Kindle is a Reverse Razorblade
Kindle has been much on my mind since May, when I decided to convert pretty much my whole body of work to Kindle editions. I'm at about thirty conversions with five to go.
I worked in marketing for many years, and I am in the habit of idly mulling over new business models as I encounter them. Kindle was a chimera until I realized yesterday that it markets in reverse on the old razorblade model.
In marketing, "razorblade" takes its meaning from the old Gillette safety razor. They gave you the razor for free or nearly free and sold you blades forever. Another razorblade is the inkjet printer: cheap printer, expensive ink. The thing a razorblade model wants to sell is the one that will sell over time.
Kindle is a reverse razorblade. Here's how it works: The Kindle is expensive. It is also proprietary; you can only buy it from Amazon.com. The books are the consumable, but they are the cheap (or even free) piece of the equation. You can only acquire them from Amazon.com, but they are not proprietary. The publisher and author own rights to the book. Amazon gets up to a 65% sales commission for selling it.
Why is Amazon into this? It must make a huge profit from each Kindle sold (and they are all sold), but the Kindle owner must rationalize the very steep up-front expense. He does so from a promise of cheap books--cheap consumables. The price for Kindle editions of trade books is typically $9.99. The publisher gets 35% of its suggested retail price (SRP), and until a few weeks ago (July 2009), the Kindle editions were sold for 20% off SRP, or usually $7.99. This is well below the roughly $10.25 one usually pays for a discounted trade paperback edition and exactly the same as a mass market paperback.
Amazon makes the claim that a Kindle owner can eventually earn back the cost of the Kindle by saving money on the reading matter. Does anyone do the math? That's about 1,923 books at $.26 saved/book ($10.25 trade paperback vs. $9.99 Kindle edition)! Oh, and Kindle "shipping" costs, if there are any, must be very close to zip. Amazon pays something when you order $25 worth of hardcopy books and request free shipping.
It gets better. In early July, as SRPs began to balloon to as high as $16.50, bands of marauding readers strongarmed many Kindle publishers into holding steady on the de facto $9.99 SRP. At the same time, Amazon discontinued the 20% discount on Kindle books. $9.99 means $9.99.
An industry article in May guessed that Amazon made 6% profit on a $9.99 book selling for $7.99. If the $9.99 book now sells for $9.99, they're up to 26% profit. It is also estimated that 1,000,000 Kindles dot the landscape. If the profit on each is $100, then Amazon has socked away at least $100,000,000 on Kindle hardware sales alone.
The $3.50 I get from a Kindle sale is used to amortize the cost of making the Kindle edition (scan, OCR, edit, reconfigure, proof, and post), paying author royalties, and amortizing the cost of back-office work such as the accounting and due diligence. At some level a single $3.50 Kindle sale has replaced the higher return (at least $5.00) derived from the sale of a hardcopy book, so some proportion of potential profit is donated by the publisher and author to the Kindle/Amazon cause.
I ask myself: Is it at all possible, based on what we know about Amazon.com business ethics, that the roving rampage to demand $9.99 books was instigated by Amazon sock puppets bent on the channeling resentment people feel if they do the math on their Kindle purchase after the Kindle is no longer returnable? Is my accession to the $9.99 "standard" price motivated by Amazon's unbelievably smart marketing plan, which turns the best consumer marketing plan of all time on its head? Am I in the long parade of addled publishers who are racing to provide cheap razorblades that enable Amazon to sell its hideously expensive razor to more unwitting dupes because of the promise of "cheap" books?
I do not know. I think I see a pattern, but I cannot say this is so with any certainty. What do you think?
I worked in marketing for many years, and I am in the habit of idly mulling over new business models as I encounter them. Kindle was a chimera until I realized yesterday that it markets in reverse on the old razorblade model.
In marketing, "razorblade" takes its meaning from the old Gillette safety razor. They gave you the razor for free or nearly free and sold you blades forever. Another razorblade is the inkjet printer: cheap printer, expensive ink. The thing a razorblade model wants to sell is the one that will sell over time.
Kindle is a reverse razorblade. Here's how it works: The Kindle is expensive. It is also proprietary; you can only buy it from Amazon.com. The books are the consumable, but they are the cheap (or even free) piece of the equation. You can only acquire them from Amazon.com, but they are not proprietary. The publisher and author own rights to the book. Amazon gets up to a 65% sales commission for selling it.
Why is Amazon into this? It must make a huge profit from each Kindle sold (and they are all sold), but the Kindle owner must rationalize the very steep up-front expense. He does so from a promise of cheap books--cheap consumables. The price for Kindle editions of trade books is typically $9.99. The publisher gets 35% of its suggested retail price (SRP), and until a few weeks ago (July 2009), the Kindle editions were sold for 20% off SRP, or usually $7.99. This is well below the roughly $10.25 one usually pays for a discounted trade paperback edition and exactly the same as a mass market paperback.
