To make it instant we show you right away schedule is justifies il title. Reports two elaborations, one of the “New York Times” and the other of News Corp, the income statement of a hardcover and a ebook. The pattern is eloquent regarding the edge of the two products and we could end it here. The thing, though, is more complex than these numbers would suggest that they speak for themselves. The publishersdespite being capitalists, they do not love il product to more high edge of contribution. And there's even more than one reason why they don't love him. Some of these founded, others, however, less. Therefore we advise you to continue reading this post.
2014: Publishers' margin falls
In fourth quarter of 2014, two of the five major publishers of the world (60% of trade market sales in the USA, a quarter of the world market) have announced a falling profits because of the slowdown of sales of ebook. edge average of book publishers are among the lower of the industrial sector, fluctuate between 10% and 15%, and therefore their albeit modest decline arouses understandable concern among insiders.
historically thebook publishing has been shown to be a I share tightly anti-cyclical, barely touched by the negative economic cycles. They are always the same ones who buy the books and they buy them regardless. Because of this peculiarity, the book industry has attracted thecaution of the great ones media conglomerates whose other activities, on the other hand, are strongly subject to the economic cycle. It so happened that, over the past 30 years, the publishing houses they have become greater part Of these conglomerates, working stabilizer. In the last few years, however, things have changed. The book industry has started to suffer from the conjunction of two phenomena that have mutated deeply i business fundamentals: I'input of the technological in the sector of content distribution and production and the evolution of behavior of the consumers.
The book industry has defended itself better than that of music or newspapers, but now it is faced with choices that colleagues in those sectors have not even had the time to process. We trust that they will be the right ones, but the matter started badly.
Publishers: one step forward and two steps back
Penguin Random House (largest trade publisher in the world today 47% Pearson and 53% Bertelsmann) announced a flexion of the profits of the 12% and Simon & Schuster (a division of CBS, the television network of the giant Viacom) of 5,6%. This is a significant downturn from that show especially theinefficacy of strategy di restraint of ebook for stick up for the product book, a strategy that is equivalent to knowingly shooting yourself in the foot.
After dispute summer Between Amazon and Hachette on the price of ebooks, resolved a favor of publishers, the latter, especially in the two markets most exposed to the action of change, have maintained high (if not increased) the price of theirs digital editions in an effort to get consumers to take the release hardcover which still constitutes the psychological engine of the entire industry as we know it. The differential di price between book and ebook it is like this thinned out, if not nearly disappeared at least for the titles of the major publishers.
But what the latter expected did not happen: i readers not have poured out in droves on the "old" books and no sales were lost. It happened instead that you are lost sales and the consumer has not bought either the ebook for 15 euros or the book for 18, but he probably bought with 18 dollars two months of subscription a Netflix (access to a catalog of 10 films) or Kindle Unlimited (Amazon's ebook streaming service). It happened a disaster, publishers have delivered il client to the competition, which isn't quite competition at all, because publishing houses, as we know, are all part of gigantic media conglomerates that also own the competition.
The cry in the Amazon desert
And yet Amazon, during the dispute with Hachette, had explained good to the publishers and the world how it works price of ebook. She could reasonably explain why Amazonunlike publishers, reason with big data, is "data driven learning": it collects, memorizes, cross-references, processes all the information it collects on consumer behavior and then transforms it into business actions and behaviours. Amazon is like a glass of water, it takes on the color and flavor of the data you throw into it.
Amazon showed as a price di 9,99 dollars for the ebook not only would it start the market as a rocket but it also brought increased revenues to publishers and increased earnings to authors. Especially a price of 9,99 would activated the economic law ofelasticity of demand and produced a virtuous circle throughout the book ecosystem.
Given that Amazon is perceived as a reprehensible monopolist, enemy of culture and everything it says affirms it in a condition of unsolvable conflict of interest, in few in the world ofpublishing have taken seriously these considerations taken fromanalysis of data and gods trends observed at the largest book outlet in the world. Unfortunately Amazon suffers from one bad reputation, also recognized by his admirers, due to a poor imitation of the brisk and direct manner that echoes the rough herdsman McLintock played by John Wayne. Publishers, booksellers, distributors still have Jeff Bezos' ominous motto in their ears, moreover always taken out of context, "your margin is mine" and the sadistic "Gazelle Project” told by Brad Stone in his The Everything Store.
Yet on the merits of the price of ebooks, theanalysis di Amazon è correct and anyone can understand it by reading the motivations developed in a post on their blog by the Kindle team in August 2014. Below is the text of the post in Italian translation.
Because 9,99 is the correct price of ebooks
Our obiettivo fundamental (by Amazon) is lower il price of ebook. Many ebooks cost $14,99 or even $19,99, one price unjustifiably high for an ebook. In an ebook, there is no printing, no letterpress, no print runs, no returns, no lost sales due to out of print copies, no inventory or shipping costs, and no a used market, ebooks cannot be resold as used books. An ebook can and should cost less.
It is also important to understand the law ofprice elasticity of ebooks. If the price goes up, consumers buy less. We tested the price elasticity of ebooks through repeated e constant measurements performed on many titles. For each copy of ebooks sold to $14,99 they would sell 1,74 if you price at $9,99. So, for example, if consumers bought 100 thousand copies of a security at the price of $14,99, these would become 174mila if the same security were offered for sale a $9,99. THE revenues stock totals priced at $14,99 would $1.499.000. THE revenues stock totals priced at $9,99 would $1.738.000.
The most important thing to note is that at a more step-up price, revenues would grow by 16%. This benefits all parties involved:
- The consumer pays 33% less.
- Theauthor he has one royalty + 16% and reaches aaudience + 74%. And that 74% increase makes it more likely that the title will enter the best-selling book charts. Any author wishing to make these rankings should insist that their ebook cost $9,99 or less.
