Scalzi and MacMillan v. Amazon

John Scalzi says smart things about the Macmillan/Amazon spat: "If Amazon is willing to play chicken with my economic well-being -- and the economic well-being of many of my friends -- to lock up its little corner of the ebook field, well, that's its call to make. But, you know what, I remember people who are happy to trample my ass into the dirt as they're rushing to grab at cash."


  1. I will say this, as a content provider I welcome the fact that others are willing to value content.

    As a consumer, dammit…does this mean I’m going to have to keep buying used books from Amazon or Half or otherwise where no money goes to the author, as opposed to a cheap eBook where the author gets something…

  2. Amazon really isn’t inspiring my confidence in their service. Retroactively removing books from personal devices (books that are pretty much a criticism of that ability!), now removing entire libraries because they’re having a spat with publishers?

    Come on Jeff. If you want to play in the knowledge market, you can’t keep user confidence by turning off the taps at will. You can only do that so many times before you’ve lost us forever.

  3. My main reason for buying DRMed eBooks? Because I want the goddamn book downloaded right the hell now, that’s why. There’s no shady Russian eBook sites that play loose with copyright law that let me get them, like there once was for MP3.

    I settle for convenience. That’s also why I have an iPhone (which is what I read my books on).

    But don’t feel too bad- if they’re CCed books, I can grab them from Stanza without DRM, so there’s that, at least.

  4. Scalzi is very smart, but his biases are showing a lot. And you’re letting them, and seemingly no questioning it.

    You are, for some reason, assuming that the goal here is to gain a monopoly; I have a feeling that it’s more of a desire to just survive.

    Right now, it seems that Amazon pays similar wholesale rates for ebooks as they do for physical books (that is, 40-50% off MSRP). Apple, on the other hand, pays significantly more for its song conent (based on various reports over the years, on a $0.99 song, Apple takes about $0.06, from which they pay credit card processing fees, bandwidth costs, storage costs, customer support costs, etc. Actual profit a fraction of a penny). Over on the iPhone App Store, Apple takes a straight 30% (and still pays credit card processing, bandwidth costs, and storage costs; customer support costs seem to be done differently).

    For for the “iBooks Store”… is Apple going for the music-style cut? Or the app-style cut? Either way, my suspicion is that Macmillan — and possibly the other publishers — want Amazon to give them exactly the same deal. And one of those models kills Amazon as an ebook distributor (while the other makes it considerably less attractive to them).

    I don’t know any of this, and I could be completely wrong. Please, dig up facts to prove me wrong — you have better sources, and readers with much better sources, than I do.

  5. Can you guys explain to me why ebooks need to be so high priced compared to paper books in order for the publishers to make money. Obviously, i wouldn’t want to cut into author’s royalties. But every time I start coveting an ebook reader, I consider that 9.99 is more than I typically spend on the paper backs that I read (where I get a physical, non-DRM’ed, sharable version of a book), and that $15 is FAR more than I pay for a typical book.
    In my head, an ebook (that is not sharable and DRM’ed and requires an expensive device to read) would need to be priced for about $5 to be considered a “good” deal compared to a paper book. I am a heavy reader, reading between 5-8 books a month. I imagine the economics are even worse for those who only read a few books a year..

    1. Can you guys explain to me why ebooks need to be so high priced compared to paper books in order for the publishers to make money.

      Caveat: I work for a publisher, but have no inside info on this. Take all this with a pinch of paprika.

      Using totally made-up numbers, let’s say it costs $20,000 to prepare a novel for publication at BoingHouse. Printing costs go down as the number of copies you print goes up; we’ll say it’s $5/copy for a print run of 2,000 (total costs: $30,000), and $4/copy for a print run of 3,000 (total costs: $32,000). At a cover price of $25, the unproven author with the smaller print run will need to sell 1,200 books before the publisher starts seeing a profit, and the popular author with the big print run will need to sell 1,280.

      Now let’s add in ebooks with the kind of deep discount a lot of people are calling for — let’s say we sell them for 2/3 the cover price, or about $8 (which is a lot higher than some people want). The incremental costs are not zero — Amazon takes a chunk of that — so we’ll say the publisher brings in $5/book.

      If ebooks don’t affect hardcover sales, there’s no problem — the publishers sell the books they would have anyway, and the $5/book from ebooks is gravy. On the other end of the scale, if these cheap ebooks completely gut hardcover sales, the publisher is in a lot of trouble — suddenly they need to sell 4,000 books just to recoup their $20,000 in pre-production costs. For a book that they expected to sell 2,000 copies, aiming to sell 4,000 is a stretch. In that case, they should really be aiming for the same profit margin per book, which means they should just subtract off the $5 in physical printing costs and sell the ebook for $20. The reality is probably somewhere in the middle, but nobody really knows where; you can find data to support pretty much any position. (But remember that per-book costs for printing increase as the print run goes down; if ebooks mean 1,000 fewer physical book sales, suddenly the physical books become more expensive to produce.)

      Enter the tiered pricing model: BoingHouse sells the ebook for $15 for a year, then drops it to $6 when the MMPB comes out. This means they cannibalize fewer hardcover sales during the first year, because the pricing differential is more resistable. After a year, they’ve probably sold most of the hardcovers they’re ever going to sell, and are looking to make money from the people who were content to delay their gratification in exchange for saving some bucks. All of the major costs were paid for by the hardcover (hopefully); the $4/book (or whatever) they get from paperbacks and ebooks is no longer needed to pay off the initial pre-production investment.

