Lest you protest that our books cannot possibly have good-looking formatting and readability, check out the Kindle version of my reference book, The Indie Author Guide, here:

    Fully formatted, with tables and illustrations, even. Yet I was able to offer this Kindle book for just $1.99 and net nearly pure profit on every copy sold, because I don’t have big publishers’ overhead to pay.

    (Note that my book is no longer for sale because it’s coming out in a revised/updated edition from Writer’s Digest Books this fall, and I have little doubt my net royalty on each ebook copy of that edition will be less than what I used to get on the self-published edition—but I’m OK with that).

    Right now ebooks only represent 3-5% of the total trade book market, but big publishers are terrified that ebooks are the wave of the future, destined to supplant paper as surely as DVD supplanted VHS. And this is an outcome they want to prevent, or delay as long as possible, because they know they cannot survive on $10 ebooks.

    Maybe big publishers simply can’t afford to be in the ebooks business, and smaller, nimbler companies need to step into that particular fray.

  20. Eric Welch says:

    Michael Stackpole’s dissection of ebook costs and author revenue: http://www.michaelastackpole.com/?p=1057

    1. Jay says:

      Thank you, Eric.

      1. Eric Welch says:

        Hi, Jay. I hope things went really well over the weekend. Am enjoying Green!

        1. Jay says:

          Excellent. I am the middle of revising the sequel right now.

          1. Eric Welch says:

            Great, I will look forward to it.

  21. Christopher says:

    This whole thing has left me torn. I think Amazon pulled a bully move but I don’t think MacMillian did much better in trying to force a price point.

    As someone who wants to be a published author i understand this fight. As a consumer it is harder to get behind the publishers. It feels way to much like the music industries price fixing scheme.

    I typed up my thoughts on my blog (Book Publishing Goes Boom http://tinyurl.com/yhctsh9 & Amazon Slap Down http://tinyurl.com/yl3l5cz) but after rereading them I am still not 100% sure where I fall in this.

    I think variable pricing is fine. I don’t have to buy the more expensive copy if I don’t want to. I still have a problem with telling a retailer it can’t see at a loss. This is a pretty common practice.

    Ultimately I hope it gets worked out in a way that doesn’t feel like price fixing and keeps the readers at the front of the process.

  22. Laura B says:

    I thank you for the information you have given me. I bought a kindle so I could read books on it. I didn’t buy it to save money. I bought it so I could get books I wanted to read quicker, with out having to run from store to store to find the books, or having to pay shipping. What I got without knowing it is a way to store my books without collecting dust, or having to waste paper to print more books. I love ebooks, and I love a bargain too. But people deserve to be paid for their work, and the actual printing of the book seems to be a very small part of it, even though it is the only part some people see. I will pay what is asked, I don’t whine about it. To me, the story is what I pay for, and a good story is worth every penny. Where else can you get transported to a world or place that only a few get to go to, and live an incredible story, for the price of 6-10 dollars. No where I know of. I read at least a book a day, sometimes more, sometimes less. But that is an average.
    Thanks for your comments.

  23. To add to your comment about social networking in-game, it also needs a user-friendly block system. (this is what I get for reading the bad_rpers_suck community on LiveJournal–500,000 complaints about bad roleplayers on WoW that people never, ever want to deal with again.)

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