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Senior Executive Indicates Random House Could Steer Clear of Price-Fixing Cabal

Thanks to Bufo Calvin at I Love My Kindle for turning my attention to some fascinating remarks last week by Madeline McIntosh, who returned to Random House in early November in the newly created position of President, Sales, Operations, and Digital. Speaking in San Jose at the Winter Institute of the American Booksellers Association, McIntosh separated herself and Random House dramatically from what had previously seemed like lockstep among Big Six publishers around issues of pricing control over ebooks.

According to a report at Publishers Lunch:

McIntosh took on pricing control directly as one of the reasons Random House has “not acted quite as quickly as others.” She expressed a series of concerns that publishers “have no real experience at setting retail prices….”

She cited a recent visit to Powell’s, where with used books and new books sitting on the same shelves “they set the prices on every single unit in a unique, demand-based way.” But more importantly from her perspective, up until now “our authors have not been at risk if you make a different decision about how to price a given book, so it didn’t actually affect our author if a given retailer decided to aggressively discount a certain segment of books. The benefit…is that we have been able to sustain a great variety of different authors at different levels.”

On the windowing of releases, McIntosh expressed a personal opinion and noted “there are a lot of divergent opinions at Random House,” but she is “not convinced that delaying an ebook will be to the benefit of either the author or the consumer.” She prefers not to lose a potential sale because an ebook version is not available and also does not want to “create an adversarial relationship” with ebook readers or “train those readers that instead the best way to get that digital copy is to download it for free.”

Instead of through changed pricing models, McIntosh said “the best value we can offer in the digital world will be about embracing what we already know how to do well…. Our best asset is our editors.” She spoke about “allowing digital to force us to reinvent ourselves as editors” as Random looks at ways “to contract and deliver content that is a whole range of different lengths, and bring ideas to market in a much faster way than we can when its print.” For the future, she is less excited about “just about creating a digital version of a book or adding bells and whistles” but wonders instead “do we need to push ourselves into an area we really don’t know anything about, which is thinking about developing applications.” She sees the process as taking a brand and conceiving of “what would be compelling to a consumer…that would make us still relevant as a content producer” in a new way, admitting that they don’t have the answers yet–just the question.

It’s good to see some engaged, intelligent, independent thinking by someone in a position to influence how the ebook pricing saga may actually play out.

Publishers Could Be Mining Millions in Their Own Backlists … Why Not?

By Stephen Windwalker

  • Originally posted February 3, 2010 at Kindle Nation Daily – © Kindle Nation Daily 2010

Peruvian author Alvaro Vargas Llosa, the son of The Real Life of Alejandro Mayta author Mario Vargas Llosa, has an interesting if politically twisted piece on the web today under the title “Holden Caulfield vs. Steve Jobs,” and it ends with this overreachingly clever effort to impose context where it might not naturally be found:

“How ironic that you will soon be able to read masterpieces on adolescent alienation such as ‘The Catcher in the Rye‘ on an iPad tablet, a monument to youthful liberation.”

Among the problems with that closing line? It’s reality-challenged.

As thousands of Kindle owners found to their great disappointment following J.D. Salinger’s death last week, neither The Catcher in the Rye nor any of Salinger’s three other books are available in ebook form.

Nothing against Salinger, of course. His four thin volumes of fiction are in good company, joined by much of the best work of many of the finest writers of the past several decades in being unavailable in the Kindle Store or in any other ebook platform. And it is highly unlikely that these wonderful books are about to show up in Apple’s yet-to-be-opened iBooks store, or anywhere else, unless they are also made available to Kindle readers.

Too bad, eh? But let’s take a look at how this could be. It’s not Amazon’s doing.

Not surprisingly, in the Simba Information survey about which we reported here this morning, the unavailability of backlist titles by their favorite authors showed up as one of the major annoyances shared by Kindle owners with the current state of ebook selection.

Naturally Amazon would love to see these books added to the Kindle Store, but for that to happen they must be provided in digital form for the Kindle platform.

