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The Manhattan Hardcover Conundrum

Judging by the online commotion, people are still arguing about whether Amazon or Hachette (and by implication, the rest of the Big Five) will win the current fistfight over ebook pricing. The media has generally positioned Hachette as the plucky little guy trying to take on Saurazon by getting everybody in the Shire to stand up, face east, and yell, “Huzzah!” It’s not that easy, heh. But then again, nothing is.

My position? I think the fight may already be over. The Big Five lost. I say that for several reasons:

  1. The Feds are against them. The whole fight is about how to keep ebook prices from falling, which in antitrust law hurts the public and becomes actionable when producers collude. Even the appearance of collusion will start that hammer on its way down again. Hachette has one leg in a sling before the kicking contest even begins.
  2. The public has already decided that ebooks can’t be sold at hardcover prices. In fact, this decision was made years ago. Although the issues are subtle, it’s completely true that producing ebooks is considerably less costly than producing print books, especially hardcovers. What publishers have tried to declare the floor ($10) is probably now the ceiling. That ship has not only sailed, it’s folded into hyperspace.
  3. Monopsony power (one buyer facing many sellers; e.g., Amazon) is not illegal. I’ve read in several places that Section 2 of the Sherman Antitrust Act does not outlaw monopsonistic practices unless they are acquired by exclusionary conduct. There’s not a lot of settled case law about what sorts of conduct are considered exclusionary by a goods retailer, as opposed to an employer. Future cases may change this, but it’s going to be a near-vertical climb.
  4. Virtually all recent technology works in Amazon’s favor. Ebook readers, cheap tablets, fast ubiquitous broadband, POD machinery, thermonuclear sales data collection, online reviews, you name it: Amazon has almost no legacy baggage.
  5. Almost everything works against print publishing generally, and the Big Five in particular. I’ll come back to this.

I’m still not entirely sure how I feel about the whole business. In general, letting publishers set their own prices via agency agreements with retailers is a good thing because it allows startups to undercut them. The value to the public of any individual publisher (or conglomerate) is low, as long as startups have access to markets and can replace them. Access to bricks’n’mortar retail shelves has always been and still is tricky. Access to other retail channels has never been easier. If I were ten years younger I might be tempted to try again.

Now, why is Big Print in such trouble? Somebody could write a book (and I wish Mike Shatzkin in particular would) but here are some hints:

  1. Trade book print publishing is a big-stakes wager against public taste. It’s hard to predict what the public will want even in categories like tech. Literary fiction? Egad. Guess wrong, and you’ve lost what might be a million-dollar advance plus the full cost of the press run and any promotional efforts.
  2. The economics of trade book publishing are diabolical. Trade books are basically sold on consignment, and can be returned by the retailer at any time for a full refund. This makes revenue projection a very gnarly business. Books assumed to be sold may not stay sold.
  3. Online used bookselling reduces hardcover sales. Buying a hardcover bestseller soon after release is a sort of impatience tax. The impatient recover some of the tax by listing the book on personal retailing sites like eBay or Amazon Marketplace at half the cover price. The patient get a basically new book for half-off, and then sometimes sell it again…for half the cover price. This would not be possible if online searches of used book inventory weren’t fast and easy.
  4. Related to the above: Remaindering teaches the public that new hardcovers are cheap. Most print books are eventually remaindered. The remainders are generally sold online for as little as three or four bucks. They’re new old stock books with a marker swipe on one edge. The more publishers guess wrong about press runs (see Point #1) the more books are remaindered, and the more hardcovers lose their mystique and (more important) their price point.
  5. Fixed costs for the Big Five are…Big. There is a very strong sort of “Manhattan culture” in trade book publishing. Big publishers are generally in very big, very expensive cities, which carry high premiums for office space and personnel. My experience in book publishing suggests that none of that is necessary, but as with Silicon Valley, it’s a cultural assumption that You Have To Be There, whatever it costs.

