Wednesday, February 3, 2010

Book Publishers Trying To Become The New Record Companies

There's a really interesting look behind the big Amazon vs MacMillan Publishing fight over at Pajamas Media. The condensed version of the dust up is that Apple's iPad and its new iBookstore has opened the door for publishers to push against Amazon's ebook pricing structure.

The key is the mainstream publishers’ worry that e-books will cannibalize the sales of physical books. Mainstream book publishers, along with mainstream music publishers and the legacy media newspapers, are actually primarily manufacturers. The costs of the content, in royalties to the authors, are only about 10 percent of the cover price of the book, and less than that for the record. It’s the costs of setting type or mastering, printing the books or pressing the disks, shipping, cataloging, and selling them that dominates the costs of publishing.

Now, along come e-books and readers, like the Kindle and the iPad. Suddenly the whole business of publishing has changed. You can sell a physical book or an e-book — but each copy of the e-book costs literally one one-millionth as much to produce.

What Apple and MacMillan and the others are doing is trying to preserve their existing business model by forcing the price of e-books to be high enough to not cut too badly into the physical book market. What Bezos and Amazon are doing is trying to cut the price of e-books to encourage adoption.
Where have I heard this sort of story before. Oh yeah! Record companies have been fighting this war with iTunes, Rhapsody, Amazon and the Zune store for a while now. How's that going for them?

It looks like book publishers are hellbent on repeating the mistakes of the record industry. By fighting to preserve a business model that ignores advances in the technology and the evolving preferences of its customer base, they are setting themselves up for years of pain. The death of the traditional paper book is coming. It might not seem as inevitable as the death of CDs, but it's coming.

Book publishers should do the same thing record companies should have done when the writing first appeared on the wall: open up their own online stores to sell eBook versions of their materials. Let the buyers decide what they're willing to pay for an electronic copy of a book. Gradually (as is practical) move more and more of their offerings to electronic form. Cut back on traditional printing runs. When eBook technology becomes ubiquitous (and thus cheap), the publishers would be well positioned to function in the new market landscape.

Instead, they're willing to let third parties like Amazon and now Apple set themselves up as middlemen. It's going to cost them in the long run.


  1. Whether it's politicians or "legacy" industries, they typically fail to retain the economic fundamentals of Supply and Demand.

  2. I really don't get it when it comes to books. The cost to manufacture an eBook is what, a fraction of a penny? You sell it for $10 and make that all as profit (minus the costs of maintaining the website).

    It seems like a no brainer to at least set yourself up to succeed in that kind of market. Nobody's advocating stopping the production of paper books today.

  3. It's possible that the big publishers aren't being as shortsighted as it appears at first glance. As long as publishing remains dominated by print, and expensive to do, big companies can dominate the industry and reap huge profits. The transition to ebooks means a splintering of the industry and domination by multiple small publishers much closer to the authors. There is simply no future for dinosaurs in the ebook world. I think they know this, and are trying to delay the inevitable as long as possible.

  4. Absolutely. This is exactly the thought process that went on (and still continues) with the record companies.

    Book publishers have the benefit of seeing the result of the process play out in front of them in the music industry. Instead of learning from it they appear to be deciding to fight the same losing battle.

    The longer they delay in embracing the emerging model, the more it will cost them in the end.