For eons I’ve seen e-books as potentially a mass phenomenon, aided by low prices. So when the pros at MarketIntellNow (yep, the guys advertising in the upper right) showed up with a market survey saying as much, I was delighted.
The company’s Marie Campell told our Robert Nagle in a Q&A: “We believe that the Publishing Industry will very quickly discover that they’re blessed with ELASTICITY. That is, the lower the prices of e-books up to a point, the more net revenue they drive (thus the cannibalization effect on traditional book sales will be overcome). E-books may start around $10.00 each, but come down in the 2008-09 timeframe and approach $5.00.”
And now it looks as if real life could well be backing up Marie’s conclusion if you go by statistics from Amazon’s Kindle editions, where just 27 of the 1,000 top bestsellers sell for more than $10 or more. In fact, $5 e-books on Amazon are already rather common.
Tim O’Reilly vs. MarketIntellNow
That said, publishers of academic or technical books, traditionally priced higher than typical trade books, may feel a tad threatened by the new business model. In a rebuttal to MarketIntell, Tim O’Reilly, deservedly one of the tech world’s favorite publishers, says the real constraint in the end, after an e-book shakeout, will be readers’ time—not simply the prices they’re willing to pay.
And you know? In many cases he could be right for the kind of book he publishes. But as Jane and friends at Dear Author can tell you, some fan of romance fiction can easily go through dozens of titles in a month. That could mean lower prices and maybe even ad-supported “free” in the cases of books where the numbers are high enough—something that improved displays and the ease of online distribution could make possible.
Granted, Tim observes that after “paperbacks became the dominant format, outselling hardbacks, prices rose substantially for both paperbacks AND hardbacks. They didn’t keep falling. So if prices fall to $5 or less, as predicted, you can equally bet that they will rise if and when the electronic format becomes dominant.” But remember, that happened within the P world where barriers of entry are much higher than with E and where distribution is endlessly costlier.
The special case of academic and technical books
As for academic and technical books, I’m hoping fervently that Tim and other publishers in that area can thrive—my bet is that O’Reilly will be among the survivors. But he’ll face his challenges. Publishers may not always be able to price a book just according to costs and what they hope, and I hope, will be a fair profit. Knowledge-based books in certain technical specialties will ultimately face stiff competition from Wikis and other crowd-sourced efforts, not to mention content put online for free by institutions for promotional, charitable and other purposes—or maybe even by academics who in the past might have turned to traditional publishers.
Frustratingly for publishers, the information in tech books is often in bits and pieces—meaning that much of it may end up on the Web, maybe even through techies’ own discoveries, without any publishers or authors involved. If nothing else, Robert Nagle notes how tech books lend themselves to “modularization.” As for information developed from the grassroots, it won’t come with the pedigrees from O’Reilly—yes, reputation counts—but user ratings online will help address that issue somewhat.
Bottom line
Ultimately , prices of books and other texts, of all kinds, will be determined not by what publishers and authors want but by what consumers are willing to pay. Tim, I wish it weren’t so. Like you, I’m a fan of subscription plans, letting readers graze on the exact information they need; and I am highly appreciative of the wonderful work that O’Reilly is doing in that area. But even subscription prices may be influenced by competition from “free.”
In the end, I’m hoping, like Tim, that people will experiment with all kinds of business models and see which works best for which kinds of books. So far, however, the sellers and buyers in the Kindle Store have voted for books at prices far lower than many would have expected (I just hope that Amazon doesn’t spoil the party by jacking up various transaction-related prices).
One solution
One way to help keep publishers in the game would be a well-stocked national digital library system in the TeleRead vein, or a nonprofit equivalent, that would pay fair compensation to content creators. It would cost a speck of the price of Iraq War, with effects just as long lasting and infinitely more positive.
Update, 2:25 Eastern: One critic of the IntellNow poll notes that respondents self-selected themselves. I agree that’s a flaw. But the poll is consistent with sentiments repeatedly expressed by TeleBloggers, who, even if they are not impoverished, want their e-books cheap. I see many e-book readers—lots of our visitors, for example—as a whole new audience for publishers. I don’t think that brick-and-mortar bookstore customers, either, would be representative of the potential market.
