1. cynthia_1968
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    cynthia_1968 Active Member

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    message from Amazon Kindle regarding e-books

    Discussion in 'The Lounge' started by cynthia_1968, Aug 9, 2014.

    Hello world, I received the following message from Amazon:


    ----// message from Amazon Kindle //----

    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: Michael.Pietsch@hbgusa.com

    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

    ----------------// end of message //-----

    What do you think about this?
     
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  2. jannert
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    jannert Contributing Member Supporter Contributor

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    I think this is very interesting. However, I would like to hear arguments from the other side as well.

    My biggest concern about ebooks is that they are dispersed by very large companies, like Amazon. I use Amazon, and they are a very customer-friendly company. However, the wages they pay employees is not good, they evade taxes by siting their warehouses in tax havens, etc. And I do wonder what life will be like if all books are owned by one company? Will they continue to offer ALL books to the reading public, or will there be censorship and/or strings attached? Amazon, for all its good points, is not necessarily the best way forward.

    The above is a persuasive argument, but I'd like to hear from the other side of the issue before I jump in with support either way. There is a lot more at stake here than 'do you like to read books off a hand-held digital device, or do you prefer to hold a paper-based book.'
     
  3. cynthia_1968
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    cynthia_1968 Active Member

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    Don't rule out I-tunes from Apple (though I dislike overpriced greedy companies that sell childlike computers), they keep an ear to the ground.

    They also keep the price of ebooks high and block books or even book covers if they don't approve it.
     
  4. Dante Dases
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    Dante Dases Contributing Member Contributor

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    Very large companies with the attendant problems of large multi-national conglomerates. Although the same applies to traditional publishers, to a great extent. Further, there's the interests of small publishers to consider. How will PS Publishing or Subterranean Press (to name two) survive when they can't afford to lower prices of ebooks they make available on Amazon because of their business models? I do suspect that I know the answer to that one, though, and it's not positive for the small presses.

    I agree that ebooks need to be cheaper, for many of the reasons above. And I do like that from time to time I can pick up ebooks for 99p from Amazon (even if the last time I did so it was the Secret Footballer's book - at least I didn't waste £5.99 or whatever the usual list price is). It's frustrating when an ebook is priced at £17.99 or whatever, when it represents a £15.00 profit to Amazon, and I refuse to buy them when I know the author won't be receiving a reasonable percentage of the sale price. A business model needs to have profit built in, that's the nature of capitalism and for-profit organisations, but not that much.

    Moving slightly away from this topic, there's something gone on with Amazon and authors' rights recently which has passed me by. Can anyone fill me in?
     
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  5. stevesh
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    stevesh Banned Contributor

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    That 'golly gee, we're just 'lil old booksellers trying to get more money for authors' tone is insulting. If you'll sell 1.74 times as many $14.99 books at $9.99, how many would you sell at $1.49 (ten times cheaper, right?)?

    "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."


    I've been saying that for years. A price of $1.49 would be ample compensation for what is essential a dollop of database server space, and the attendant dramatic increase in sales (your contention) would provide for the authors.

    I'm a fan and user of Amazon (Prime member), but this sort of self-serving propaganda chaps my ass. Make a deal with Hachette or don't, but leave us out of it.

    By the way Amazon, this crock was apparently addressed to authors. Do you really think you needed to provide talking points at the end for people who write for a living, or did the PR consultants tell you to include that nonsense?
     
  6. Trish
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    Trish I've been deleted.. again Contributor

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    I got the same letter this morning.

    On the one hand I agree with them as far as pricing and such goes, but on the other hand.... They say they want to keep authors out of the middle, then ask authors for help? And why do they want authors to copy them in the email? They want to see how many authors listen? Do what they're told (ahem... I mean asked)? Make sure they hit the specific talking points (like they're writing a report and going to get graded)? It's a weak, hypocritical, and childish move on Amazon's part, IMO. They're only 4 months in on this mess, when with Kensington it took 18 months to come to an agreement.

    @stevesh This one was addressed to authors, but there is another copy of it addressed to readers on readers united.
     
  7. Mike Hill
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    Mike Hill Natural born citizen of republic of Finland.

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    I think that Amazon makes some good points. They just tried to make sure everybody understood what they are fighting for. I think that e-books have to be cheaper, like digital music has to be cheaper. If e-books are expensive folks are just going to get from a local bay.
     
  8. shadowwalker
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    shadowwalker Contributing Member Contributor

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    That's if you ignore the initial costs of publishing the book up to the point where it goes print or ebook. Then there's formatting, cost of the server and maintenance, order processing, etc. It's not just a "dollop" of space. Looking around the net, it's fairly standard to assume a 10% difference in cost to produce - so if a hardcover is selling for $25, an ebook should sell for $22.50. That rarely happens. It appears to me that ebooks are already a bargain, without both the author and the publisher making pennies instead of dollars.

    As to the letter, I find it pretty tacky that Amazon is trying to involve authors and readers in what is purely a business dispute. But then why would that surprise me?
     
  9. Dante Dases
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    Dante Dases Contributing Member Contributor

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    Given Amazon's record with writers, it's hardly a surprise that it's trying to involve them, tbh. Though they made a mess of it recently (I've been doing some research and sort of understand what's been going on - I think, as I haven't self-published through them and I've not had anything that I have had published made available on the Kindle).

