Makinson: e-books are the new paperback
09.02.10 | Benedicte Page
Publishers need to "keep a tight control of rights and a measure of authority over pricing" if they are to ride the tide of the digital revolution, Penguin Group c.e.o. John Makinson has said in an opinion piece for the Wall Street Journal.
Writing in the aftermath of the e-book pricing battle between Macmillan US and Amazon, and following Amazon's acquisition of digital rights for titles by authors including Steven Covey, Ian McEwan and Paolo Coelho, Makinson argued that publishers must have the right to access all channels and platforms for their books, and that there was limited room for flexibility on e-book pricing and author royalties.
Makinson invoked Penguin's past, calling the e-book a "direct descendent of the 1930s paperback" on the back of which Allen Lane began the publishing company in 1935. "Penguin's paperback idea eventually collapsed . . . because hardback publishers decided to publish the paperbacks themselves rather than to sell the rights. Penguin responded by moving into the hardback market and now all of the world's major publishers operate on the same integrated basis," he wrote.
"The integrated model has become universal because it works. The cost of acquiring, editing, selling and marketing a book doesn't change when one format, a paperback or an e-book for example, gains ground at the expense of another."
Makinson also argued that there was limited scope to play with e-book prices and royalties, saying: "The small cost of producing ebooks is viewed by authors as an opportunity for higher royalties and by consumers as an opportunity for lower prices. Fair enough. Yet the physical cost of a book - manufacturing, transportation and warehousing - is just under 10% of its retail price. Ten per cent is also, as it happens, roughly the average margin of the consumer book publishing industry and what's needed to keep investing in new writing and new ideas. So there's some room for discussion but not much."
Comments on this article
By Jim
By Bob That last paragaph is an exercise in self-delusion Why? Taking print out of the equation makes very little difference to the return. It would be different if a customer bought the eBook as well as a print copy but that will be as common as customers buying both the hardback and paperback versions.09 Feb 10 11:43
By Ancient Mariner
Allen Lane could freely set the price of Penguin Books in 1935. John Makinson has no such freedom today. Publishers should be extremely wary of attempting to maintain ‘a measure of authority over pricing’ in the UK, as he suggests. They may set a recommended retail price for e-books in the way that they do for paper editions. Other than that all they have is the power to play Amazon and Apple against each other in negotiations. The Office of Fair Trading will be watching every move. Publishers have given Amazon absurdly high discounts on paper volumes compared to high street booksellers in a Gadarene rush for market share and a place in bestseller lists. It will be interesting to see if this has boxed them in when it comes to agreeing terms for e-books. Macmillan may have won a temporary victory in the US and other big publishers may try to take a similar position for a while but the competition for that bestseller list slot does not change just because the format does. Sooner, rather than later, one will break rank and discounts to Apple or Amazon will creep up. Make revenue hay while the sun, very briefly, shines...09 Feb 10 12:03
By Bob
You assume that an author needs a traditional publisher, in order to publish an ebook. Ian McEwan etc.09 Feb 10 12:03
By Ancient Mariner
McEwan slipped through a sloppy contractual net. Publishers will insist on watertight rights where they can and, while they still have market heft with paper editions and in branding and marketing, their role will continue to be dominant for the next few years. After that, sure, anything's possible.09 Feb 10 12:41
By Noor Jahangir
Perhaps if they packaged a single P.O.D license (redeemable at a bookseller) with an ebook (mimicking the license to burn MP3 music to disk once), it would make the pricing more attractive to customers. I'm not a big fan of ebooks, though I have three on my pen-drive, and would rather buy a paperback than an ebook at the same price.09 Feb 10 13:40
By Noor Jahangir
As Bob says, what's to say writers will go to traditional publishers? There are a number of ebook only operations available now and authors may even see this as an opportunity to produce the book in PDF themselves (there are several off the shelf solutions available) and get a publicist to do the marketing.09 Feb 10 13:44
By Ancient Mariner
There seems to be a hint from one or two contributors to this thread that because something can be done it will happen. I think of the book trade as a constantly evolving symbiotic network of brands (large publishers and retailers) and micro-brands (smaller publishers, retailers, authors and agents) built on contracts and agreements designed to exploit copyright to mutual advantage. The market for 'indies' in books is perhaps less wired and responsive than, say, the music industry. Tensions between players (e.g. publisher/retailer and agent/publisher) have always existed and will become greater as competition increase, but the difficulties of launching new products and the branding and skills required to do it successfully remain, whatever the format. In a mixed format market, so long as publishers are able to maintain world rights in all formats they will have some advantage, for the moment, in bringing copyright product via the e-book route to market. Their problems will really kick in when other formats fade in a near fully Googled world.09 Feb 10 14:23
By Cry Me a River
