Urgent note to book industry: There's a better way to window eBooks

Frankly I am surprised that it took this long. But today, we read in the Wall Street Journal that two major publishers have decided to pull a music industry mistake. Simon and Schuster and Hachette Book Group have announced that they will not release most eBook editions until the hardbacks have been on shelves for four months.

And I quote David Young, CEO of Hachette Book Group, whom the article cites as saying: "We're doing this to preserve our industry, I can't sit back and watch years of building authors sold off at bargain-basement prices. It's about the future of the business."

 

Correction: This move is about the past of your business.

 

I'm just being a historian here when I point out that language like "We're doing this to preserve our industry" is a classic symptom of what we at Forrester loving call The Media Meltdown. I wrote a whole report on this ailment and its many symptoms, chief among them is that media businesses attempt to preserve analog business models in the digital economy, even when analog economics no longer apply. This is exactly that scenario.

I have two very important messages to offer the book industry (most all of them clients, so I'm trying to be delicate here, the way a group of friends running an intervention for an alcoholic have to act even if it involves summoning tough love). The first message is the hardest to hear and it will make me some enemies. But the second message offers some hope and I encourage you book types to give it a fair hearing, because I have history and economics on my side. 

Message #1: Dear book industry, I'm so sorry to tell you this, but your books really aren't worth $25. Just like newspapers weren't really worth what people were paying for them and magazines, either. And CDs, and DVDs. These were all worthy of a high price when analog economics were the only economics. When people understood that they paid $25 to get some paper, ink, and a binding, all of which had to be warehoused, shipped, and slotted on shelves in warm stores with muzak and imported coffee odors wafting through the environment. 

A digital book suffers from none of those impediments. Therefore: it should be cheaper. Stop glorying in historical prices and accept the fact that a digital book should not cost $25 unless it comes with some awesome, exclusive premium that makes it worthy of such a price. Otherwise, $9.99 is darn awesome a price to pay, given how cheap it is to deliver an eBook (which has fewer bytes in it than a TV episode sold for $1.99 on iTunes).  

I am no Chris Anderson. I am not telling you that content wants to be free. I'm just telling you that it wants to behave according to digital economics, not analog inefficiencies. I understand that you have the awful burden of serving both analog and digital economics simultaneously. That's real life and I don't pretend that you can go digital in a month, or even a year. So what's a good publisher to do?

Message #2: You can actively window in a way that doesn't alienate consumers. Just as I want you to charge a fair price for your digital content, I want you to be able to sell physical books for as long as a majority of consumers still want them. So here's my proposal: Rather than creating artificial scarcity by holding eBooks back four months, why not dynamically price your offerings so that a consumer who really wants that new Stephen King book on his or her digital reader can get it the same day as the hardback. Here are two possible, nonexclusive scenarios, both of which are better than what you currently have planned:

 

  1. Bundle the digital download with the hardback. Having a hard time selling that hardback book these days? Bundle the digital version (at Amazon and Barnes & Noble, they'd be happy to facilitate this for you). It costs pennies to deliver the digital version, it gives you a way to establish a relationship with the consumer since they'll have to sign up to get the download, and it creates a truly multiplatform consumer experience that can't be beat.
  2. Offer a premium digital version to coincide with hardback release. Worried that $25 can't compete with $9.99? It can't, frankly, and ten years from now, it won't have to, but for now, manage that gap by offering digital content in windows: premium and basic. This takes a page from our recommendations to the music industry and it applies here perfectly. Offer a premium digital version (with a personalized dedication page from the author to the reader [automated, of course], an exclusive interview with the author, and some behind the scenes essays) for $19.99 that goes on sale the same day as the hardback. But make it clear to buyers that if they are willing to wait and don't want the premium content, they can pre-order the $9.99 version right now, while all the marketing for the hardback is in full swing and awareness is at its peak. The money is already committed, and the digital book is simply delivered four months hence.

These options are ten times more interesting to consumers than what you've given them today. Plus, they allow you to manage that awkward transition from analog inefficiencies to digital economics. You become a friend to readers in this scenario, not their headmaster or disciplinarian. We call that Media Rebuild, a phase beyond Media Meltdown and one we welcome you to if you're ready.

