Are Publishers going to withhold books from Kindle?

Yes. It certainly seems so.

Here’s the transcript from a mini-interview of Steve Jobs by Walt Mossberg –

Mossberg: Why should she buy a book for $14.99 on your device when she can buy that for $9.99 on the Amazon Kindle?

Jobs: Well, that won’t be the case.

Mossberg: Meaning you won’t be $14.99 or they won’t be $9.99.

Jobs: Aah … the prices will be the same. (Laughing by the audience and then by Jobs) Publishers are actually withholding books from Amazon. They’re not happy really.

Check out the Walt Mossberg and Steve Jobs video at All Things Digital.

Why Publishers are withholding books from Amazon

We’ve had Hachette and Simon & Schuster and a few more of the big Publishers delay ebook releases by 1-4 months.

There are lots of reasons Publishers are wary of Amazon –

  1. Amazon already has a lot of power due to its physical book sales. 
  2. Amazon’s $9.99 pricing for eBooks scares Publishers – They feel that $9.99 is an unsustainable price. 
  3. Amazon’s lead in the eReader market scares Publishers. 
  4. Amazon’s alleged 90% share in eBook sales threatens Publishers.
  5. Amazon getting into Publishing with Encore also worries Publishers.

Thomas Brookside comments at GalleyCat and points out one reason that hasn’t been discussed before (he also points out the $9.99 factor) –

The publishers are angry at Amazon because Amazon takes a loss on some titles to be able to sell them at $9.99, and the publishers don’t want people to get used to paying $9.99 for ebooks.

The publishers are also angry at Amazon because Amazon allows authors to self-publish directly to the Kindle and price however they want, and this had led to a lot of indie authors selling books for $2.99 or less outselling midlist authors from traditional publishers.

Why Apple seems a better option to Publishers than Amazon

The Big Money blog points out that Publishers, despite the higher prices, will make less from eBook sales on Apple iPad than they do from sales on Kindle.

Why then are Publishers going to withhold from Amazon and give to Apple?

  1. Publishers don’t want users to get used to $9.99. They think Amazon are going to start paying them less eventually so they want to push $14.99 as the new price.
  2. Amazon has too much power – Publishers want to weaken Amazon and play off Amazon against Apple against B&N and so on.
  3. Publishers want their status as gatekeepers upheld. If the iPad Books Store doesn’t allow indie authors then we have a third reason Publishers love iPad.

Thomas Brookside’s comment above is spot-on. Publishers are desperate to find a weapon against Amazon and the iPad is just that.

What exactly are Publishers going to do?

They’ll try to create an artificial distinction –

  1. eBook Hardcovers that are released at $14.99 and only sold on platforms that agree to that price.
  2. eBook Paperbacks that can be sold for $12.99 and $9.99 a few months after release of the eBook Hardcovers.

Why? Because they know eBooks are taking off and they want to keep their iron grip on book profits and what books get published.

Since Apple is willing to play along with eBooks at $14.99 they get those at the same time as the hardcover is released (via Big Money) –

The Wall Street Journal has Hachette Group CEO David Young announcing that nearly all of his firm’s titles will now be released simultaneously in electronic format with the print editions.

The implication in the story is that Apple is offering trading terms attractive enough to motivate the company to do so.

The one unknown is how customers are going to respond.

Customers are going to pick the eReader and the Authors/Publishers that are pro-customer

We’ve had over 2 years of $9.99 eBooks. Publishers can’t just reset prices to $14.99.

Here’s what’s going to happen –

  1. Readers start boycotting Publishers who push $14.99 and delay the release of $9.99 versions.  
  2. Readers will start pirating more.
  3. Independent Authors and Smaller Publishers will start getting read more.
  4. Amazon’s Encore program will start seeing more success.

Publishers and Apple will, inadvertently, rally readers around the Kindle and $9.99 prices.

If Nook being late seems like a Christmas Present – imposing $14.99 prices and locking out the Kindle and readers (thereby driving them into each other’s arms) will be the gift of the decade.