Bottom line: The Big Five need the $25 (and up) hardcover price point to maintain the business model they’ve been evolving for 75 years. If hardcover sales ramp down, they need ebook sales to make up the difference. Ebooks are cheaper to produce and manage (i.e., no print/bind costs, shipping, warehousing, or returns) and it’s quite possible that a $20 ebook price point could stand in for a $30 hardcover price point. However, Amazon has trained the public to feel that an ebook shouldn’t cost more than $10. Indies have put downward pressure on even that, and the demystification of hardcovers via used and remainder sales hasn’t helped.

What options do the Big Five have? Culture is strong: They’re not going to cut the glitz and get out of Manhattan. (That may not be invariably true; Wiley US moved from Manhattan to New Jersey some years ago. Wiley, however, does not publish trade fiction and has never been deep into glitz. I doubt, furthermore, that they would have moved to Omaha.) A reliable midlist might help, but midlist titles now exist mostly as ebooks. Most publishers, big and small, have long since outsourced design and production to third parties, and are already doing a great deal of printing in China. Beyond that, I just don’t know.

Don’t misunderstand: My sympathies are with publishers, if not specifically large publishers. I was in the trenches and I know how it works. Books can only be made so cheap before quality suffers, especially ambitious nonfiction like Steven Pinker’s The Better Angels of Our Nature. We may be in a race-to-the-bottom that cannot be won by either side. What I’d really like is honesty in all quarters about the issues and (especially) the consequences. Rah-rah tribalism helps no one.

Both sides have points in their favor. Amazon has done something not well-appreciated: It’s made it possible for self-publishers and indie publishers to reach readers. Physical bookstores have long been barriers to entry in publishing. Quality remains a problem, but hey, is that a new problem? Traditional publishers claim that they guarantee quality, even though “quality” is a very tough thing to define. Most of my life I’ve abandoned a fair number of print books every year as unreadable, not because I dislike the approach or the topic but because the writing is bad. This is supposedly the value that publishers add. The adding is, shall we say, uneven.

My suggestions sound a little bit banal, even to me:

  • Publishers need to pay more attention to objective quality. Bad writing is a fixable problem; you either don’t buy it, or you fix it after you buy it if you judge the work important enough to go forward. This is the edge traditional publishers have over the indies.
  • Amazon needs to consider that book publishing is an ecosystem in which many players have important roles. Market share won’t matter if you kill huge segments of the market. They may not care; there’s plenty of money in selling thumb drives and diapers.
  • Readers need to meditate on the realities of writing. Writers need to be paid. Cover price isn’t everything. Quality matters.
  • The hardcover as the core of trade publishing must die. Hardcovers need to become a luxury option. If I read an ebook or paperback of a truly excellent work, I may want a hardcover, and we’re very close to having the machinery to do hardcover onesies at reasonable cost. I’ve upgraded to hardcover many times, but generally on the used market, since by the time I read a paperback the hardcover may already have been remaindered and unavailable new.
  • Publishers need to ask themselves if Manhattan and San Francisco really deliver benefits comcomitant to their astronomical cost.
  • Amazon is a given. The Internet leans toward channel capture. If it weren’t them it would be someone else. Grumble though we might, we need to start there and figure out the best way forward.

In the meantime, remember: There are countless sides to every argument, and no easy answers to anything. You are always wrong. And so am I. Get used to it.


  1. Alex says:

    I have always been an avid user of libraries. In my younger days I could easily read 3 – 5 books a week and I could never have afforded to buy so many books when I was earning little or no money.

    Something I have occasionally pondered is how libraries could work in an ebook culture. It seems to me to throw up a lot of problems. Do you have any thoughts on the subject? I would be fascinated to read an article by you on the subject, as an industry expert and insider.

  2. Bill Meyer says:

    A continuing problem with e-books is shoddy quality, no merely that bad books by unskilled authors are everywhere, but also that Kindle versions, in particular, are filled with formatting problems. And typos.

    E-books are no less in need of proof-reading than print.

