Posts Tagged ebooks

Shakeup, Shakedown

Today is Monday, April 16th.  The 11th, with its suit from the DOJ against Apple and five of the Big Six publishers is most of a week behind us, and lines are still being drawn in the sands.  In the end there’s one guarantee, this entire issue is bringing the future of publishing to much more public light than anything has in a good long time.  That’s probably for the best, it’s good that there is an informed public seeing, perhaps for the first time, just how their sausages are being made.  Even if it comes hand in hand with many of the predictable questions about why digital books should be so “expensive,” considering there’s no price to printing.

So a rundown of what I’ve been reading and what I’ve been thinking, starting with what’s turning into one of the bigger lightening rods, Charlie Stross’s weekend post “What Amazon’s ebook strategy means“.

And the peculiar evil genius of Amazon is that Amazon seems to be trying to simultaneously establish a wholesale monopsony and a retail monopoly in the ebook sector.

He makes an interesting point about DRM as a player in this game.  I’ve always had a rather funny feeling about DRM, embedded technology intended to prevent pirating of copyrighted digital material.  As a producer of intellectual property (even if it’s not all that intellectual), I’ve got a stake in the protection of copyright.  However, in the end, most DRM technology has proven only to make it difficult for legal owners of material to enjoy it, rather than stemming any actual piracy.  DRM on music, DRM on eBooks, DRM on movies, all are non-trivial to overcome, but all are also nothing more than annoyances for those who know their various workarounds.  So in the end, DRM misses its mark by hindering not the pirate but the casual user.

Stross says that DRM allowed Amazon’s near monopoly of the eBook market, they very one that the alleged collusion of Apple and the publishers was meant to combat.  It was the DRM/wholesale one-two punch that created the problem.

So, because Amazon had shoved a subsidized Kindle reader or a free Kindle iPhone app into their hands, and they’d bought a handful of books using it, the majority of customers found themselves locked in to the platform they’d started out on. Want to move to another platform? That’s hard; you lose all the books you’ve already bought, because you can’t take them with you.

By foolishly insisting on DRM, and then selling to Amazon on a wholesale basis, the publishers handed Amazon a monopoly on their customers—and thereby empowered a predatory monopsony.

Amazon could take a loss on its sales of eBooks purchased under a wholesale basis (this loss is not in question), then have books locked to the Kindle thanks to the DRM.  Publishers didn’t entirely understand how the DRMs would work, but they wanted them because they would prevent piracy.  This was the advent of the modern eBook market, where most selling sources lock you into one format readable on only one reader or a family of readers.  Which means that consumers aren’t buying books, they’re buying licenses.  Stross sees the next move being the death of DRM.  Even as a content creator, I’m for this, as I don’t believe there would be any significant uptick in piracy, but there would be a significant uptick in availability of intellectual properties.  This is a net positive.

Want a dose of pessimism?  Baldur Bjarnason in his post Today is Not Tomorrow (reblogged with some additional commentary by Charlie Jane Anders on io9) looks at what the effect of an Amazon ruled eBook market could have on eBooks as a whole.  He identifies five problems:

  1. No margins (mostly due to hardware)
  2. No moat
  3. Subsidised hardware
  4. Integrated silo
  5. Specialised user-base (expert readers)

Basically by creating a specialty market, like the rise of the comic book store, Amazon ends up bracketing off a portion of the market that is more than happy with the developments, but makes it harder for someone new to get into reading eBooks.  They’re not on the newsstand, so to speak.

But, having captured the expert reader populace, Amazon is in the position to squeeze the market dry as it slowly fades away over the next twenty years. They won’t have the margins to expand novel reading and the Kindle is in many ways as unfriendly to casual readers as a comic book store is.

The Kindle as a device is a shibboleth for expert readers and as such drives casual readers away. ‘Why should I buy a Kindle? I only read a couple of books a year.’ It’s a symbol for a clique they know they won’t ever be a member of.

A free app, on the other hand, is a no-brainer decision for most people. They’ll download it, just in case.

But none of that addresses the problem of renewal once novels are removed from the public sphere. Comics have taught us that you can’t rely on parents training their children to love a medium, it needs to be instilled through exposure. The industry needs strong, healthy, and vibrant libraries. Ask any adult expert reader and they’ll all rave about how much time they spent in libraries as kids.

And here we get into another core issue, one that I don’t talk about much.  Libraries.  Publishers serve libraries in a way Amazon as yet doesn’t.  This makes sense.  Publishers support libraries because they benefit from people stumbling across new and interesting stories.  Amazon doesn’t because libraries buy one copy once and there’s no profit margin in that.  Publishers envision better profit through support, Amazon through neglect.