Are customers really going to pick the company that gives them lower prices?

That is a stupid question. Except to Publishers.

You have to wonder what Publishers are thinking. It’s exactly what Walt Mossberg asked Steve Jobs –

Why pay $14.99 on the iPad when you can get books for $9.99 on Kindle?

Well, Publishers are saying they’re not going to let Amazon sell $9.99 books – even if it is Amazon subsidizing prices.

That’s pretty ridiculous and a stand like that paints Publishers as evil and Amazon (and the Kindle) as good. As long as Amazon keep improving the Kindle rapidly they’re set to dominate eBooks for a long time.

Will Publishers, Apple really push $13 to $15 ebooks?

Apple Insider writes that Apple and Book Publishers are in negotiations to provide books for the Apple iSlate with new hardcovers prived at $12.99 to $14.99.

That sounds like a rather unreasonable rumor to me.

Will Publishers use Apple iSlate to attack $9.99?

This section from the Apple Insider article is key –

 Apple would rather charge a higher premium for its content, sources told the Journal.

It said the tablet will create a major battle between Apple and Amazon over how books are priced and distributed.

It also said that while Apple would recommend prices of $12.99 and $14.99 for new bestsellers, publishers would be able to establish their own prices and “re-set the rules” with the tablet.

Wait a minute –

  1. $13 to $15 prices for ebook versions of hardcover bestsellers. 
  2. Letting Publishers set their own prices.

Those are both major threats to $9.99 and not exactly progress.

A lot of this doesn’t make sense

  1. Why would Publishers choose 70% of $12.99 (which is $9.09) or 70$ of $14.99 (which is %10.49) over 50% of list price from the Kindle Store (which is usually $14 or so).
  2. Why would readers choose $12.99 or $14.99 over $9.99?

Are Publishers counting on users paying a premium to get ebooks at the same time as hardcovers? Or do they expect a premium simply for being able to get ebooks on the new magic iSlate?

$9.99 can’t be beaten by eBook release delays or Using a Different Device

This is a pipe-dream.

People are not going to go back to another pricing paradigm – $9.99 is set and past efforts to go higher haven’t worked well.

  1. First Publishers tried to sell books at $14 or so and they didn’t see good sales so they had to go back to $9.99. 
  2. Next Publishers tried the ‘delay ebooks by 2-4 months’ strategy and users killed them with 1 star reviews and boycotts.

Publishers are pushing their luck again.

Is the Apple iSlate going to improve the reading experience and justify higher prices?

Publishers might have deluded themselves into thinking they could do things like add color author interviews and charge $3 to $5 more.

However, it’s a book.

  1. The Kindle and eInk readers are  great for reading.
  2. There’s not much that can be done to improve the book.
  3. We aren’t talking about games or movies or even illustrated textbooks – these are books that are just fine on black and white eReaders. 

The higher prices aren’t going to work – If anything, it’s a great way for Publishers to ensure the iSlate doesn’t have massive impact on eBooks and eReaders.

Besides you’re going to have Kindle for iSlate and that’ll have ebooks at $9.99.

70%, $9.99, eReaders, Apps – Irreversible Changes

Freedom is like an incurable, infectious disease. People get one whiff of it and they’re hooked for life.

70% share for indie authors, $9.99 price for ebooks, eReaders that let you change fonts and read books to you, Apps for eReaders – These are all being disregarded as transitory and merely strategic moves by eReader companies.

Publishers think they can get back control and then undo all these changes.

However, each of these initiatives is one more stake into the heart of the vampire squid Publishers (due apologies to Matt Taibbi). A step closer to freedom for readers and freedom for authors.

Authors, Readers will never give up their new Freedoms

Authors and Readers are not going to go back to the abyss Publishers had them trapped in.