By the publishers, if they own the copyright. And if the publishers do not own the copyright, the rightsholders are in the perfect position either to deal directly with Amazon and other ebook platforms or to work through a company finely attuned to the needs and opportunities of the 21st century book publishing world, such as the Open Road Integrated Media venture created last year by Jane Friedman and Jeffrey Sharp “to use technology to bring the literary giants of yesteryear to a new generation of readers and along the way to introduce new stars.”

If they build these ebooks, readers will come. “They” in this case could mean authors, publishers, or survivors and estates, whoever owns the rights. “Readers” in this case refers primarily for now to Kindle readers, since it is Kindle readers for the most part who are buying the lion’s share of ebooks, but there is plenty of room for newcomers to the party, regardless of device or platform.

Some of these titles are out of print, because the economics of maintaining print-edition inventory for backlist titles are rather difficult given the costs of production, warehousing, fulfillment, and returns, but almost all remain “in copyright.” But the economics of using new technologies to provide backlist are compelling indeed:

  • Priced at $7.99 in the Kindle Store, many of these books would sell briskly.
  • With the 70 percent “royalty” or “commission” that Amazon expects to pay under either the publishers’ newly beloved “agency model” or Amazon’s own recently announced Digital Text Platform structure, publishers would receive $5.59 per download, so that authors or estates would receive at least $1.45 per download. The only other costs involved are the manageable one-time costs of digitization and formatting. (Isn’t that what smart interns are for?)
  • By comparison, for traditionally printed paperback print copies sold at $12, publishers would receive $6 from distributors and retailers, and over half of that would be eaten up by the costs of production, warehousing, fulfillment, returns, and the dollar or so per copy that would flow through to authors or estates.
  • For titles that publishers wished to keep in print with respect to their print editions, relatively new print-on-demand services such as CreateSpace would allow them worldwide fulfillment to bookstores, libraries, wholesalers, and online retailers at zero front-end expense and far better margins than are available to most publishers, via technologies similar to those that major music labels are using to restore their out-of-print catalogues and produce and sell them widely and profitably.

As everyone who has read Chris Anderson’s The Long Tail understands, the future of just about any content business lies in broadening the catalogue and achieving economies of scale and access that allow profitability even when annual sales of particular items amount to a few thousand or a few hundred units. Backlist book classics are the perfect fit for this model with technologies that exist today. Perhaps the Big Six publishers have their own reasons for failing to seize these opportunities, such as a desire to avoid doing anything to make but it is a betrayal not only of their backlist authors and the reading public but also of the publishers’ own self-proclaimed role as gatekeepers and arbiters of quality.

The upside, of course, is the creation of a strong and steady new revenue stream for an industry that is working hard these days to convince us that it is dying at the hands of the same companies and media that would be its willing and generous partners in the creation of that new revenue.

What are we missing? Just to give you a taste, here in no particular order are a few titles from one man’s list of possibilities, books for which the lack of ebook access is, in my eyes, a crime:

Catcher in the Rye, Nine Stories, and Franny and Zooey  by J.D. Salinger
The Last Picture Show by Larry McMurtry
The Complete Stories by Flannery O’Connor
A Summons to Memphis and The Flying Change by Henry Taylor
The Color Purple by Alice Walker 
The Good Mother by Sue Miller
The Spy Who Came in From the Cold by John le Carre
Invisible Man by Ralph Ellison
Advertisements for Myself by Norman Mailer
The Mambo Kings Play Songs of Love by Oscar Hijuelos
The Moviegoer by Walker Percy
Selected Stories by Alice Munro
The Laughing Policeman by Per Wahloo and Maj Sjowall

Like I say, just a few off the top of my own idiosyncratic noggin. Get a few hundred Kindle owners together and the list of quality entries would quickly climb into the thousands. And with Kindle owners having already distinguished themselves as the most voracious group of book buyers and readers on the planet, that would mean millions for the publishing industry, and for the authors or their survivors.

