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Letter from John Sargent (CEO of Macmillan) about eBook pricing

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message 1: by Rob, S&L Forum Mod (last edited Dec 19, 2012 01:50PM) (new)

Rob (robzak) | 3061 comments Mod
John Sargent released a letter about lawsuits, DRM and ebook pricing that is up on tor.com

This is the part I found the most interesting/relevant to readers:

Which leaves me with the final and more jolly topic of this missive-matters digital now and in the future. At this writing 26% of our total sales this year have been digital. It is good to remember that means 74% of Macmillan’s total sales are ink on paper books. Just as in 2011, the percentage of e-book sales has remained consistent week by week through the year for the most part (the big uplift in the last two years has occurred the week after Christmas). Our e-book business has been softer of late, particularly for the last few weeks, even as the number of reading devices continues to grow. Interesting.

We continue to invest heavily in the digital side of the business, from anti-piracy efforts to social marketing tools. We are not managing our business with an expectation of a final e-book percentage. We are focusing instead on the rate of change. Consumers will decide in the end how they want to read books, and we will deliver your books in all the formats they desire. Our job is to get to this final state with an even playing field for retailers, a healthy marketplace, and the maximum possible distribution of your work in all formats.

And we will keep experimenting to determine the best way forward. This year we went DRM-free at TOR. It is still too early to tell the outcome, but initial results suggest there was no increase in piracy. In early 2013 we will launch library lending of e-books. As you probably know, we have not sold e-books to libraries to date, though we have been working for three years to find a model that works for the libraries, but that didn’t undermine our retail partners and didn’t jeopardize our fundamental business model. We have found a model we believe works for a limited part of our list, so we will now move forward.



message 2: by Aildiin (last edited Dec 19, 2012 02:44PM) (new)

Aildiin | 121 comments Am I the only one having the feeling that John Sargent still doesn't get it ?

I find ironic the way he presents himself as a defender of the market place when for years the publishers did a lot of things that contributed to the closure of a lot of small bookstores..( eh John, you never tried to tell B&N that they couldn't sell some of your books 30% bellow the advertised price..)


message 3: by David Sven (new)

David Sven (Gorro) | 1553 comments I think maintaining 26% digital sales is quite remarkable, considering, I suspect, that there is a large potential customer base who don't pay for their digital content. I think the key to attracting that market will be in a combination of making it easier for ebookers to access content legally - removing DRM is a good move - (it saves the customer the step of doing it themselves). As well as including add-on content/benefits (some creative lateral thinking might be in order). Pricing that make sense also helps - charging certain countries more for the same content doesn't make sense. It is more likely to tempt customers who want to do the right thing into saying, "How about I just get the content for free at pirates anonymous and you can take your two Audible credits and shove them where the sun don't shine ..."


message 4: by Aildiin (last edited Dec 19, 2012 03:19PM) (new)

Aildiin | 121 comments I wouldn't think the piracy base for books is that big but maybe I am wrong.
I would think people are less tempted to pirate as the price of the item is lowered too.

You have to be really cheap to pirate an e-book that cost 6$ and will last you several hours. I can get people wanted to pirate e-books that are sold at 15$ though..

The key reason for their digital share staying at 26% is however I suspect quite different.
There is growing part of the e-book market that is being taken over by self published authors, partially because of the initial approach to e-books by most big publishers.( low royalties, high price)
The e-books market is still growing, the part of the big publishers in that market might however be shrinking... And big publishers like Macmillan can only blame themselves for that...


message 5: by Emy (new)

Emy (EmyPT) | 98 comments Aildiin wrote: "I wouldn't think the piracy base for books is that big but maybe I am wrong.
I would think people are less tempted to pirate as the price of the item is lowered too."


The piracy base for books, just judging on the number of sites that are out there, seems pretty huge. It seems to be especially the case with people wanting copies of books not sold in their country for whatever reason, but it's pretty strong in those where the Big 6 sell too...

Price will please those with less money and big habits (the book junkies I guess!), and DRM removal will please the more technical, who like multiple devices and compatibility. The third sector won't make a difference - the "don't wanna pays", and those who see it as money to corporates not authors too, perhaps, but the former of these wouldn't pay whatever.

(As a book junkie myself, so anything that reduces the amount I have to bribe out of the husband to get enough fixes that month makes me happy ;))

Whilst 'corporates' can often be out of touch, I hope this is a good step forward. It's certainly good seeing the TOR trial has worked - DRM doesn't stop people pirating in the end, despite what many senior managers may think.