So what do we do?  We the writers who are just pounding away on keyboards and seeing the publishing world outside our windows going to hell in a handbag?  We do what we should always do: listen to Chuck Wendig on Prepping For The Publishing Doomsday:

Calm down.

Breathe easy.

In. Out. In. Out.

Maybe have a drink. Take a walk. Sip some oolong tea.

Then, when you’ve relaxed: keep writing.

Stay the course.

Which is what I’m going to do.  Because it’s all I can do right now.  Anything else is a course to madness, or worse, distraction from writing.  So yesterday I finished the rough draft of Chapter 34.  The outline goes 38 chapters plus an epilogue.  So I’m just going to keep writing it.  Then editing it.  Then see what comes when it comes.

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The Free Dilemma

I got an interesting reply today on my post about the 99 cent price point, and it made me do some reading and research.  First, a chunk of the reply:

But didn’t you hear: FREE on Amazon’s Kdp Select is the new 99 cents! These people have tripped over themselves in that race to the bottom, that race to nowhere, and are offering Amazon Select EXCLUSIVITY on their ‘work’ in exchange for being able to give it away for free.

I had heard, but I forgot about it.  Largely because it didn’t affect me at the time, since I’ve pulled my one and only self published eBook from all distribution channels over quality concerns.  However, I did some more reading and while…wait.  Crap.  That’s a picture of Admiral Ackbar I just posted over on the right hand side.  Damnit, that’s going to give away my entire thesis.  Alright, play it cool, maybe no one noticed it.

Ahem.

I did some more reading and while it’s a program that doesn’t directly affect me right now, I do have some thoughts.  Largely because it plays into a few things that I like to talk about: math, innumeracy, and psychology.

First off, what is KDP Select?  It’s a new program that eBook self publishers can opt into that allows Amazon Prime members access to their books within the Kindle Owner’s Lending Library program.  What is the Lending Library?  It’s a new carrot Amazon has offered to lure Kindle owners into Prime membership by offering them the ability to “borrow” free of charge one Kindle book per month from a limited catalog of all titles.  It’s a fine benefit, and the one-a-month limit makes a certain amount of sense.  Amazon has, in general, provided some fantastic value-added to the Prime membership since it’s initial launch offer of free two-day shipping.

To compensate for these free downloads, Amazon has created a pool of money, promising that it will dip no lower than $500,000/month for the duration of 2012.  Each month this money is split between those authors who have books within the KDP Select program using a formula that I’m going to quote directly from Amazon’s KDP Select Terms and Conditions (REQUIRED reading for anyone considering participating):

We will establish a fund on a monthly basis and you will earn a share of that fund for each of your Digital Books included in the Kindle Owners’ Lending Library Program. Your share will be calculated as the number of times that the Digital Book has been borrowed during the month as a percentage of the number of times all KDP Digital Books have been borrowed, multiplied by the fund amount we establish for that month. This share is your total Royalty for borrows of that Digital Book through the Kindle Owners’ Lending Library Program. For example, if the fund for a particular month is $500,000, your Digital Book is borrowed 1,500 times, and all participating Digital Books are cumulatively borrowed 100,000 times, your Digital Book will earn $7,500 ($500,000 x 1,500/100,000 = $7,500). We will determine in our sole discretion the criteria for determining which borrowing events qualify for this calculation. A maximum of one borrowing per customer will qualify. We may publically announce the top Digital Books borrowed, including the author, publisher, number of borrows and KDP Select fund royalties earned.

This is odd explanation for what is a complicated formula to begin with.  Basically they look at what percentage of all KDP Select loans your books represent, and you get that same percentage of the pool money.  The sample math then shows someone earning $7500 based on two entirely hypothetical numbers.  While there’s no point where Amazon states that this is how much you might reasonably expect to earn, I’m rather uncomfortable with them throwing around such a generous number in their hypothetical math.  This is some of the initial bait that Amazon is laying down.  The next will come at the end of the month.

See, December is the first full month for the program, so it’s the first time these loans will pay out.  Expect to see some people report some gaudy numbers, as I suspect there are a lot of people taking a wait-and-see approach to this new deal.  However, there is a very limited resource at play here.  Thanks to the one-a-month limit, the total number of monthly loans has an absolute cap equal to the number of Amazon Prime members who also own a Kindle.  This means that, as more writers and books jump into the program, the pool will get diluted.