What are some of the titles that you would like to see brough back to life for the Kindle?

Exclusive: Here’s What the Publishers Are Hearing from Their Own Media Intelligence Sources

By Stephen Windwalker

  • Originally posted February 3, 2010 at Kindle Nation Daily – © Kindle Nation Daily 2010

One might assume, given the apparent commitment that the BS Cabal (Apple and the Big Six publishers) is making to anti-consumer collusive price-gouging for ebooks, that their strategy is at least supported by a bit of market research. Apparently one would be wrong. Those publishers are real cowboys, and they’ve drawn their guns, so they might as well shoot someone, or something, somewhere, sometime. Even if it’s their own feet!

Simba Information, which bills itself as “The Market Intelligence Leader for the Media and Publishing Industries,” recently completed a survey of Kindle owners’ book-buying behavior and has been good enough to share a preliminary report exclusively with Kindle Nation Daily. Although Simba did not survey a huge sample, these results are especially interesting in the context of the current battles and controversies swirling around ebook pricing. Special thanks to Michael Norris, Senior Analyst with Simba’s Trade Books Group, for sharing this information.

Summary of Data from Simba’s December 2009 Kindle Owner’s Survey
Summary of Message Kindle Owners Have For Publishers: Most Kindle owners are unhappy about the e-book delay of new hardcover releases, to be sure. Other complaints had to do with pricing (books are too costly or shouldn’t cost more than print titles) but quite a few are very annoyed at the lack of selection; particularly in the backlist titles of a popular author who doesn’t have their older titles available as an e-book.
  • 43% of Kindle owners have 100 books or more on their Kindles. Just 11% have nine titles or fewer, and most of that group have only had their Kindles a few months. Unsurprisingly the ones who have had their Kindles the longest are the most likely to have large numbers of books on their devices, and are also slightly more likely to have owned a first generation Kindle
  • Prior book consumption habits are mixed: one in five Kindle owners didn’t buy any hardcover titles at all in the year prior to acquiring their Kindle, but about 23% bought 10 or more hardcovers, and 60% bought 10 or more paperbacks, showing a large commitment to reading (most adult book buyers buy fewer than 5 books of any format)
  • 9.4% of Kindle owners are on their second Kindle, and half of Kindle owners never read e-books before getting their Kindle
  • One in four Kindle owners got their Kindle as a gift, and 62% bought it without ever seeing another Kindle owner using it first, showing how effective Amazon is in making the device a ‘gift for readers.’
  • The most popular activity Kindles are used for is reading books, with 87.7% of respondents indicating they read books on the Kindle ‘very often.’ The least popular activity Kindles are used is reading magazines (57.9% say they never have read a magazine on their Kindle) and reading newspapers, with 58.8% saying they’ve never read a newspaper on their Kindle. Given that the surveyed Kindle owners are mostly very happy with the reading experience (more on this in a moment) these statistics don’t bode particularly well for the upcoming ‘tablet’ devices that may enter the market for the purposes of reading magazine and newspaper content. As far as blogs are concerned, though, 28.4% of Kindle users ‘often’ or ‘very often’ use their Kindles to read blogs, but 32.8% never do.
  • The most popular place Kindles are used are in the home (78.8% indicate that’s where they use their Kindles the most frequently).
  • Kindle owners surveyed are very happy with their devices. 59.1% strongly agree with the statement ‘The Kindle is a great value for the money’ and 51.8% strongly agree with the statement that they ‘expect to replace their Kindles with another Kindle someday.’
  • 32.6% strongly agree with the statement ‘print books are overpriced’ and 42.0% somewhat agree. Fewer agree that e-books are overpriced (10.2% strongly agree and 24.8% somewhat agreeing).  54.3% of Kindle owners strongly agree with the statement ‘I always look for the free e-books when browsing’ and 64.5% strongly disagree with the statement: ‘I buy more print books now that I have a Kindle’

Today’s Question for High School Civics Class or Harvard Law School Students: Can a competing retailer (Apple) really dictate individual item prices to another retailer (Amazon) by colluding with a publisher/wholesaler (MacMillan)?