    I had feedback this morning from a company which produces a blog, and offers free e-books that comprise chiefly collections of past columns. I was curious about their process, as I found matching format errors in MOBI and PDF of one title. Turns out that they put together a ColdFusion app that emits PDF, MOBI, and EPUB, hence the consistency.

    I have seen numerous books which Amazon used to seed the Kindle collection by converting from Gutenberg texts. One of the little oversights in their processor was that if a book included an occasional couplet or two of verse, they were missing from the Kindle version. I suppose you get what you pay for — these were free books from Amazon.

    I am a big fan of e-books. I have become quite selective about the printed books I will retain. This is largely because of my many moves. However, I do often post reviews, and I complain in them when the formatting and proof-reading were poorly done.

    As to Alex’ question about libraries, our local public library lends e-books, as well as print. Kindle (and I assume, others) has DRM in place which facilitates book borrowing. All that is necessary is that sooner or later, the user goes online with his Kindle. Any expired borrows are then cancelled, and deleted.

    1. Alex says:

      Very interesting thanks Bill. Here’s a few more questions:

      1) Do they allow multiple borrowings of the same book by different people at the same time, or is the book ‘locked’ when someone borrows it and then ‘unlocked’ when ‘returned’?

      2) How are renewals handled? Is there a maximum number of renewals? With my library, print books can be renewed online a certain number of times and then you have to go into the library and renew it if you want to keep hold of it.


  3. Tom Dison says:

    One factor I don’t hear much about in the discussion is volume of sales. I think I am a good example. Normally, I would not be able to buy many books. I would buy a handful of “real” books a year. I would perhaps spend around $100-$150.

    With eBooks, I have a constant stream of purchases. I have purchased the entire collection of Kathy Reich’s Bones series. Now I am working through Rizzoli and Isles. I have probably purchased 25-30 books this year so far. There is no way I would have been able to obtain this many books under the old model. So, even though the books are cheaper, I am actually spending more money on books due to the low barrier of entry. Are there studies on this factor?

  4. Erbo says:

    Jeff, you may have seen this piece, which answers an interesting question: how did Amazon wind up with such a dominant position in E-books in the first place? And the answer is surprising: by doing exactly what the publishers wanted!

    See, the publishers were so terrified of E-books possibly being “Napstered” that they insisted on DRM that locked E-books to the platform on which they were purchased. This means that every Kindle book you buy locks you further into the Kindle platform, because if you move to a different one, you lose all the books you’ve already bought. You can’t move them to a different platform; the publishers won’t let you! This led to a very strong network effect in favor of Amazon and the Kindle platform. So Amazon’s monopsony power in E-books exists, in large part, because the publishers forced it on them…meaning they effectively shot themselves in the foot without realizing it.

    1. Hadn’t thought of this, but whereas it may not be the whole story (or even the greater part of the story) it’s a strong contributor. The other half of the irony overload here is that locking books to a particular platform is yet another way to teach otherwise paying customers to become pirates.

      It’s not hard to strip DRM from Kindle books. There are utilities and detailed instructions online. Most people would never bother reading up on piracy if their ebooks were just files that could go anywhere and play anywhere. Take their books away when their Kindle dies and they will first be angry…and then get even. Another good customer lost, another pirate graduates from Pirates Online University.

      I’ve discussed this on Contra a number of times before, but maybe it’s time to take it up again.

  5. Bill Meyer says:

    Another tidbit: As Amazon pushes hard to persuade authors to their sweet spot ($2.99 – $9.99), I am generally puzzled when I see e-books there with odd prices like $13.59, where the benefit to the author is less than it would be at $9.99. I suppose the sweet spot incentive must not apply to the print houses, else it would make little or no sense.

    In general, though, the pricing I see from print houses appears to be set in the interest of preserving print sales.

  6. […] part of this is the peculiar business model that has grown up around hardcover editions since WWII. I’ve written about this at some length. We had to cope with it at Coriolis back in the 1990s. We did as well as we did for as long as we […]

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