  1. Publishers decided what to publish.
  2. Publishers set prices. 
  3. Authors got scraps i.e. 8% to 15%.
  4. Readers and Authors had no insight into actual costs of book publishing.  
  5. Publishers were the only ones with the finances to market a book.
  6. Publishers had the hooks in the distribution channels.  

All of this is dissolving. The concept of Publishers as gatekeepers is fading away.

There is no way to fool authors and readers now.

Could new middle-men arise?

Yes, of course.

However, these will increasingly be benevolent platforms like Kindle and iTunes that want only 30% and handle nearly all the work.

70% is for the author.

Even if another middle-man or another company takes over –

  1. Readers will not forget the days of $9.99 eBooks.
  2. Authors will not forget the days of 70% of revenue/profit.

How do you fool people who, after centuries, have been liberated? You don’t. These are the people most acutely aware of how precious freedom is.

The Role of eReaders and eBook Stores and App Stores

 It’s crucial to understand all the contributions these have made (and will make) –

eReaders 

  1. An eReader is a device that allows for more value than a book could provide i.e. changeable fonts, greater capacity, new features like text to speech, and more. 
  2. eReaders let us work with eBooks and negate the advantage Publishers had i.e. economies of scale.
  3. An eReader basically liberates reader and author from the tyranny of the physical book as a non-ideal distribution mechanism. Also a mechanism that middle-men could control and use to enslave both readers and authors.

eBook Stores

  1. An eBook Store allows for extremely easy discovery and distribution of eBooks.
  2. eBook Stores are ridiculously convenient. Find a book in 5 minutes, buy it with 1 click, get it in 60 seconds – at any time of the day.
  3. eBook Stores allow for free distribution in the sense of no one is deciding what you can access.
  4. eBook Stores allow for cheap distribution in the sense that very little is added to the cost of the book.

 App Stores

  1. App Stores allow absolutely anyone to help readers and/or authors.
  2. App Stores allow readers to choose what their book can do and cannot do.
  3. App Stores allow developers to change publishing and eBooks.

App Stores make the eco-system very vibrant and rich and free of monopolies.

70% and $9.99 are ridiculously important and firmly established

Consider where we are at the moment –

  1. We all know that Books could and should be $9.99 or less.
  2. We all know that Apple and Amazon are both willing to give authors 70% of that $9.99 (or whatever price authors pick).
  3. We know lots of sales are happening at $9.99.
  4. We know Amazon has managed to keep the $9.99 price intact for over 2 years.

How do you un-teach the lessons of 70% and $9.99?

  • You just can’t. 
  • What possible rationale could Publishers come up with to convince readers that they ought to pay $15 or $20 for an eBook?
  • What story could they spin to authors to get them to accept 15% royalties?

What Happens Next? The 10% Platform is inevitable

Sooner or later a company is going to figure out how to create a 10% platform.

Yes, a platform that gives authors 90% of revenue.

How could you possibly survive on just 10%?

Well,

  1. 10% of $25 billion a year (just in the US) is a pretty huge number.  
  2. You’ll have billions of dollars a year in eReader revenue.

It’s possible and likely that a company will dominate both eReaders and platforms (via a 10% Platform).

In 2 years we’ve jumped from 8-15% royalties to 70% royalties – Does a jump from 70% to 90% really seem that improbable?

What Happens Next? Attacks on the Platforms

Amazon and Apple are doing two things that will get a lot of people upset –

  1. Breaking down barriers in Publishing – Publishers and retailers and distributors get upset because they lose out.  
  2. Creating Cash Cows – Rival companies get upset because Apple and Amazon get healthy revenue streams from both devices and eBooks.

We will see all sorts of ‘openness’ initiatives, eBook delays, threats, advertising based strategies, and a lot of dirty tricks.

The Platforms enable a lot of things – cheap books, advances in technology, new features. However, they are evil because they are not open.

Thanks to Amazon and Apple we have 70% profits for Authors (Apple) and $9.99 prices (Amazon) – and yet they are evil because they don’t let Publishers and new middle-men undo all the progress and put authors and readers back into shackles.