By Stephen Windwalker

  • Originally posted February 1, 2010 at Kindle Nation Daily – © Kindle Nation Daily 2010

I received this email overnight entitled, “Steve, Stock up on Audiobooks for Less,” and it got me thinking, which is always dangerous.

Yesterday, as Kindle Nation and others were fanning the flames of consumer revolt against the inside-dealing, self-dealing, double-dealing, dealing-with-the-devil tactics of Steve Jobs, Apple, and the big publishers who are conspiring to send ebook prices into turmoil, Amazon took what seemed in the moment to be a surprisingly meek move: it apparently threw in the towel with an announcement on one of its own community forum pages that “ultimately … we will have to capitulate and accept Macmillan’s terms.”

Then I received that email from Audible.com, which is owned by Amazon, showing me a picture of an iPod Touch and urging me to buy a ton of audiobooks and listen to them on my iPod Touch. That’s an Apple device, by the way. I don’t happen to own an iPod Touch myself, although I have given them as gifts to my son, one of my daughters, and my girlfriend. I do have an Audible.com account, and in most cases I listen to the associated audiobooks on my Kindle. In about three months I’ll be getting a 3G iPad, now that I am persuaded that the iPad will run the Kindle App, Skype, and my blogging service. I own a little Amazon stock, and my best friend owns a little Amazon stock and a little Apple stock. Not enough in either case that it would ever affect what I write in Kindle Nation, but enough so that I occasionally think about what Amazon does not only from a Kindle owner’s perspective but also from a shareholder’s perspective. Since I make limited use of my cellphone, I’ll probably cancel my month-to-month Verizon wireless account in favor of using Skype on board that iPad, although my sister works for Verizon, and the savings will pay the wireless costs for the iPad. Perhaps I won’t mention this to my sister when we have dinner next week. I’ll continue buying a lot of Kindle books and subscribe to Kindle blogs, newspapers, and magazines, and I will probably even buy books published by MacMillan, although I will not spend over $9.99 for them unless they involve a clear case of some expensive technical or professional book for which the dead-tree edition would be priced at least 20% above the Kindle edition price. I will even continue, occasionally, to buy a paperback or hardcover from MacMillan or other publishers. I have nothing against paperbacks or hardcovers now and then, and I was even charmed recently that one of Japan’s largest business publishers contacted me through an agent and offered me a nice sum for paperback Japanese translation rights to my Kindle guide. I’m just glad the publisher in question isn’t part of MacMillan’s global publishing empire, because that would be just too confusing.

Er, what’s my point?

It’s just that all of this is very confusing and entangled. And if it’s confusing for me, can you imagine what it’s like for Jeff Bezos? However much he and his Kindle team might like to take names and kick ass in these battles over ebook pricing, it’s certainly reasonable for Amazon’s shareholders to expect the company to play nice with its vendors and even with those competitors, such as Apple, with whom it is involved in various strategic or de facto partnerships (what I mean here, for instance, is that the availability of the Kindle App on the iPhone, iPod Touch, iPad, and Mac are extremely beneficial for Amazon, just as it is also extremely beneficial to Amazon to be an authorized reseller of most of these devices in the Apple-branded store at Amazon.com.

So, yes, I was disappointed to read Amazon’s apparent capitulation yesterday. When I read the last line where Amazon said “Kindle is a business for Amazon, and it is also a mission,” I wondered if it have been more transparent to change a few words so that it read “Kindle may be a mission for Amazon, but at the end of the day it’s all just business.”

Maybe that’s fair, but maybe not. It is clear to me that Amazon is treading carefully here, and setting things up for future strategic steps.