– Similarly, the higher revenue generated from $9,99 also benefits the publisher and reseller. At $9,99, even if the customer pays less, the cake is bigger and there is more to share between the parties.
We must not forget that i books they don't just compete with books. The books compete with Games, television, the film, Facebook, the blog free news sites and more. If we want to develop a healthy culture of reading we must work seriously because i books can to compete with these other types of media and a big part of that work is making the books cheaper.
Here ends the press release from Amazon. And it works just like this: the price of ebook it's a'very powerful weapon To increase billed e profits, for the simple reason that the contribution margin of ebook è top than that of the books. If you can't trust Amazon, you can listen to the opinion of the patron of the media industry, the octogenarian Rupert Murdoch, which on several occasions has recognized the generous margin of the ebook, going so far as to see it as the only exit for book publishing. Anyone who thinks that Murdoch is just a robber baron can finally try to be convinced by this article by Motoko Rich in the "New York Times", Math of Publishing Meets the E-Book, which we reproduce in the translation by Ilaria Amurri. The article is interesting because it explains well why publishers cannot immediately drop below a certain threshold for the price of ebooks.
Customer expectation
Since they arrived ebook you tend to give for discounted that publishers have everything from earn from the new format, in terms economic and that the disappearance of printing and distribution costs can only benefit customers.
The publishers themselves admit it. According to the publishers, however, the customer expectation is nothing short of exaggerated and not likely. There is no longer the problem of the press, it is true, but ne remain many othersand at our Costs fixed, to advertising, to copyright. That said, a question arises: what difference there is between a ebook it's a printed book, at the level of skyrocketing production costs.?
The response of the publishing houses is certainly not unequivocal, but the statements made by executives and CEOs allow us to draw a general picture, albeit inevitably simplified.
Book scenery
Let's say the MSRP is $26. The library must approx $13 (50%) to the publisher, who in turn paid $3,25 is preferably used for Press, the storage , shipment of books, not counting returns.
La cover, composition , review amount to approx $0,80 a copy, while the marketing it costs more or less $1, even if the cost varies a lot according to the titles and it must be added that the more copies are sold, the more the costs are diluted.
Last, but not least, there is the Copyright, which is usually around the 15%, that is $3,90 $26 per copy. If returns are excluded, ateditor remain $4,05from which overheads are deducted.
Scenario ebook
In the field of ebook, instead, it scenario it is slightly diverse. We assume that the distribution costs the 30% on every copy sold. Thus, the publisher remains $9.09 for each ebook from $12,99. At this point the publisher still has to pay approx $0,50 for convert il text in ePub format, compose and review it, while the cost of marketing and of $0,78 to copy.
As regards the Copyright, in general, the percentage set by the major publishing houses corresponds to the 25% of the revenue net of commissions from online bookstores or, sometimes, of the cover price. Consequently, on each $12,99 ebook, the right is between $2,27 e $3,25.
The margin is between $4,56 e $5,54, from which the general expenses are subtracted, to then add the advance of the unsold rights.
The economic problem of a mixed system
Apparently, therefore, the ebook they look like a lot cheaper. problem of the publishing houses is that electronic books do not cover all sales, therefore remain i Costs associated to the Press and at the storage of the books which should be amortized with lower number di hard copies.
Le paperback editions, in particular, allow to recover most of the investments and to increase the margin, but if the prices of the ebooks become too competitive it would be even more difficult to recover the costs of the paper part. Paperbacks were the first to be affected by the growth of ebooks.
Another reason why the publishers they prefer don't lower i prices is that the chains such as Barns & Noble, but also the independent bookstores, they would no longer be able to compete.
“The only way to save libraries is slow down la transition", he has declared Mike Shatzkin, CEO of Idea Logical Company, a consulting firm that operates in the publishing field, "the simplest solution is to limit the drop in prices as much as possible."
In some ways, a price above $12.99, rather than Amazon's $9.99, on most of the latest books and Kindle bestsellers seems to fit that need better.
The consequences of the low price
THEmusic industry, for example, suffered a strong contraction in the digital age. According to the US consumer price index, the trend of the prices di CD and cassettes, but also digital music, is down under il 3% between 2000 and 2009, while that of the literature of entertainment has superato il 6%. Another phenomenon that characterized the passage of music to digital was a paradoxical trend to say the least: alla very strong growth in consumption è paid a comparable decline in revenueswhen it should have been the other way around. Hence the extreme prudence of book industry executives to proceed more quickly in the direction of ebooks.
The publishers explain that it would be almost impossible to maintain certain standard with prices too bassi. THE margini si they would restrict too much and it would become difficult invest on new authors. In fact, as Simon & Schuster CEO Carolyn Reidy explains, "it's rare for a writer to make big money right out of the box." In the sector, in fact, it is taken for granted that the 70% of the books will bring little or nothing to the publisher, net of expenses.
Often it is about experimental genres or little-known authors. Also adds Lindy Hess, director of the Columbia Publishing Course, a training program for young people who aspire to work in the publishing field: it is very difficult to break through the first time, because you have to compete with the sales volume of the great bestsellers, the truth is that hardly anyone manages to get rich with writing, with very rare exceptions.
For most of the authors il price remains aunknown, explains Anne Rice, author of Interview with the vampire and the series Songs of the Seraphim. Nobody knows the extent of the expenses incurred by the publishing houses, nor the actual profit deriving from the sales of hardcovers and paperbacks.
The American writer maintains a fairly neutral judgment regarding the price of ebooks, but points out: if an author sells a million copies at $9.99 he can still be satisfied, but it would be wrong to try to hinder the expansion of ebooks or the Kindle. It is useless to try to stem this authentic revolution. Nothing and no one can stop her.