Now, the cap is going up.  One of the goals Amazon has in this program is for more Prime members to buy Kindles, and vice versa.  More and more Kindles are being bought, many people just got them for Christmas (some, if they got a Fire, also got three months of free Prime membership, so three chances to borrow).  The ceiling is rising, but it’s still a ceiling.

This creates an interesting situation.  First, it means that a participating book is facing wider competition for a slowly growing, finite number of borrowing slots.  Second, it means that the same number of borrows, month to month, might produce widely different payout.  Let’s say that a lot of people just got a new Kindle Fire for Christmas, and discover the Lending Library in January.  This sends the number of borrows up by 20% from Amazon’s math above to 120,000.  This means that each borrow is no longer worth a $5 royalty, but now only $4.16.

The $4.16 calculation assumes that the pool remains at $500,000.  I will give Amazon some credit.  When they launched Amazon Studios, they were promising minimum payouts for the first year, but those payouts have actually increased.  By the end of 2012 the pool of money for KDP Select may very well be closer to $1,000,000.  Or it may still be $500,000.  Or the number of downloads may be such that, even if the pool of money does double, the worth of each loan goes down by more than half.  Everything is an unknown right now, even how much these payouts will come to in December.  I can’t say people won’t make significant money.  Amazon can’t say people will.

But here’s where I get uncomfortable with the deal.  Again, from Amazon:

1 Exclusivity. When you include a Digital Book in KDP Select, you give us the exclusive right to sell and distribute your Digital Book in digital format while your book is in KDP Select. During this period of exclusivity, you cannot sell or distribute, or give anyone else the right to sell or distribute, your Digital Book (or content that is reasonably likely to compete commercially with your Digital Book, diminish its value, or be confused with it), in digital format in any territory where you have rights.

There’s the price you pay for entering the program.  You cannot offer the book on Smashwords, have it distributed to the Nook or iBook stores, or sell it directly on your website.  Amazon has become your publisher, and only they may distribute your eBook.  Additionally, there’s a non-compete clause in there I cannot even begin to understand or speak about, so I instead refer to the KDP Select post over on Writer Beware.  It’ll be hard to say what Amazon will consider as “likely to compete commercially,” diminish value, or create confusion until such a time as they invoke this clause.  It also has Smashwords, which has a growing stake in the wide distribution of eBooks to multiple sales venues, accusing Amazon of predatory practices.

So yes.  I started this post with a picture of Admiral Ackbar, largely because I look at this and my only reaction is…It’s a Trap!  But honestly, this is another one of those trials of being a writer looking to self publish, right up there with setting your price point and finding the best way to make your book as polished as possible.  Many writers will determine this is a good way to promote their books, and many authors will get good promotion out of this program.  Many of the authors jumping into this program are offering just one novel, whether a stand-alone or the entrance novel into a series.  However, as with any legal agreement, it’s best to know exactly what you’re getting into and what the ramifications are.  Especially with that exclusivity clause that I’m certain at least some writers will fall afoul of entirely by accident.

Let’s go back to the math for one more interesting, and I stress entirely hypothetical, thought experiment.  It’s possible for the pool of money to increase, for an individual author’s readership to increase, but for that writer’s compensation to decrease.  Here’s how it works.  Let’s use Amazon’s math from above: 1500 borrows for a book out of 100,000 total borrows.  Which results in a $7500 payment.  Let’s say the number of borrows quadruples, so Amazon moves to double the money available to $1 million.  Let’s also say the author improves their borrowing rate by 50%.  That means they have 2250 loans out of 400,000 total.  This is 0.5625% of all loans, which means the author is now making $5625.  In spite of everything going up (overall popularity of the program, payment pool, and number of loans for the author), the author’s compensation goes down 25%.  It makes this a gamble.  And the paradox here is that the program will be better for early adopters the less popular it is.  Hell, in theory if only one person signed up one book he or she would get a cool half million.

So be smart, consider the risk versus reward.  And if you jump in?  I wish you nothing but the best of luck.  I’d be thrilled if I’m being unnecessarily pessimistic about this program.  But, for now, I write to you firmly from the wait-and-see camp.  And keep an eye on Writer Beware in the following months, as there are several self published authors who are experimenting with KDP Select and have promised their experiences to the blog.

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Playing Dirty vs Playing Stupid

First, some required reading.  The Chicago Tribune has an opinion piece up looking at how publishers should be tackling declining print sales in the light of eBook readers.  Give it a read, it’s what I’m about to talk about.

Back?  Okay, good.

There is so much I reject about the premise of this piece that I hardly know where to start.  Perhaps breaking down my objections into a list.