Comments

re: Urgent note to book industry: There's a better way to windo

Great post. Unfortunately Amazon and BN.com are NOT happy to bundle. HarperStudio has been trying to make that happen (with the Indies too) for a year and a half. NO ONE has shown interest in building a shopping cart that will bundle formats. Crazy, I know. You can fly hundreds of people in a hunk of metal across the world and you can't put a digital and physical product in the same shopping cart at a major retailer.

re: Urgent note to book industry: There's a better way to windo

James, great post. One of the peculiarities of the digital economy - from ebooks to enterprise software applications - is that the cost of production is essentially zero: Once you've made one copy, making a million duplicates hardly costs anything. So yes, ebooks could be lower cost than the physical hardback.But I think the book industry is right to stagger output according to format. This is common practice. When the movie Avatar eventually hits the screens, we're all going to have to pay $13 to go see it. More for 3D. The DVD, PPV and eventually the cable release will all come later. This strikes me as good marketing.

re: Urgent note to book industry: There's a better way to windo

Debbie, you are now my new favorite person for revealing what you just did. So interesting: Every time I talk about bundling with certain unnamed players, they nod as though it's obvious, but to hear that the problem seems to lie with the shopping cart is fascinating. I guess even the digital players aren't ready for the digital future!

re: Urgent note to book industry: There's a better way to windo

superb post, james. i hope some of the publishers who read your words soon begin to follow message #2. preservation always loses out to creation! it might take some time but nobody escapes entropy. besides, there is profit in confusion and your message #2 is one clear example of how that works for book publishers. you may be a voice crying in the wilderness, but i hope you keep making noise!

re: Urgent note to book industry: There's a better way to windo

There are small players who can bundle formats, so I know it CAN be done. TOPSPIN does for music and I've been trying to make it happen with them with books too -- but then you're skirting the mainstream -- and if you want to have sales count towards the bestseller list (where they then get placement and discounting), you can't use alternatives like Topspin.

re: Urgent note to book industry: There's a better way to windo

Bundling is definitely a technology issue, not lack of interest of desire on the part of publishers. Similar problems with bundling books and magazine subscriptions.Forrester should talk with the various ecommerce players, both retailers and 3rd-party platforms about that.

re: Urgent note to book industry: There's a better way to windo

While I am one of those old-fashioned holdouts who can't imagine enjoying a book on my computer or smartphone, I am absolutely in your corner on the premium vs. basic e-book releases. It's so logical it boggles the mind why the publishers haven't come up with it themselves. Great stuff.

re: Urgent note to book industry: There's a better way to windo

Just to chime in with my colleague Debbie Stier...we're dying to do the bundle approach, and agree that it's a terrific way to offer consumers an e-book earlier but still have your profit margin cake. Now we just need Amazon, BN.com, etc...to make it possible to combine digital and physical shopping carts...

re: Urgent note to book industry: There's a better way to windo

Great post, and great suggestion! I really hope the industry listens!

re: Urgent note to book industry: There's a better way to windo

Such great input on bundling. In fact, I wonder if this whole announcement is all a ploy for the publishers to get leverage against Amazon and B&N to force the bundling issue. If so, it's brilliant. If not, let's turn it into that! Either way, I feel a new mandate from these comments to accelerate bundling and make it work. Will report.

re: Urgent note to book industry: There's a better way to windo

James, I love the post, but shouldn't there be a third option? I come from the text industry, not trade, so I may be missing something, but is seems that the third, and in my mind most logical option, would be this:Set the price for the e-book at the content value and have it go on sell first. Then charge the premium for the hardback based on initial ebook sales (to account for volume discounts in production). After all, isn't the premium in holding the actual book and showing it off on your shelf?But then, we would have to provide career counseling and job training for all the printers, which could be paid for in carbon credits for producing fewer carbon-consuming books.

re: Urgent note to book industry: There's a better way to windo

JamesYou're clearly a smart guy and I can't disagree with everything that you wrote. However, I have a hard time with the following:****A digital book suffers from none of those impediments. Therefore: it should be cheaper. Stop glorying in historical prices and accept the fact that a digital book should not cost $25 unless it comes with some awesome, exclusive premium that makes it worthy of such a price.****To me, the market should drive the price of a book and there should be no arbitrary value about what's "fair."I can think of books that have thousands of dollars in value, such as Carnegie's How to Win Friends and Influence people. For me, a trashy romance novel has no value but, to others, it's a much-needed form of escape.If you think about only the cost of production, then yes, $25 might seem inflated. Think about the number of pages in most books. Also think about how long it takes a person to read one. On a per-hour basis, reading is still a really cheap form of entertainment, whether the price of a book is $25 or $10.Let's not forget that there are plenty of stores and sites (ok, just sites) out there to buy books much cheaper than the retail price. This certainly isn't the early 90s when I was in college, unable to find low cost textbooks.