The big thing for me on that letter though was that they're finally going to be selling to libraries! That's been a major issue. I'm REALLY hoping they don't do the 26 loans and then you've got to rebuy it model though! That made me growl...


message 6: by Mapleson (new)

Mapleson | 94 comments As an occasional e-book pirate (arr) and frequent e-book and paper-book buyer, I would be less likely to first download a book illegally, if I could read the first chapter or so for free. When I go to a bookstore, I can get a fell for the book off the shelf before I take it to the till. Too often, this experience isn't replicated for e-books.


message 7: by Emy (new)

Emy (EmyPT) | 98 comments OOh - possible change in UK law based on what I was saying above:

http://www.bbc.co.uk/news/entertainme...


message 8: by Paul R (new)

Paul R | 43 comments e books are nice, the difficulty is that you don't own the book- so only certain ones can be lent - and then only for a set period of time and you cannot give someone else a book once you have read it.

then there are the prices- a lot of the prices are the same as print paperback- and i do not think the royalty scheme has changed much -so most of the extra swells the coffer of the publishing company.

i struggle as the concept of ebooks is so wrapped into the digital mellenium act that we forget that at one time we could take a tome we enjoyed- sign it and give it to our sons and daughters.

those days are over


message 9: by Thurman (new)

Thurman (nycblkboy) | 145 comments The name Macmillan got to me at first. I remember them from school. They mostly make educational books. They do have a division for non/fiction but its seems to be small. I don't think it is relevant for most readers. Btw just a year ago they were selling $100+ text books. And some were the same price as the hardcover ones. Macmillan Publishers (Wiki)

Clearly what Macmillan Publishers wants to do is make the same amount on an ebook that they get from a paperback or hard cover copy. They are just looking at the bottom line. And if they sell for less they get less profit. (One could argue that people will buy more at a cheaper price but I want to make this post simple.)

I'm a book junkie I guess. I just checked and my ebook/audio book folder has about 50,000 items and is 200GB. I usually will go to Amazon first. But if they don't have the book or its too expensive I usually can find it online. I regularly find books Amazon doesn't have

Mapleson wrote: "As an occasional e-book pirate (arr) and frequent e-book and paper-book buyer, I would be less likely to first download a book illegally, if I could read the first chapter or so for free. When I g..."

If you have a Kindle you can get a sample of all books for free before you buy.


message 10: by Kevin (new)

Kevin | 630 comments Paul R wrote: "e books are nice, the difficulty is that you don't own the book- so only certain ones can be lent - and then only for a set period of time and you cannot give someone else a book once you have read..."

Why would those days be over? I'm giving away paper books all over the place ...

E-books might completely replace mass markets in time, but just as the music industry still releases CDs and even vinyl for collectors, nice trade paperbacks and hardcovers will stay too.


message 11: by Scott (new)

Scott Palmer | 2 comments The publishers are clearly just greedy and/or incompetent. Why can't I own my copy of an eBook? Why can't I lend it? Why does it cost so much given there is no physical manufacturing or shipping? I've seen Kindle books on Amazon that are priced higher than the paperback. When that happens I instantly look for a pirated copy and I don't feel the least bit guilty about it. They screw us, I screw'em right back.
If I could pay the author directly and by-pass the publisher I would. Pretty soon the publishers will realize just how obsolete they are.


message 12: by Apsalar (new)

Apsalar | 29 comments KevinB wrote: "Why would those days be over? I'm giving away paper books all over the place ..."
That is not always the case with e-books, if they have DRM on them. It seems more like you borrow a copy from the publisher for an unknown time or buying a license for it. You cannot move them to whatever, or to however many devices you want.


message 13: by Paul (new)

Paul | 99 comments Not sure why anyone would want/need electronic book sales to be more than than they are.
Long live hard copy.


message 14: by Aildiin (last edited Dec 28, 2012 02:20PM) (new)

Aildiin | 121 comments Actually royalties have started to change.( someone mentioned them earlier in the thread)
On a print book the author gets between 7.5% and 15% depending on the book format ( lower percentage for paperbacks, higher for hardcover).
For e-books a royalty rate of 25% is slowly becoming the norm.
So an author gets more than twice as much money when you purchase an e-book over a similarly priced paperback..,( so if all you care are authors as some claim here, buy e-books)
The royalties rate are even a lot higher for Amazon published authors where they are either 35% or 70% depending on some conditions and countries. But Amazon tends to push its authors to price their book lower...

Personally I don't purchase e-books over 9.99$. ( I have however paid as much as 15$ for an advanced e-book copy ). But the main reason is that I have a backlog big enough that I can wait 1 year for the price to go down...

What most people do not realize is that the price of books be they print or e-books is not a function of the delivery media, it is a function mostly of time and of the popularity of the author... You pay more to get access to the book closer to its release date...( which from a marketing point of view makes sense, you spend money getting a book famous and you have to maximize your revenue during the window that the books is in the public eye. Basically you raise demand and then you cash on it, as demand lowers, so does the price).

Those nice hardcover that you purchase for 20$ over a 9$ paperback actually barely cost 2-3$ more than the paperback to produce. They may look nicer in your bookcases but their price is not a function of their production cost....

So if your argument is that you won't purchase an e-book at 12$ because of its production cost, well you shouldn't purchase a 20$ hardcover either, because the exact same argument hold there....

As for piracy, I won't go there as this is something I abhor and most the arguments used to justify are in my view fallacious...( I am entitled to read this book or watch this movie and if the access conditions/price do not satisfy me I will just get it for free at the author's expense...blah blah blah). Notice by the way that piracy can only survive if only a segment of the market does it, if everyone was doing it, there would be no market and no books or movies...


message 15: by Scott (new)

Scott Palmer | 2 comments "For e-books a royalty rate of 25% is slowly becoming the norm."