Amazon might be in a better position to charge some of the other players with price-fixing and anti-competitive collusion, after all, if it takes a step back (as it has just done) and lets things develop a bit:

  • if it restores MacMillan titles to the Kindle Store (and the main Amazon store) and MacMillan sets exorbitant and, more to the point, fixed prices for its ebooks;
  • if the other Big Six publishers all move into lockstep with MacMillan and insist upon $12.99 to $14.99 ebook price points combined with the “agency model”; and
  • if the entire scenario plays out just as Steve Jobs said it would.

Perhaps I am working too hard at harvesting inferences from Amazon’s statement yesterday, but given what I have already said about treading carefully here, I have to think Amazon chose its words — especially its use of the word “monopoly” — very carefully. Corporations seldom throw such words around without consulting with their in-house counsel.

Such consultatons, or any related communications that Amazon or its barristers might be holding these days with representatives of, say, the Federal Trade Commission, might properly revolve around some fairly simple questions:

  • Can publishers — or any wholesalers, for that matter — really dictate individual item prices to retailers?
  • To focus a little more precisely on what seems actually to have happened in this instance, can a competing retailer (Apple) really dictate individual item prices to another retailer (Amazon) by colluding with a publisher/wholesaler (MacMillan).
  • What about “it’s a free country?”

Perhaps Amazon will rely on market forces to sort these issues out over time, or perhaps it will seek the intervention either of the courts or of regulatory agencies. Amazon may also be reticent to engage ebook pricing issues in a courtroom if it feels that some of its own strategies may be vulnerable to judicial or regulatory scrutiny, given the claim by some publishers that the Kindle Store currently has an effective monopoly with respect to ebook content, with 90 per cent market share.

But to the extent that either the Big Six publishers (Random House, Hachette, HarperCollins, Macmillan, Penguin and Simon & Schuster) or their authors believe that they will somehow protect themselves from Amazon by lying down with Steve Jobs and Apple, an old caveat comes to mind: “Be careful what you wish for.”

For starters, don’t underestimate the market power of Kindle Nation’s citizens. Neither Kindle owners nor iPad/iPhone/iPod Touch owners nor those who have both are stupid, thank you very much. Price points matter enormously in influencing sales velocity. The same downward pressures that we have all seen on Kindle ebook prices and for that matter on discounted hardcover prices have also been a powerful force in Apple’s Apps store. If you are thinking that Steve Jobs’ 125 million i-customers are suddenly going to start springing for $14.99 ebooks, well, that’s just silly.

Publishers would be wise to spend a little time going to school on the rise and fall of the music industry as chronicled in Steve Knopper‘s Appetite for Self-Destruction: The Spectacular Crash of the Record Industry in the Digital Age. It’s available in hardcover for $26 (discounted to $18.82 by Amazon), in paperback for $16.95 (discounted to $11.53 by Amazon), and a Kindle edition for $10.38.

Hardball: Amazon Ceases Shipping of All Books by MacMillan Publishers and Imprints over Kindle Pricing Dispute

By Stephen Windwalker

Are you ready for the latest chapter in the business thriller saga of the year? The one that has some print-book publishers in a death match with Amazon in their efforts to hold onto the last remnants of their publishing prerogatives from an earlier century?

We’ll call this chapter “HardBall.”

Brad Stone and Motoko Rich report in the New York Times today that Amazon’s has pulled all books by major publisher MacMillan from its shelves. That’s all print books, all ebooks, all books, period, although some quick spotchecking by this reporter suggests that Amazon’s move may not yet have been extended to all titles.

Amazon has been involved in difficult discussions with MacMillan over Kindle Store pricing for months, and has responded with a “temporary” move to stop shipping the publisher’s books. It is widely believed that Amazon is responsible for over 20 percent of all book sales in the United States, with Kindle-formatted books representing more than one-third of all Amazon sales.

One of MacMillan’s most venerable imprints, Farrar, Straus & Giroux, is headed by my old college friend and literary zine colleague Jonathan Galassi, shown here, who weighed in with an intriguing but incomplete op-ed piece in the Times late last year.