"...the physical cost of a book - manufacturing, transportation and warehousing - is just under 10% of its retail price. Ten per cent is also, as it happens, roughly the average margin of the consumer book publishing industry..." Those are not percentages of the same sum, you'll notice. Dig behind the waffle and you can see that "physical cost" is about 22% of what the publisher gets for each book sold. Remove that cost and publishers will triple their margins. Bob, you are right. What this geezer is really saying: "We hope we can keep authors scared so that they don't realize they can do very well without us. As the biggest investor and risk-taker in any new book, the author should really be getting a much bigger share of the revenue, only up till now we publishers have had a stranglehold. And now we're frightened that those days are over - sob." Hand him and hanky, someone, and tell him where he can put it.09 Feb 10 14:55
By downbythebeach
One of the pitfalls of author's going it alone is thinking that they can go it alone, as in without an editor or proofreader. The problem with a lot, though of course not all, self-published books is that they are not as well produced. That will apply to ebooks just as much as physical books. Publishers are a vital part of the value chain, and will remain so for readers, and possibly even more so, as a filter, if there is a dramatic increase in self-published ebooks.09 Feb 10 16:15
By Cry Me a River
Hey downbythebeach - sure, but I didn't say go it alone. I said that it's time to put aside the old patrician idea of a publisher keeping everything secretive and just assuring the author they're getting a fair deal. "There's your money, now don't spend it all at once, will you?" I've heard publishers bring out the same old spiel every time, it sounds like BS to me, and my friends in publishing assure me it is BS. The contract between author and publisher is vastly skewed in the publisher's favour. Publishing a book is a joint venture between author and publisher. Fine, so let's see that all laid out transparently so that risk and reward are balanced out. E-books make the costs easier to evaluate. I suspect this is why we hear that note of blustering fear in pronouncements like this one from old Mr Penguin there - because fair is the last thing publishers want their deals to be.09 Feb 10 16:49
By downbythebeach
Cry me a River, I do understand your point, but I do think the relationship between authors and publishers is not that antagonistic. Fair enough, some publishers make large profits when they have some profitable authors on the list, but in those cases those authors are doing well also. As regards the breakdown of costs though, and I think it's actually easier to evaluate in the physical book model as it's well established, if you break it down, it might look something like this: A standard paperback, retailing at £10. The bulk of the sales will be to wholesalers at avg discount of 55%. So the publisher gets £4.50. Of this, the author might get 10% of cover price, or 20% net, so £1. (Publisher gets £3.50). After this there will generally be a percentage given to the distributor, aprox 10% of what is received, the £4.50, so 45p. (Publisher now has £3.05) After this there will be costs specifically related to that book, ie marketing, freelanced proofing, maybe freelanced cover and internal design. And then the printing. Build in also the costs, averaged out over the books on the year's list, of editorial, admin, and the various office functions and overheads, and the margins are actually quite tight. The publishers are not making much more, if any more, than the authors. And while the authors have written the book, the publishers have taken all the financial risk. And after all, it is a business, so it has to have some profit or there's no point. We hear a lot of talk about the big salaries of the big players in the big houses, but they are a tiny minority, and if they have risen to the top of their profession and oversee a big companies operation, those few large salaries are probably justified. And more, they at least give people working their way through the ranks something to hope for, in salary terms. The reason I am using the above model, rather than ebooks, is not to cloud the issue, but because a lot of costs relating to ebook development is being sunk into development, taken as a proportion of the fairly small amount of revenue that ebooks are actually generating for publishers. Finally, and sorry to go on, most publishers actually enjoy and seek to enjoy a good relationship with their authors. I don't think it's as altogether as skewed as sometimes gets portrayed here.09 Feb 10 19:29
By Oriel
I would definitely be up for buying an ebook+paperback bundle. The ebook for taking on holiday/on the train, and the paperback to curl up in a chair at home and as a last-ditch hardcopy backup for the digital version. I don't think I'm the only one who'd like to see this pricing model either.09 Feb 10 19:55
By Alex Greenwood
Being an independent author has its drawbacks, but the ability to market, set price and distribute my book myself is liberating. So what if "Pilate's Cross" is never a bestseller? I write to be read. Getting a book through the gears of the major publishing houses isn't worth it anymore. Who needs to waste the time for so little reward?09 Feb 10 21:26
By Cry Me a River
downbytheriver, you make a reasoned case and our positions are not so far apart. I am hoping that authors will see more transparency in their dealings with publishers. In any normal business partnership, each side knows what the other is going to commit - but publishers are very reluctant to reveal detailed marketing plans and costs. Publishers need to appreciate that the author has made a financial investment too (typically 1-2 man-years) and has a far longer risk period (and higher risk) than the publisher. If the rise of ebooks frightens publishers into treating authors with a little more respect, I'm all for it.10 Feb 10 12:38
By Cry Me a River
Duh - sorry, downbythebeach. I guess I do need an editor :-)10 Feb 10 12:39