Technorati Tags: Tim O’Reilly,ORA,O’Reilly & Associates
Distribution is endlessly costlier in print? You’ve got to be kidding? Amazon is replicating exactly the cost structure of print for ebook distribution. And anyone who’s done their own electronic infrastructure realizes that it is quite costly.
And have you really done the math on how many copies a free book would have to have read in order to generate the kind of revenue that is now generated by print? For the sake of argument, take 50,000 copies of a paperback romance novel costing $5, say, generating $2.50 per copy, or $125,000, to the publisher. Now consider the same book, free, with an ad on every page. Assume the book is 300 pages, for 50,000 copies read, you get 15 million page views. At a very generous $1 per thousand impressions (and Romance novels are probably worth less than that), you get $15,000 in potential ad revenue. So you need to have at least eight times as many readers to break even.
And that $1 is very generous. Ads would be more likely to be cost per click (a la Google), with a few pennies per click, and quite likely generating only a few hundred dollars from all those page views. Suddenly, that 50,000 copy book needs millions of readers to break even with its current revenue.
And don’t get started on how you don’t have the cost of paper etc. You now have the cost of ad serving, and middlemen who will take a significant fraction of anything you generate.
I’m sure that there will be ad supported books, even successful ad supported books. But don’t expect it to become the norm.
> Suddenly, that 50,000 copy book needs millions of readers to break even with its current revenue.
But, Tim, you’re forgetting about the ever-hopeful ‘tude of trade publishers. They will just keep pumping out books in hopes of being the big exception, whatever the biz model. Notice the obscene advances they pay? I’m not saying that’s right or sustainable. But it’s the mindset of typical trade publishers, who, alas, are not as savvy as you or some other tech publishers.
Re math: You say the regular model brings in $125,000 with 50,000 sold and the ad-supported one brings in $15,000. So if you can get 10X the number of readers, you’re up to $150,000. And you’re at 500,000 readers–or well below the “millions of readers needed to break even with its current revenue.” Even with your fudge factors, my hunch is that a million might do the trick. My apologies ahead of time if I’m missing something.
I of course agree with your big point that advertising isn’t for every book. Maybe even not most books. But it should be there as an option–ideally with a pay alternative so readers can turn the ads off.
As for costs, many small publishes are slashing them to the bone by eliminating DRM in cases when they have a chance. Certain costs such as editing won’t and shouldn’t go away for any book, but in general E has the chance to be cheaper.
Happy holidays,
David
I have argued elsewhere that the correct price comparison for an eBook is not a new glossy printed edition but a tattered old copy in the used paperback store — or on Amazon or AbeBooks. Like an eBook, it requires seeking out by someone who is particularly keen to buy it. Like an eBook, its appearance is secondary to its content. Like an eBook, it competes with millions of other items that may have been published years or decades ago, not the few modern volumes that a new-book store can afford to place on a shelf. And like an eBook, if the price is too high the user will look into libraries, join BookMooch, contact friends and generally do their best to avoid paying for it, usually with success.
One eBooks drop below the Amazon used price plus shipping, and appear with more titles than I can currently browse at a local second-hand bookshop, THEN things will take off for me.
“And you know? In many cases he could be right for the kind of book he publishes. But as Jane and friends at Dear Author can tell you, some fan of romance fiction can easily go through dozens of titles in a month.”
I’d think the tech books would be easier sells. I have dozens of O’Reilly books and only handful have I ever read cover-to-cover. If they were, say $1/apiece, I’d buy all of the hacks books, for example, just to have for reference purposes.
I know people who do use it, but I’ve never been a fan of Safari. I don’t think most people want an ongoing subscription model to a single publisher anymore than they’d want an ongoing subscription model to a single label (fortunately, my institution picks up the tab to make Safari free to me, so I don’t have to make that choice!)
David —
And tell me again how many books are going to get a million readers?