Amazon makes the claim that a Kindle owner can eventually earn back the cost of the Kindle by saving money on the reading matter. Does anyone do the math? That's about 1,923 books at $.26 saved/book ($10.25 trade paperback vs. $9.99 Kindle edition)! Oh, and Kindle "shipping" costs, if there are any, must be very close to zip. Amazon pays something when you order $25 worth of hardcopy books and request free shipping.
It gets better. In early July, as SRPs began to balloon to as high as $16.50, bands of marauding readers strongarmed many Kindle publishers into holding steady on the de facto $9.99 SRP. At the same time, Amazon discontinued the 20% discount on Kindle books. $9.99 means $9.99.
An industry article in May guessed that Amazon made 6% profit on a $9.99 book selling for $7.99. If the $9.99 book now sells for $9.99, they're up to 26% profit. It is also estimated that 1,000,000 Kindles dot the landscape. If the profit on each is $100, then Amazon has socked away at least $100,000,000 on Kindle hardware sales alone.
The $3.50 I get from a Kindle sale is used to amortize the cost of making the Kindle edition (scan, OCR, edit, reconfigure, proof, and post), paying author royalties, and amortizing the cost of back-office work such as the accounting and due diligence. At some level a single $3.50 Kindle sale has replaced the higher return (at least $5.00) derived from the sale of a hardcopy book, so some proportion of potential profit is donated by the publisher and author to the Kindle/Amazon cause.
I ask myself: Is it at all possible, based on what we know about Amazon.com business ethics, that the roving rampage to demand $9.99 books was instigated by Amazon sock puppets bent on the channeling resentment people feel if they do the math on their Kindle purchase after the Kindle is no longer returnable? Is my accession to the $9.99 "standard" price motivated by Amazon's unbelievably smart marketing plan, which turns the best consumer marketing plan of all time on its head? Am I in the long parade of addled publishers who are racing to provide cheap razorblades that enable Amazon to sell its hideously expensive razor to more unwitting dupes because of the promise of "cheap" books?
I do not know. I think I see a pattern, but I cannot say this is so with any certainty. What do you think?
date
newest »
newest »
I have a Kindle and love it and am thrilled that you are converting your books to the format. But I hate DRM and hope that some day, perhaps, the model will be low cost and multi-platform. On the other hand, I see that the cost of books for the Kindle is creeping up. Vollman's new book is listed at $44, which seems ridiculous. It seems to me that the people who will be hurt the most are used booksellers, but that authors and publishers have only to gain since a buyer will not be able to resell or give away the book. Anyway, I look forward to reading your work.Eric
Eric wrote: "Think this through from the publisher's perspective: Hardcore Kindle users say that there is no cost for paper or printing. True, but those account for no more than 20 percent of a book's list pric..."I hear you. The whole process is biased against authors. My wife writes and illustrates children's books and has been quite successful in terms of being publishing (Cricket, Boyds Mills Press, Golden Books, etc.). The stories she gets published in nmagazines earn about $300 - $500 one-time fee. For illustrations she might get a little more. Her most successful book sold about 160,000 copies over about 4 years and earned about $8,000 in royalties (she gets 10% of the invoice prices, the book sells for $5.99, and most schools, libraries and resellers get a 50% discount so she makes about 20 cents per book.)
We tried publishing one of her more edgy books for teens under a pseudonym through iUniverse. That worked well. For a reasonable fee they had excellent copy-editing, print on-demand, no warehousing,etc. etc. except we have to do the marketing and there is always the prejudice against self-published books -- but she gets 20% royalty on the list price.
We published as a micro-press (I was a librarian and interested in the economics of publishing) a couple of books of very local historical interest. The standard list pricing is 8 times cost. We had a press run of 1500 copies in both hard cover and trade paperback so each copy cost us about $4.00. We listed them at $21.95 and $10.95 (paper) obviously way below what we should have charged, but who would pay $30 for a YA trade paperback. Amazon requires a 55% discount and we pay shipping and we pay the author %10 royalty on the invoice price. So if we sell a book through Amazon we get $2.67 (10.95 - 6.02 discount - 1.77 shipping - .49 royalty) so we lose money on every book we sell. Obviously we're not anxious to sell them that we. We do much better selling the books directly to the author at 50% discount and letting her sell them directly to schools at presentations etc. It's a totally bizarre business. My wife makes money from presentations, for which she can charge a significant amount of money, plus travel, etc., not from her books or illustrations for sure. And it's no where near enough to live on. Fortunately she has me. :)
I hear you about used book stores. I was merely suggesting that in the long run ebooks might be better economically for authors than printed ones precisely because it will dry up the used book market.