“Macmillan, like other publishers, has asked Amazon to raise the price of e-books to around $15 from $9.99,” said Rich and Stone in their report, although the phrasing that suggests that publishers in general have taken that position is, according to our information, grossly unwarranted.

The only way you can buy books published by MacMillan and its imprints at the Amazon website is to get them from third-party sellers through Amazon Marketplace. (This, by the way, will be a huge boon to third-party sellers, like the thousands who have built their businesses by applying the principles and strategies described in Selling Used Books Online: The Complete Guide to Bookselling at Amazon’s Marketplace and Other Online Sites.)

The background for this story, of course, involves Steve Jobs and Apple playing the uncharacteristic role of David to Amazon’s Goliath and attempting to build an iBooks catalogue for the iPad — from scratch — by trying to convince publishers that millions of prospective iPad buyers will want to pay $12.99 to $14.99 for the types of iBooks “bestseller” offerings that have previously been available for $9.99 in the Kindle Store. Ordinarily one might say, “Good luck with trying to get that dog to hunt, Mr. Jobs,” but Jobs is as tenacious a player as Jeff Bezos, if perhaps not quite as focused and consistent. And Jobs gave a remarkable impromptu interview to Walt Mossberg at the iPad launch event in which he claimed that “the prices will be the same” between the iBooks and Kindle stores and touted his belief that “publishers are actually withholding books from Amazon.”

Indeed, Rich and Stone report that “publishers have withheld select e-book editions for several months after the release of hardcover versions of books.  It is not clear yet if publishers can withhold books from Amazon while giving them to other parties like Apple. Antitrust lawyers said it could raise legal issues.”

In that final sentence, I think, is one very likely denouement for this saga: a courtroom drama that might well be worthy of John Grisham’s talents, but of course if he writes the book, we won’t get to read it on the Kindle.

And then there’s the fact that such courtroom solutions tend to take years, during which the entire landscape would change anyway.

MacMillan is owned by the global publishing holding company Verlagsgruppe Georg von Holtzbrinck, based it Stuttgart (that would be Germany, not Arkansas), whose imprints include:

  • Macmillan
  • Farrar, Straus & Giroux
  • Faber  
  • Farrar, Straus 
  • Hill & Wang  
  • Sarah Crichton Books  
  • Henry Holt  
  • Holt  
  • Metropolitan  
  • Times Books  
  • Macmillan Children’s  
  • Farrar, Straus Children’s  
  • Frances Foster Books  
  • Melanie Kroupa Books  
  • First Second 
  • Holt Children’s 
  • Christy Ottaviano Books  
  • Kingfisher
  • Macmillan Children’s
  • Priddy Books 
  • Roaring Brook Press 
  • Neal Porter Books 
  • Square Fish  
  • Starscape  
  • Macmillan Science  
  • Palgrave  
  • Picador USA 
  • St. Martin’s Press  
  • Griffin  
  • Minotaur 
  • St. Martin’s  
  • Thomas Dunne Books  
  • Truman Talley 
  • Tor/Forge  
  • Forge  
  • Orb  
  • Tor  
  • Macmillan Publishers (UK) 
  • Pan Macmillan 
  • Boxtree  
  • Campbell Books Kingfisher 
  • UK Macmillan  
  • Macmillan New Writing 
  • Macmillan UK Children’s  
  • Pan Macmillan  
  • Picador  
  • Rodale UK 
  • Sidgwick & Jackson  
  • Think Books  
  • Tor UK 
  • Young Picador 
  • Pan MacMillan Australia  
  • von Holtzbrinck 
  • Droemer Knaur 
  • Droemer Profile  
  • Kiepenheuer & Witsch 
  • Rowohlt  
  • Kindler  
  • Rowohlt 
  • Rowohlt Taschenbuch  
  • Wunderlich  
  • S. Fischer  
  • Fischer  
  • Fischer Taschenbuch  
  • Krueger  
  • Scherz 

It is not known, as we post this, if the German imprint Kindler will be barred permanently from the Kindle Store.