      As I say, these numbers are made up, and vastly oversimplify the situation, but one detail is both counterintuitive and true: the per-book printing costs are not a major percentage of the cover price. Hardcovers don’t cost $18 more than paperbacks because there’s $18 of extra stuff in the physical book; they cost more because the publisher has just sunk a lot of money into pre-production, and needs to make it back before it can release a low-profit, low-cost, mass-market version. Likewise, removing the physical book doesn’t make the ebook suddenly $20 cheaper to produce; it makes it a few bucks cheaper, yes, but the bulk of the costs are the same regardless of the edition.

      It’s the same with direct-to-DVD movies — physical DVDs cost a little money to produce, plus shipping costs and whatnot, but most of the cover price goes to the cost of production, not the bits of plastic. This is true whether you buy the physical DVD or pay for a download from iTunes; the difference in format makes for a small savings, but not an order of magnitude. Thus you get $15 DVDs and $10 downloads (or whatever).

  6. As a customer I support Amazon’s game of chicken with publishers who want to charge customers as if ebooks cost the same to distribute as hardcovers, which have to be printed in batches, warehoused and physically sent to each bookstore. How many unsold ebooks does Macmillan have to pulp or remainder?

    Sure, Amazon locks you to the Kindle, but lower Amazon pricing means that other e-book prices from competitor’s will have to come down too–and one wonders if there is a most favored nation clause in the iPad that is related to why the price needs to go up right now. Either way, lower Amazon prices mean that if publishers offer competing offerings with no DRM at a higher price, they’ll be more affordable than if the Kindle versions are at $15. I’m not seeing a consumer downside to this spat, except, I supposed that increased success of the Kindle means more locked in Kindle book owners.

    And Scalzi, he’s angry about Amazon in their rush to grab cash? Amazon has allegedly been **loosing** money keeping prices down on ebooks, whereas Macmillan is the one grabbing for cash. Scalzi is a smart guy but I’m not really with him on this–our interests are not aligned and I don’t think he’s thinking through his that well, either.

  7. There’s no shady Russian eBook sites that play loose with copyright law that let me get them, like there once was for MP3.


    If not paying for books is the goal, there is .net/, which resolves to Sweden and China. But not Russia, sorry :)

    But I’m sure there are swathes of dodgy .ru ebook sites.

  8. Last night I went to buy a book that was published by Tor. It’s for my book club. I was planning on buying the ~$8 Kindle edition, for convenience. Seeing that it wasn’t available, I bought a second-hand paperback instead.

    So rather than getting a $10 sale and the author getting a chunk of cash, the author got nothing because of Macmillan’s greed. I blame Macmillan, and I hope their authors have the sense to move elsewhere.

    (And no, I wouldn’t have paid $15 for the Kindle version.)

  9. What a dickmove by Amazon.
    No matter what your standpoint in the whole ebook debate that has to be the dumbest move they could possibly make.
    If Amazon decides they dont want to sell books to me because they are cross with the publisher I take my buisness elsewhere.
    Pissing off writers and then refusing to comment about it is another thing I can’t understand in this whole debacle, because the writers won’t be short on words.

    And why would I buy DRM ebooks from a company that operates like a 5 year old taking its ball and going home when things don’t go their way.
    What gurantee do I have they won’t screw me over?

    I wouldn’t buy an ebook at 15$ but that’s a decission I can make on my own without Amazon holding my hand.

    The Kindle is poison and it looks like it slowly kills a once great company.

  10. Why do they have no problem with Amazon taking a loss and selling new HB’s for 9.99, as they just did with the new Stephen King and a few others, but when Amazon takes a loss with selling the NY Times bestsellers for 9.99, publisher cry fowl? After they’re off the best seller list, quite often, the price goes up, so it’s not a 9.99 across the board price. Publishers are the one’s playing chicken on this. If you look at the best selling Kindle books you’ll see a lot of indie authors on there…if the publishers aren’t careful they might give authors the idea that you don’t need a publisher anymore.

  11. Anonymous @ #9 – How do we know that MacMillan didn’t just pull the rights from Amazon?

    Because otherwise, the CEO of Macmillan is lying. his statement is here. There is no statement from Amazon. And also because the NY Times, the LA Times, and various insiders like Cory, Charlie Stross, John Scalzi and Toby Buckell are telling us that this is what they’ve heard.

    To everyone else – this is not a game of “Chicken”. That’d be where Amazon just said no, and refused to carry the eBooks and things went on as normal. What they’ve done is to pull all Macmillan titles, print or ebook, as a means of escalation.

  12. If Barnes & Noble had a pricing dispute with a publisher, and physically pulled all of that publisher’s books off their shelves, would anyone be defending them? It’s ridiculous.

  13. I don’t think Amazon handled the situation well at all. But I will say that by offering prices lower than local book stores and big box retailers, Amazon gets my business. If it wasn’t able to do that I wouldn’t even consider purchasing because I still have to pay shipping on everything I buy from them.

    So in a sense I’m glad the prices are lower–but the definitely could have acted ethically.

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