Tuesday, 10 December 2013

The Digital Reader

The Digital Reader

The Morning Coffee – 11 December 2013

Posted: 10 Dec 2013 09:30 PM PST

Top stories this morning include a commentary on the Feedly ruckus from over the weekend (link), Facebook’s conflicting goals (link), a question on where the current debate on paywalls is heading (link), a petition signed by writers which calls for an end to the NSA’s illegal spying (link), and more.

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Indies Are Getting Clobbered by Big Name eBook Discounts – But Not For The Reason You Think

Posted: 10 Dec 2013 05:27 PM PST

If you’ve ebook-best-seller-pricing-aug-2012-to-nov-2013[1]been following ebook news over the past 6 months then you’ve noticed that ebook prices have tended to drop. In fact, the average prices of ebook bestseller lists have shown a fairly consistent downward trend for the past year as more and more titles exit agency price controls and enter the free market.

Indie authors are beginning to notice, and one in particular blogged about it last week. That blog post crossed my desk yesterday, and while it’s interesting and factually correct I don’t the author reached a valid conclusion.

Toby Neal wrote this over on her blog:

The DOJ price-fixing case with Apple and the Big 5 publishers was settled awhile ago, but September was when Amazon began really discounting big name books. I get several email lists of discounted books daily in my inbox, and I've been agog to see big names like Janet Evanovich, Louise Perry, Michael Connelly, Patricia Cornwell and most recently, Donna Tartt's Goldfinch, one of the Best Books of 2013, going for 2.99 or less.

And in September, my sales went to half of what they'd been. They've stayed at half what they'd been in spite of doing active marketing, ads on Kirkus Reviews, giveaways, promos in those same lists I get in my email inbox, and launching two new books.

Toby Neal blames her drop in sales on Amazon heavily discounting agency titles. That could be true, except that such heavy discounts are probably more than Amazon could do on their own. The new post-agency contracts limit Amazon’s ability to discount ebooks, so if heavy discounts are dropping prices for titles from legacy publishers enough to affect cheap indie titles then there is probably another cause.

And just to be clear, all signs point to ebook prices dropping and indie ebooks facing more price competition; I just want to offer a more nuanced explanation.

Edit: I’m not sure that this is related, but Dear Author posted in mid-November that free and deep discounting is not as effective of a promotional tool as it used to be:

In the early days of digital publishing, free was one of the most powerful tools that could be used to elevate the profile of a book.  In a self publishing world, the price is probably the number one promotional tool of an author.  But is it still working?

A few on the Kindleboards have reported more diminished success with Bookbub, a newsletter that broadcasts sales and freebies to an audience of hundreds of thousands of subscribers. I've come across a couple of author posts that suggest that free and even 99c promotions aren't working as well as they might have in the past even though promotional pricing is more popular than ever.

As anyone in publishing can tell you, the Big 5 publishers release most of their Fall titles in a tight window starting in late September and stretching to early December. That’s a huge influx of content from popular and best-selling authors, and it’s pretty obvious that the major ebookstores are going to push the hot new releases. So of course indie authors might see a noticeable drop in sales  as readers spend their limited budget on more expensive ebooks.

But that only accounts for the time since the end of September; Toby Neal saw a drop in sales early in that month, and that was probably due to the major publishers putting their older titles on sale in anticipation of the Fall releases.

That sounds like a good promotional model, but you don’t have to take my word for it; check out this best-seller price index from Digital Book World. Note the severe dip extending from late August to late September:


I’m not usually one to put any weight into best-seller lists but this graph, simply as a price index, fits too closely to be ignored.

At this point I’m sure that some are wondering why this year is different. After all, some agency titles were already ex-agency around this time last year so why didn’t indie authors see a similar effect?

For one thing, the above chart tells us that there is increasing price competition in the best-seller lists now that the major publishers no longer get to set the price and shove it down consumers’ throats. The effect appears to be cumulative over time (so far), and if it continues it could have an interesting effect next Spring and Fall.

The other possible reason why indies didn’t see price competition last Fall is that, according to Kristine Rusch, the publishers were still coordinating their release schedules:

Events in traditional publishing are Event Novels. Until 2012/2013, it was common practice for the editors in chief of traditional publishing houses to have a polite, if off-the-record, discussion with cohorts at other publishing houses. The editors would scatter their Event Books throughout the fall season—which is the big season in publishing.

…Book publishers have had that same attitude too, but they don't announce their lists that early. They announce the fall lists in January, sometimes even in March, of the same year. And all of the book publishers announce at roughly the same time.

