A sinister plot to sell e-books for less
E-book skullduggery is afoot, warned New York Times reporters Motoko Rich and Brad Stone (3/18/10), reporting that “Amazon.com has threatened to stop directly selling the books of some publishers online unless they agree to a detailed list of concessions regarding the sale of electronic books.”
Tabbed on the website as “Amazon May Impede Access to Some Publishers’ Books,” the story described the online bookseller as “pressuring publishers” with its “hardball approach”; Amazon had been “widely accused of abusing its position” with similar tactics that “shocked the publishing world.” If Amazon kept it up, the reporters warned, “it could harm its reputation in the eyes of customers and the publishing industry.”
In a lengthy New Yorker piece (4/26/10) about Amazon’s rivalry with Apple computers over e-books, Ken Auletta similarly painted Amazon as a villain:
Amazon’s offense, in the eyes of book publishers and the reporters who carry their banner, was to try to sell electronic versions of books for $9.99, rather than at $12.99 or $14.99, as the book industry (and Apple) would prefer. “Publishers were concerned that lower prices would decimate their profits,” wrote Auletta. If Amazon gets away with the $9.99 price, he quotes one publishing CEO, “to my mind it’s game over for this business.”
The New York Times’ Rich, in a March 1 article, wrote that publishers say consumers have
The strange thing is that Rich herself, in a chart attached to that same article, calculated the respective profit margins for e-books priced at $9.99 and $12.99, finding that the per-unit profit for publishers at the lower price—$3.51 to $4.26, depending on how authors’ royalties are figured—was roughly the same as for a $26 hardcover ($4.05), whereas the publisher profit on the higher e-book price was considerably greater: $4.56 to $5.54. Rich didn’t give a breakdown for the $14.99 pricetag, but clearly it would give publishers an even bigger windfall.
This insight—that Amazon’s prices are completely compatible with publishers maintaining their traditional hardcover profits, or even increasing them through the increased volume that might follow a 60 percent price cut—is one that Rich’s write-up went out of its way to conceal:
Yes, that’s why publishers think consumers should pay dramatically more for e-books: to cover the industry’s massive warehouse investments.
The most eye-opening thing about the Times’ chart—again, not spelled out in the article—were the shifting contributions of the various players in the publishing business. With the traditional book, the publisher pays an author $3.90 per copy for a manuscript, adds $5.05 worth of editing, printing, marketing etc. to it, and takes a profit of $4.05—about the same amount that the person who actually wrote the book gets. With the e-book priced at $13, on the other hand, they’re paying the author between $2.27 and $3.25, adding $1.28 worth of value, and taking between $4.56 and $5.54 in profit—roughly twice as much as the writer gets.
It’s hard to say exactly why publishers in a digital age should get so much for doing so little—which is why sympathetic journalists like Auletta have to portray publishers as essentially a kind of charity:
It’s a moving story, but it belongs in the fiction section.