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E-book models
Feb. 1st, 2010 12:28 pmWhat niche should an e-book occupy?
People buy hardcovers for two reasons (aside from gifts): because they want a nice copy, or because they want it earlier than they could get in in paperback. The first market shades into people who join the Folio Society, the latter into people who buy Baen E-ARCs.
Macmillan's position in the argument with Amazon amounts to saying: if e-books are to be sold at the same time as hardcovers, then they should share some of the premium-price character of the hardcover because, if they don't, then they will cannibalize the hardcover market in a way which will reduce the overall viability of the market, period.
I will note that publishers obviously consider the main market for hardcovers to be those buyers who want it now, as witnessed by the fact thet the quality of HCs has dropped over the last several decades (perfect binding, paper rather than cloth covers -- about the only thing that has improved is the use of acid-free paper). In essence, the higher price of HCs is a premium paid to be an early reader.
I can think of two alternative futures, at the extremes, for the e-book market:
1) Provide a premium service (immediate availability! portability! searchability!). The biggest fly in the ointment here is DRM, and what would make some sense would be an arrangement whereby sales in the first N months of publication have a DRM which will expire automatically after the period is up (realistically, via allowing free replacement with a non-DRM'd version, to avoid hijinks with people playing with system clocks). This gives the purchaser a long-term purchase rather than a crippled licensed version.
Under this model, e-books cannibalize the HC market and come out on or before (see Baen e-ARC for an example) the hardcover publishing date. Hardcovers become a premium niche (since print runs will decline, cost per copy will go up) -- and I'd hope that this would be reflected in better production values (chain binding and better covers, maybe?). More likely, hardcovers, and maybe trade paperbacks, disappear for a range of products.
2) E-books become the discount end of the book publishing business. They get released after the HC sales have begun their downward trend, at a price point that either competes directly with or undercuts the paperback market. The HC/TradePB industry remains the same, essentially, with some possibility of the MMPB industry dying out. Note that this works well only if e-book readers drop in price and rise in popularity to a point of becoming ubiquitous. Note also that this kills off second-hand (as opposed to antiquarian) bookstores.
What Macmillan is proposing is basically a combination of the two models -- prices dropping as time goes on. The overall aim of this model -- whether it's achievable or not -- is to have the HC and MMPB markets survive with e-books coexisting. The place where they take over is in covering the period when books go out-of-print.
When I was an editor (long ago) in professional publishing, we had a couple of digest services which were essentially overruns of some volumes from a larger service (The Canadian Abridgment, if anyone cares) with different front matter and covers. On standard P&L calculations, these books lost money (low subscriber numbers). When we proposed discontinuing them, the President of publishing (who had been an editor of the Abridgment, many years before) pointed out that because these books were straight overruns we had to calculate P&L differently -- basically, omit the normal entries for overhead -- and that under this model they should be seen as profitable.
The same thing is currently the case with e-books. They are viewed as overruns; and since their unit cost is low, many consumers think that they ought to be dirt cheap. And since they are a tiny sliver of the market, the publishers can live with that (not happily) for a while. But if they start to replace any existing part of the market, especially the HC part, the buy-it-now part, of the market, then accounting for them changes.
The bulk of the costs of a book are up front -- overhead, acquisition, editing, proofing, typesetting. The HC run allows that cost to be addressed up front. As long as e-books are a small extra market they can support a model of being an "extra" revenue flow. However, as they become a main market they will have to shoulder a P&L role requiring more return to the publisher.
People buy hardcovers for two reasons (aside from gifts): because they want a nice copy, or because they want it earlier than they could get in in paperback. The first market shades into people who join the Folio Society, the latter into people who buy Baen E-ARCs.
Macmillan's position in the argument with Amazon amounts to saying: if e-books are to be sold at the same time as hardcovers, then they should share some of the premium-price character of the hardcover because, if they don't, then they will cannibalize the hardcover market in a way which will reduce the overall viability of the market, period.
I will note that publishers obviously consider the main market for hardcovers to be those buyers who want it now, as witnessed by the fact thet the quality of HCs has dropped over the last several decades (perfect binding, paper rather than cloth covers -- about the only thing that has improved is the use of acid-free paper). In essence, the higher price of HCs is a premium paid to be an early reader.
I can think of two alternative futures, at the extremes, for the e-book market:
1) Provide a premium service (immediate availability! portability! searchability!). The biggest fly in the ointment here is DRM, and what would make some sense would be an arrangement whereby sales in the first N months of publication have a DRM which will expire automatically after the period is up (realistically, via allowing free replacement with a non-DRM'd version, to avoid hijinks with people playing with system clocks). This gives the purchaser a long-term purchase rather than a crippled licensed version.
Under this model, e-books cannibalize the HC market and come out on or before (see Baen e-ARC for an example) the hardcover publishing date. Hardcovers become a premium niche (since print runs will decline, cost per copy will go up) -- and I'd hope that this would be reflected in better production values (chain binding and better covers, maybe?). More likely, hardcovers, and maybe trade paperbacks, disappear for a range of products.
2) E-books become the discount end of the book publishing business. They get released after the HC sales have begun their downward trend, at a price point that either competes directly with or undercuts the paperback market. The HC/TradePB industry remains the same, essentially, with some possibility of the MMPB industry dying out. Note that this works well only if e-book readers drop in price and rise in popularity to a point of becoming ubiquitous. Note also that this kills off second-hand (as opposed to antiquarian) bookstores.
What Macmillan is proposing is basically a combination of the two models -- prices dropping as time goes on. The overall aim of this model -- whether it's achievable or not -- is to have the HC and MMPB markets survive with e-books coexisting. The place where they take over is in covering the period when books go out-of-print.
When I was an editor (long ago) in professional publishing, we had a couple of digest services which were essentially overruns of some volumes from a larger service (The Canadian Abridgment, if anyone cares) with different front matter and covers. On standard P&L calculations, these books lost money (low subscriber numbers). When we proposed discontinuing them, the President of publishing (who had been an editor of the Abridgment, many years before) pointed out that because these books were straight overruns we had to calculate P&L differently -- basically, omit the normal entries for overhead -- and that under this model they should be seen as profitable.
The same thing is currently the case with e-books. They are viewed as overruns; and since their unit cost is low, many consumers think that they ought to be dirt cheap. And since they are a tiny sliver of the market, the publishers can live with that (not happily) for a while. But if they start to replace any existing part of the market, especially the HC part, the buy-it-now part, of the market, then accounting for them changes.
The bulk of the costs of a book are up front -- overhead, acquisition, editing, proofing, typesetting. The HC run allows that cost to be addressed up front. As long as e-books are a small extra market they can support a model of being an "extra" revenue flow. However, as they become a main market they will have to shoulder a P&L role requiring more return to the publisher.