    Shadowwalker, I think a 10% difference is being quite kind to Amazon. Although those costs need to be taken into account, one ebook unit will still cost a great deal less to produce and distribute than a paperback.

    Take, for example, the book I have in front of me now - The Penguin History of the USA. Its price over here, purchased from Waterstones, was £14.99 ($19.00 US price). It's a 730-page brick of a book. Just the raw materials required to print that much text on so many pages won't come cheap. Then factor in author royalties, the fact that's the retail price and not the price the publisher will have sold it on to the bookshop for (taking into account that Waterstones will want to turn a profit as well as the publisher), and distribution costs. The profit made by the bookshop on each copy might be £2.00. The profit of the publisher might be £1.50.

    The same book is available for £6.64 on the Kindle. That, too, will have publisher and distributer profit built in to the price, and it's worth pointing out that there's VAT to take into account over here of 20%, which isn't the case for print books. It comes in at almost 60% less. There are costs for maintenance of a server, there are staffing costs and some distribution costs. But an ebook, once initial production costs are out of the way, can effectively be copied and pasted, which isn't the case for a paper copy. And thus it comes in at a much lower price, assuming sales over a certain level.
     
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  10. shadowwalker
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    shadowwalker Contributing Member Contributor

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    No, that's why I brought up the 10%. That is the generally noted difference in cost to produce an ebook versus a print book. Ten percent. The rest of the cost is the same regardless of format - the acquisition, advance, editing, marketing, etc. So no, ebooks do not cost a great deal less to produce.
     
  11. Dante Dases
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    Dante Dases Contributing Member Contributor

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    But my point is that once an ebook is produced, it's produced. If there are a hundred sales of paperbacks, a hundred actual books need to be published, which requires the raw materials. The same cannot be said for ebooks. I accept your point about those costs being the same regardless of format, and I'd never try to argue against it. Equally, I accept they're a significant amount of money for a book, and that an ebook cannot be described as being 100% profit on a copy/paste basis.
     
  12. daemon
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    daemon Contributing Member Contributor

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    To boil Amazon's argument down to the main point:

    Market efficiency is paramount. There should never be an obstacle to the exchange of goods.

    Assume that a $15 ebook would profit more than a $20 ebook because more people would buy it. Therefore, charging $20 for the ebook is an obstacle to the exchange of goods and it does not profit anyone.

    Assume that the only reason why the ebook costs $20 instead of $15 is that Hachette refuses to sell it for less than $20. Hachette is therefore responsible for an obstacle to the exchange of goods, and therefore, they are doing something evil.

    That is just stating the obvious. So to me, the argument itself is not as interesting as the fact that Amazon is making it.

    Personally, I do not see the point in trying to persuade your business competitor to do the right thing. Especially if you are Amazon.

    It would be interesting if Amazon tried a business strategy like the following:
    1. Do everything in their power to become the only major retailer of printed books or ebooks, even if it means operating at a loss temporarily.
    2. Once Barnes & Noble, iTunes books, et. al. are out of business, stop stocking books from publishers altogether -- leave authors with no choice but to self-publish through KDP. Use print-on-demand to sell printed copies.
    The point is not that I advocate that specific strategy, but that I want Amazon to play hardball and take advantage of their position in order to bring down any business interests that make it artificially difficult for readers to acquire books.

    Not because I think Amazon is saintly, but because something needs to shake up the industry, and Amazon has the greatest power to do that.
     
  13. ChickenFreak
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    ChickenFreak Contributing Member Contributor

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    My reaction to this situation is simplistic: If Amazon wins this point, then competition is reduced--one company with excessive power will have even more excessive power. I consider that a bad thing. If maintaining competition means that some books cost more, so be it. So I'm on Hachette's side and against Amazon's.

    Edited to add:

    This quote from Amazon's letter is interesting to me:

    "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."

    Amazon is using a strategy used by small, independent businesses to justify action by Amazon's massive, powerful self.

    Edited again to add: In fact, this may finally be what it takes for me to buy myself that Kobo reader. My book-buying logic has currently been:

    - I want to support my local bookstore.
    - Ordering paper books through them gives them meaningful money, so whenever paper is an option, that's what I do.
    - Ordering Kobo books through them doesn't give them meaningful money, so when I definitely want an eBook I may as well go with the convenience of Kindle.

    Now I don't want Amazon getting my book money, even if my local bookstore won't get it either. So Amazon's letter has had one small effect: I'm ready to personally boycott Amazon as far as book purchases are concerned.

    Now I'm going to go see where I can directly order some Hachette books.
     
    Last edited: Aug 10, 2014
  14. daemon
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    daemon Contributing Member Contributor

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    What is a competition without winners or losers?

    And which competition are you referring to? Who are the players and what are they competing for?
     
  15. shadowwalker
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    shadowwalker Contributing Member Contributor

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    If competition is reduced, the consumer loses. Amazon can then charge whatever they want and if readers can't afford it, TS, bub. They either find a way to come up with it or don't buy. And since Amazon is not just a bookseller, they won't care. They have plenty of other products to keep them happy.
     
  16. ChickenFreak
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    ChickenFreak Contributing Member Contributor

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    Competition between booksellers and booksellers, publishers and publishers, and booksellers and publishers. If Amazon has a big bite of both of those markets, then Amazon can decide what gets published and decide what to charge for it. And the authors, readers, and employees of both booksellers and publishers, are the losers.
     

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