And that is the problem. The author did all the work, minus some editing and advertising. They should be getting at least 50% if not 75% or more. They probably will in time, as the stores themselves become the publishers. Amazon, Google and iTunes will soon make RandomHouse and the like nearly extinct. I doubt they expected to take 75%.


message 16: by Aildiin (last edited Dec 28, 2012 02:51PM) (new)

Aildiin | 121 comments Scott wrote: ""For e-books a royalty rate of 25% is slowly becoming the norm."

And that is the problem. The author did all the work, minus some editing and advertising. They should be getting at least 50% if ..."


The e-store gets 30%, the author 25%, the publishers gets the remaining 45%.
That is a lot and in my view it will evolve more in the future( the publisher and the author each getting 35% would seem better) but the publishers will always retain a share as they do a job promoting the author and its books...( their main job in my view is actually finding the good authors among the bad ones, even if they are still human and sometime a good author gets through the crack but lets be realistic, we would not be talking of Joe Abercrombie, Peter V Brett or Brent Weeks without the publishers that discovered them and published their first book)

As much as I love Amazon published books, it is very hard to find good books among the mass of bad ones( it's one of the reason I joined GoodReads), especially when the only reviews are the ones you find on Amazon which are sometime very suspect..( just look at top rated fantasy books on Amazon kindle store to convince yourself, the top rated books are by Anthony Ryan, Karina Halle, Jeff Wheeler, Elizabeth Hunter and co and no offense to them, while their books might be ok ( I honestly have no clue) I think we can all agree here that they are not the best fantasy books of all time)


message 17: by Paul R (new)

Paul R | 43 comments the whole royalty schema for media - no matter if books, magazine or music is based on physical media. it is also very much based on clearing houses taking their cut as well.

for years we have waited for the companies to look at this new way of distribution and adjust not just royalties but cost. yet instead greed to hold and the decision was to keep the cost the same to the consumer- to keep royalties and profits the same as for physical.

i don;t condone privacy and will not participate in it, since this will end up costing the author of the work money.

however i have passed on electronic works due to DRM and either went back to the physical media or in cases where there was only emedia- passed - due to the cost being to high to justify


message 18: by Rick (last edited Dec 28, 2012 07:04PM) (new)

Rick | 932 comments It's amusing that people rail about DRM on this particular thread when MacMillan's Tor imprint is one of the few imprints in the Big Six to have gone DRM-free. And of course you can break DRM though that is technically illegal. The best thing publishers could do is drop DRM altogether, though. It helps no one but Amazon now and doesn't stop piracy. DRM is so easy to break that anyone who wants to fileshare books can buy the book and break the DRM in minutes - all it does is hurt those people who just want to read a book bought in Store A on a different ereader.

If publishers dropped DRM and came up with a licensing scheme that let independents sell ebooks without DRM it would help small bookstores and likely lead to an explosion of small, online specialty sites. Imagine a S&L Bookstore...

Many of the complaints about price seem odd to me though. Claiming that a book is worth less because it's digital places a lot of the value of a book in the paper it's printed on. For most books, this seems weird... really, is most of the value of an $8 mass-market paperback in the physical book? Or is it in the words on the paper? I'll grant you that limited editions and specialty printings are different, but most of the books printed today aren't artisanally crafted and to fetishize the artifact vs valuing the words feels like an inversion of priorities.

Sure, ebooks have disadvantages compared to paper... but the reverse is true too. In an ebook, I can highlight a term and search for its definition and depending on the software, a Google or Wikipedia article about the term. I can have thousands of books in something that is the size of a trade paperback. Right now I don't know where my copy of The Hobbit is nor can I find Old Man's War. If those were digital I could easily lay my hands on them. Disaster strikes and the house burns? Get a new iPad and redownload everything.


message 19: by Aildiin (new)

Aildiin | 121 comments The production cost of that paperback is around 1$.
You are totally right in your analysis.


message 20: by Paul (new)

Paul | 99 comments Darren wrote: "Paul R wrote: "i don;t condone privacy and will not participate in it, "

Get that on a t-shirt!"


"I don't condone piracy and will not participate in it." must be a better slogan for a tee shirt in this context? ;)


message 21: by Aethelberga (new)

Aethelberga | 35 comments Rick wrote: "Many of the complaints about price seem odd to me though. Claiming that a book is worth less because it's digital places a lot of the value of a book in the paper it's printed on. For most books, this seems weird... really, is most of the value of an $8 mass-market paperback in the physical book? Or is it in the words on the paper?..."

Fine, but don't charge me more than the cost of a paperback. I'm a little tired of going on to Amazon & seeing the lowest available price of a paper book at 8 or 9 dollars & the ebook at $14.


message 22: by Paul R (new)

Paul R | 43 comments That is where i have a problem with the price model. I want electronic media- yet the pricing scheme is getting to dear.

i won't pirate- so that leaves me not buying, it's the same with all e-media- as they increase prices the people who do not pirate- just stop

the sales drop and they blame piracy and not their greed.


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