re: Urgent note to book industry: There's a better way to windo

Phil, I like your disagreement with me, because what you're implying is a completely variable pricing model: where someone might pay $100 for a book while someone else might value it at $5. Theoretically, that's the market maximizing approach. In practice, though, only a few experiments have ever been able to do that, such as Public Radio sponsorship or Radiohead's "pay if and what you want to" trial.The day may come when individuals have all the tools they need to self-publish, putting their wares out for the market to efficiently discuss and value. In that world, variable pricing could work. But for now, companies are needed to pick good books, refine them, distribute, and market them. Those companies need a fixed price model against which to value any books they want to acquire. And in that world, the economics of distribution (moreso than creation) will largely dictate price.I also love your media-crossing point about how people choose to spend their time. I can get a masterful narrative experience out of 45 mins (one hour minus the commercials) of a good TV show, while I have to put 3-6 hours of my time at risk to find out if a book is good or not. (But when it's good, it's oh, so, gooooood.) So it's interesting to consider a world in which people paid for the value of how their time invested was rewarded. No answers to that one from me, just really interesting questions to ask.

re: Urgent note to book industry: There's a better way to windo

Very interesting post James, and a lot of equally interesting discussion here.It seems to me that a part of publishers' concerns is that by selling digital titles as a loss leader in order to sell more Kindles, Amazon is trying to lock as many readers as possible into their proprietary format, at which point they can go back and take an even bigger bite out of the publishers' & authors' end.Of course, I do agree that ebooks should be cheaper than physical books, but the question is how much cheaper. Just because the physical production costs are zero, that doesn't mean the year of the author's life spent writing the book, or the time, effort & money spent by the publisher to get it into its final form are worth less. So does $9.99 really need to be the only price point that makes sense?Perhaps the rumors of Apple offering publishers a better revenue split is one way for lower pricing to make sense, as that way publishers (and authors) will be able to maintain more livable margins.Anyway, excellent post James and it will certainly be interesting to see how this all shakes out.

re: Urgent note to book industry: There's a better way to windo

I couldn't help myself...I turned a comment into a rant:http://philsimonsystems.com/2009/12/publishing/Sorry, James... I have a bone to pick with you. :)

re: Urgent note to book industry: There's a better way to windo

David raises a good point: in all my insistence that publishers pursue a reader-friendly strategy, shouldn't Amazon be forced to concede something to the consumer/publishers as well? Another reason to root for the Nook -- the business will only be healthy when there are viable alternatives for consumers and publishers alike. At the moment, I'm optimistic: there's enough activity here to suggest we're going to make it through this and end up in a place where $9.99 isn't the magic price for everything, but that consumers have the choice to pay more to get more benefits (like earlier distribution). Char Lyn makes that point above: how about a digital edition that is sold a week before the hardback? For $30? Maybe even only through a bookstore (including independents)? People who hate bookstores can wait a week and pay $20 for the digital version if they want. All of this and more should be tried and evaluated in the coming year. Let's hope.

re: Urgent note to book industry: There's a better way to windo

There are some good experimental ideas about pricing here James, but they all overlook the fundamental thing that has driven the moves by S&S and HBG: Amazon is both willing and able to take losses on the sales of individual ebook titles, no matter how publishers price them. And no one can sell a protected Kindle file except for Amazon.Publishers know that ebooks generally can and should cost consumers less than the same book in print. That's now what the current moves are about.

re: Urgent note to book industry: There's a better way to windo

Take a page from the latest Star Trek movie when it comes to bundling: For the DVD with the digital copy for the iPod they simply included a code to download the movie for free from iTunes no matter whether you bought the movie at Walmart, amazon, or wherever.I'm not saying iTunes is the answer, but rather that the publishers (especially those who already have an ecommerce presence--which most publishers in Canada do, not sure about the US) can provide the downloads through unique coupon codes included with hardbacks (can be preprinted inserts that retailers can stick in or be provided as already bundled to sellers like amazon as a separate product so the hardback with digital copy can be sold as a "special edition" bypassing the shopping card issue).Publishers should want the consumer to come to their site for the download to build a list of consumers to sell to (don't ask for demographic information that is none of your business in exchange for the ebook download though--it's not a freebie, the consumer has paid for it. There will be opportunity later to interact with that consumer and find out more about them.)