I read somewhere in the New Yorker a few years ago that a successful literary fiction title will be lucky to sell 7,000 - 10,000 copies. Nobody can live on that.
I would have strongly disagreed with you a few weeks ago, citing a similar situation with DRM and music and iTunes...you know what I mean. Then I read an article that very correctly pointed out that unlike the music industry, authors have nothing to back them up financially. Musicians make their real $ on appearances, not recordings. Authors can't do the same.It is going to have to be the responsibility of authors and publishing houses to get that message out to us 'ebookers'. Right now, most of us see the whole cost and DRM thing the same way we view them for music so some re-education is necessary.
I do wonder at the talk of OCR'ing, etc. I would imagine that most authors are using some sort of mainstream word processing program. Perhaps the publishers can keep down costs by maintaining an editable format all the way to printing (where feasible); that may make the entire conversion to ebook process shorter, less error ridden and less costly. IMO, all books meant for general reading should be available in ebook format and technology seems to be taking us farther along that path on a daily basis.
Fight back against Amazon. Why should authors pay the price of Amazon's hardware? Make sure your books are available elsewhere if not in the Kindle store. When you're ready to come down to $9.99, then do so. I'm a Kindler, but believe me, if a book is available elsewhere, but not yet for Kindle, I buy it then convert it. There are enough hacks for all the various formats out there.
On a similar note, most folks that I know who pirate ebooks would not do so if the ebook was available to buy. I have gone so far as to order from overseas vendors--it makes no sense to me that so few books are available in ebook format these days. Keep the DRM, but figure out how to let a family or more than one device share a book; something that depends on a person, not a device. If you don't control the tech, it will eventually start to control you.
RE: making e-booksThere's actually quite a bit to converting books into ebooks, even if you have a digital file to start with. During the typesetting process, some editing is often done in the course of, for instance, preventing widows and orphans, so that the typeset book can be significantly different from the word processing document. If you're lucky, you can export the typeset file as HTML, but you will often find errors. If the text contains forced hyphens, those can be rendered as breaks in HTML, so you get a line break in the middle of a word. If you don't have the typeset file and have to convert a pdf to HTML, that's even worse, with blocks of text out of place, words run together, paragraph breaks in the middle of sentences, stuff like that.
I've converted several books for Kindle, both from InDesign files and from pdfs, and a 300-page book can take anywhere from four hours to four days.
RE: the price of e-books
I am hopeful that as more e-reader devices reach the market, Amazon will start to lose their dominant position in the e-book market. Then perhaps we can get a better deal for both readers and writers.
I've been blogging about this too:
http://www.catherinemwilson.com/blogg...
Eric,Fortunately, as a web developer, I am fluent in HTML, which seems to be the format that most e-book converters, including mobi/Kindle, prefer. I can't imagine trying to format for Kindle in a word processing program of any kind. Even knowing HTML, the tags supported by the mobi/azw format are a somewhat eclectic set and seem to be inconsistent between the various Kindle versions (K1, K2, DX).
I don't know where people get the idea that converting one digital file type into another digital file type is a quick or simple task. Joshua Tallent has written a book called, Kindle Formatting: The Complete Guide to Formatting Books for the Amazon Kindle. It's 158 pages in paperback.
Nuff said!
I was suggesting that the Kindle or other ebook formatting take place after all editing, etc., in order to make the conversion process less taxing on the publisher-nothing further than that.
Jesslyn wrote: "I was suggesting that the Kindle or other ebook formatting take place after all editing, etc., in order to make the conversion process less taxing on the publisher-nothing further than that."Jesslyn,
The problem is that the a lot of editing takes place in a typesetting file, which, by its very nature is full of formatting (headers, footers, page numbers, drop caps on the first paragraph of a chapter, kerning instructions, forced hyphens to get the line lengths right, and much more). A typesetting program like InDesign does all of this and outputs a file that can be sent to a digital printing machine and comes out looking like a book.
Aside from finding and correcting the odd typo, the typesetter is also doing some editing to make page lengths work across the left and right pages, eliminate widows and orphans, stuff like that. So the typesetting file or the resulting pdf must then be used to make the e-book, which means stripping all that formatting out, a non-trivial task.
I've formatted e-books ripped from pdfs in which I found chunks of text mysteriously transported to a spot several paragraphs from where they should have been. When there are errors like that, there really is no substitute for proofreading the entire book.
Eric Hammel's Blog
- Eric Hammel's profile
- 50 followers
Eric Hammel isn't a Goodreads Author
(yet),
but they
do have a blog,
so here are some recent posts imported from
their feed.
Thank you for the very informative post, it's always interesting to read about Kindle issues from an author's perspective. I look forward to reading your posts in the future.