BTW, my point isn’t that ebooks won’t go for $5 or less, it’s just that publishers are smoking something if they think that will increase volume enough to offset the reduced price!
Tim, thanks very much for your further thoughts. Big points:
1. Your million-book mention is missing a verb. SELL. That’s the current, known model. Free ad-supported books by name writers might find new audiences. Please note, meanwhile, that you and I are not as far apart as you might think. While I believe it’s risky for the industry NOT to experiment with ad supported books, they’re not a panacea. Not every title is suitable. Most probably aren’t.
2. Sustainability with low prices won’t be easy but it isn’t impossible, either, and publishers really should experiment, given all the free content competing for readers’ time. As I’ve said elsewhere, low-cost books may result in new readers for publishers—far, far beyond the usual bookstore patrons. Book spending per capita is pretty pathetic in the U.S. Imagine the chance for people to get highly publicized best-sellers for much less than they have in the past. Plus, they can download them instantly when they’re promoted on Oprah. Not bad in terms of potential. Yes, there’ll be bombs–I’ve already talked about publishers’ hopes vs. actual successes in the context of “free” and it applies to “low-cost,” too–but some extra-affordable books could actually take off in a major way when the tech is simple and attractive enough. If publishers don’t splurge on advances, they may stand a chance of sustainability in time even though most publishing won’t ever be a high-profit activity (never really has been in the majority of cases). Also keep in mind that publishers currently must try hard to get the stores to stock the big p-books–planning months ahead in many cases. With E, an obscure low-advance title can instantly be a best seller without a risk of running out of stock. Result? More efficiencies and chances of success.
Again, no miracles promised via ads or low prices, and I totally agree with you about the BW piece being off target. But I don’t think the situation is as gloomy as you think.
I’ll welcome your further responses. Thanks for dropping by.
David
Jon Jermey, I don’t get your comparison at all. “requires seeking out by someone who is particularly keen to buy it”; so you’re talking about something long-tail; hard to find.
It seems to me that many people looking for a specific title, would pay more for instant gratification, to save the effort of poking around used bookshops, or the risk of getting an unusably tattered copy online.
That’s notwithstanding the people for whom poking around used bookstores is a pleasure, of course.
Wishing doesn’t make it so.
How many authors will sign up to be part of the experiment, David? Publishers, even those open to the suggestions you make, will need to move into these areas gradually and with adequate financial failsafes. It is not going to happen overnight.
Bryan: You mean ad-supported books? It’s already happening at Wowio, which, however, is unfortunately stuck on the PDF format. No piracy problems, though. As for a gradual approach for those wanting it, I’m all in favor of it. I’ve never said things need to happen overnight. Wowio, as far as I know, is offering just older titles (from majors) or books from smaller publishers. With the right book, I’d sign up in a flash. Perhaps writers could try traditional models for individual books, then switch to the ad-supported one when sales fell off. I’d welcome this additional choice. Happy holidays. David
Reality Check for everyone: There are *already* free books. I get perhaps thirty of them *every month*.
Local public library. (Which is now doing ebooks! And audiobooks — and video — all online/downloadable.)
Let me tell you: Many of those now-free thirty would be *purchases* at $5/each in e form. At $15-$20 in e? I’ve got my library card.
David:
Well, I was commenting both on ad-supported and your arguments that ebook should drive prices down to the $5 range while eliminating DRM. Although you say you’re in favor of gradual change, you’ve become almost a Johnny One-Note in your criticism of the Kindle, which is the next step in the gradual change we’re all hoping to see.
So much so, in fact, that I may soon stop bothering to keep up with TeleRead. It’s starting to feel pretty strident around here, and I say that with respect.
Bryan, I love the positives of the Kindle and am hoping that the interface will work out for novices. Great way to popularize e-books, yes! Kindle pricing does seem to be progress. It’s the lockups (as reported by others) and eBabel approach and the privacy and DRM issues that I have problems with. The predominantly negative Washington Post review is actually tougher on the Kindle than I’ve been. Hang around. We may agree on the next Big Device. Happy holidays. David