Point the first.  Publishers don’t act as a monolithic force.  They just don’t.  They haven’t.  And I suspect they won’t.  And there’s never in my memory been a campaign generically for books.  That doesn’t mean that there shouldn’t be, but it’s such a vague thing to be selling to the American public.  The comparison made in the article is to the pork council sitting down and raising pork’s public acceptance with their “Other White Meat” campaign.  But here’s the differences.  Pork is a much more specific product than books.  And there is a single monolithic entity that represents the entirety of the pork industry within the United States.  Books are not pork.  If anything books are meat, or perhaps food stuffs in general.

So while Pork: The Other White Meat worked, I don’t think that Meat: It’s Made of Animals or Food: That Stuff You Eat is as workable of a campaign.  And that’s partially the problem with the idea.  The piece is looking to create an awareness campaign for a broader category of commercial goods than has ever been made before.  Perhaps the closest example is Microsoft launching general “buy a PC ads,” but in the end those still boil down to being ads for Windows, not ads for PCs in general.  Any attempt to more generally advertise a broad market sector is typically done buy a retailer.  You don’t have a conglomeration of companies saying Movies: Come Watch Them!  No, you get AMC Theaters advertising.  You don’t get Electronics: Plug them in and Use them!  No, you get Best Buy or HHGregg ads.

Which really comes into point the second.

Point the second.  This isn’t a publishers issue, this is a book sellers issue.  The fight here is not publishers vs Kindle.  Publishers ARE Kindle.  Yes, there are now channels open that allow for easier direct publication of titles onto the Kindle, but those are a miniscule share of the market right now.  Books are made available for Kindle by publishers.  And in the end, publishers still make the money from them.  In some cases they’re making MORE money due to slightly less overhead.  So there is absolutely no financial advantage to a publisher advertising against the Kindle, much less publishers as a broad category doing so.

This is a book sellers issue.  If you want people advertising FOR books and AGAINST Kindles, it’s going to have to come from the brick and mortar stores.  This isn’t Publishers v Kindle, it’s Book Sellers v Amazon.  Just as it has been for the last decade.  Sure people are buying books directly from the Kindle, but I see no solid evidence that the sales losses are coming predominantly from retail sellers rather than from Amazon themselves.  If it is, as I suspect, “hurting” Amazon paper sales more, then it’s a net wash to the book sellers, and it means Amazon is probably pushing more product in the end (don’t over estimate the power of impulse buying).  If it is coming from the book sellers, the remaining behemoth is already fighting back with the Barnes & Noble Nook.

So in the end what we’re left with might not even be book sellers vs Amazon, but independent book sellers vs a tag team of Amazon and Barnes.  Which really has been the state of things, again, for the last decade or so.  And it’s a fight a lot of them initially lost.  But plenty have their niche, but that doesn’t mean that books are a niche product, which brings me conveniently to point the third.

Point the third.  Books won’t become vinyl unless they’re treated like vinyl.  Yes there’s still a market out there for records, actually honest to god literal records rather than “records” as a term for any music.  And the piece talks about them.  Talks about the audiophiles that love them.  But here’s the trick.  Even with audiophiles loving records, they’re a niche market.  Super niche.  You don’t have big box record stores anymore.  Big box music stores maybe carry a few dozen, usually hidden where only the chosen know where to find them.  Modeling books after vinyl when trying to craft a campaign to “save” books really just says that books have already lost.

They haven’t.

The death of Borders isn’t the death of books, it’s a result of years of mismanagement and ignoring problems at hand.  It could have happened to almost any company.  However, since it happened to a big box book store at the same time as the rise of Kindle makes it easy to paint this as Electronics-1, Books-0.  But that’s not right.  That’s not the score at all.  Barnes and Nobles, which actually approached the change in the book selling market intelligently, is doing just fine.  Their stock isn’t where it was, but it certainly isn’t falling into the abyss.  Those independent stores that survived the advent of the Big Box are fine.  Books are fine!  People want them, people buy them.

Do they buy as many?  Perhaps not.  But let’s get back to impulse buying.  People now have the ability to buy books right at their fingers.  Someone with a 3G Kindle can, on a whim, buy a book almost everywhere.  This is going to increase sales.  Yes, they’re electronic sales, but people are going to be reading, and they’re going to look for books when they want to continue on a certain subject or author and it’s not available electronically.  This isn’t the death of books.  Books aren’t in trouble.  Books don’t need some slick new pro-ecology message to stay alive, some new ad campaign.

Books: Those Things You Read.

Book sellers just need to be smart, they need to recognize that selling electronic readers is selling books.  And many have.  And they’re doing fine.  Borders killed itself, but the industry lives.

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