re: Urgent note to book industry: There's a better way to windo

I would so love it if publishers even just offered a discount on the hardback version of an eBook I buy. I'm still vacillating on asking for a Kindle this Christmas, because if I absolutely love an eBook from my Kindle, I want to be able to buy it in hardback to re-experience it more fully.

re: Urgent note to book industry: There's a better way to windo

James, great post. While from the author/publisher perspective, a $25 book seems fair given the work that went into writing the book, as you note, customers don't see the value. At Smashwords, nearly 1,000 of the 5,000+ original ebooks we publish are priced at free by the authors, and if download stats are any indication, there are thousands of ebook fanatics who value the time they spend reading books, but are reluctant to pay. Therefore, I think even the $9.99 threshold will be difficult to sustain. Somewhere along the spectrum between free and $9.99 publishers should consider new price points for some books (not all). I blogged about the $4.00 book here: http://www.huffingtonpost.com/mark-coker/why-we-need-400-books_b_309260.html

re: Urgent note to book industry: There's a better way to windo

Mark, you're a courageous man (and thanks for the link). I've gotten hammered by some who insist $9.99 is too cheap and you're asking for even lower prices! But your point is worth considering, especially in light of our formal position on digital media: people will ultimately consume more of it. People now listen to more music than they did in the world of radio and CDs. People now watch more video than they did when they had to watch linear TV or DVDs. And we expect more people will read books if they are easy (including cheap) to find and consume.Latent in your comment, however, is an topic professional publishers fear: the day when a self-published digital author can make a living without a publisher's help. I know Smashwords is interested in hastening that day's arrival so I am eager to see how it evolves. Keep us posted!

re: Urgent note to book industry: There's a better way to windo

I'm not saying digital will make books go away, because it can't. A digital file only lasts as long as its media its been saved to, an Mp3 flash drive, an iPod, or a CD. Sure cassette tapes slowly phased out vinyl records, but not before CDs showed them up. Now its all CDs, except the mp3 files available online or aac or whatever iPods use online through iTunes one of the most un-userfriendly programs ever. My work is self-published, you can buy as e-book right away (really cheap), or pay for the print copy, wait about a week normally (Print on demand). You can do the same at Amazon, and in parts at Shortcovers, kind of like iTunes for books, just get a song/ chapter or so instead of album/book. Now Sony and Amazon Kindle offer the new E-readers, which you can do on an iPod touch or iPhone anyway. My goal is to be in a binding on a shelf at a bookstore.I don't hold my iPod all day to read a book, I could, but I prefer something my hand needs a better grip on that won't suddenly dissappear during a freak magnetic accident (like my left hand taht alters compasses). Maybe photolabs are gone, since SD cards on digital cameras changed that industry, but really good photographers still use film (www.waltermachel.com does) Authors want people to hold their books in their hand from a binding. Readers want to hold that binding. Yes it takes up space in the basement recroom, but its our space to put it in, we should be allowed to buy real books and not just magnetic media copies of them.It would be real nice if people would buy mine at all! I have xmas presents to buy too. I want books.

re: Urgent note to book industry: There's a better way to windo

I don't understand the resistance to bundling. I love books, and there are very few cases where I'd want a book on a Kindle and not have the real book too. I'd gladly pay a little bit more for a bundle. Amazon is missing the boat here big time-- not only would it be more money for them on each sale, it would make me more likely to buy from Amazon (b/c if I buy the book elsewhere I can't get the bundle!). Hopefully we'll see something like this soon.

re: Urgent note to book industry: There's a better way to windo

The Center for Media Research has released a study by Vertical Response that shows just where many of these ‘Main Street’ players are going with their online dollars. The big winners: e-mail and social media. With only 3.8% of small business folks NOT planning on using e-mail marketing and with social media carrying the perception of being free (which they so rudely discover it is far from free) this should make some in the banner and search crowd a little wary.www.onlineuniversalwork.com

re: Urgent note to book industry: There's a better way to windo

I wish the publishing industry were more open about their non-physical costs.Someone has to wade through slushpiles to find books worth investing in. Even a manuscript from a careful author usually needs editing and reformatting.As a reader, I'm willing to pay the someone to do that for me. Sticking to published books drastically increases my odds of finding one I'll enjoy.I'd also like library stats to affect the value of a book. 3/4 of my reading is invisible to the publishers. That's a tough one, though. Free public libraries with a wide range of content are absolutely necessary, so any change to that model must be thought through very carefully.