So, until last year, they would have "informal" discussions, designating September 24 Stephen King week, and October 22 John Grisham week, and so on. No one would schedule a tent-pole book—a blockbuster, if you will—against another tent-pole. Unless those tent-poles were in radically different genres. Sure, a romance publisher might release a sweet contemporary romance blockbuster on September 24, under the assumption that romance book-buying dollars are different than horror book-buying dollars. In other words, the romance reader wouldn't be buying the King, and the King reader wouldn't be buying romance.

I think part of the reason why indies are taking a hit in the wallet is the general uncoordinated nature of the major publishers’ sales promotions. They’re promoting all the titles heavily due to the more intense competition, and while that does help their sales it also hurts anyone that doesn’t have the huge marketing budget.

If that is true, and if  book prices continue their downward trend, then the problems that Toby Neal reported last week are only going to get worse. Can you imagine what is going to happen next April, when the major publishers start their Spring release schedule? I think indie authors might want to consider getting a day job just in case.

On a related note, I think we may be looking at practical proof of Mike Shatzkin’s argument that high agency prices reduced the amount of direct price competition that indies might face:

But I want to argue here that all authors, including those who self-publish for $0.99 or $2.99, should be applauding the big publishers' efforts to keep the perception of value for branded books high by keeping prices high and stopping retailer discounting. Authors should be vocally supporting price maintenance and the agency model, even if they are not "in the union". There are several reasons for this.

3. If big publishers reduced their prices sharply, the key marketing distinction that fostered the discovery of such writers as Amanda Hocking and John Locke would be eliminated. On the comment stream of a blogpost I read on this subject (can't find it so can't link it), one person posted a string of suggestions for major publisher survival strategies that included "cut all your prices to $2.99." Why? Because it would eliminate all the competition from the self-published riff-raff that is using price as a marketing tool. So not only would the publishers and branded authors make less money, the aspirants would find their path to success cut off as well.

That’s now going away, and indie publishing might wither with it.

Oh, I don’t think that indie publishing is going to die, but I do think we’re going to go into a brutal Darwinian period where the weak and the merely unlucky will be slaughtered. The next 6 months to a year could be a major upheaval in indie publishing as indies have to face more direct competition from the majors.

If I were an author, I would follow the advice of Toby Neal and start aggressively developing pursuing new options. I think she’s right when she says that it will be necessary.

P.S. I would like to thank Kristine Rusch for sharing the details about the Fall and Spring launch windows and Will Entrekin for pointing me in the right direction.

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Wiley Reports eBook Revenues Up 40%

Posted: 10 Dec 2013 12:51 PM PST

When the wiley[1]book on 2013 flattening ebook market is written someone is going to have to write a long footnote to explain John Wiley & Sons. This technical and academic publisher defied assumptions today when they released a financial report for their second fiscal quarter.

According to the presentation, Wiley’s Q2 revenues were up by 8% over last year ($449.2 million from $417.7 million). The company showed modest gains in their professional division and excellent growth in the education division.

But the important detail is that Wiley’s digital book revenues increased by $9 million (from $22.4 million to $31.4 million). And that’s not all; Wiley also reported an additional gain of $3 million in revenue from WileyPlus, their online learning environment. This runs counter to the belief that the ebook market is flattening out; it also tends to cast doubt as to Mike Shatzkin’s claim that there is no digital market for nonfiction ebooks.

Of course, it’s not all good news today; Wiley’s increase in digital revenues is outweighed by the drop in paper book revenues, presenting all the appearance of digital growth occurring only at the expense of paper’s decline. Also, if you note how the decline in paper exceeds the growth in digital then it makes you wonder if perhaps Wiley is feeling the pressure from freely available information found online (maybe the internet is a serious threat after all).

Wiley via Infodocket


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Google Glass Gets News Reader, Blogging Apps

Posted: 10 Dec 2013 11:07 AM PST

Google GlassGoogle_Glass_Explorer_Edition[1] might still be the purview of a few rich techies thanks to its $1,500 price tag but it is gaining new features at an impressive rate (no coincidence there, I’m sure).

Over the past week 2 new apps have been announced for Google’s heads up display which will enable users to create and read blog posts. I’m still not quite sure how that is going to work out on the Glass’s fraction of an inch display, but clearly it works well enough for the projects to be released.

First up is an unofficial WordPress app called wpForGlass. This is the latest project from the technologists at Weber Shandwick, and Glassheads can use it to post to any WordPress blog directly from Glass -  once you’ve jumped through some hoops. This app requires an extensive set up process, but once that’s done users will be able to dictate a blog post and upload it.

Check out the promo video:

I suspect that if wpForGlass does see widespread use it’s mainly going to be used for short content like photos and videos shot with the Glass’s camera; the voice dictation seems too likely to cause bystanders to tell the blogger to shut up. Perhaps this app might be a better fit for Tumblr?

I might also suggest Twitter, but that service already has a Glass app (and yes, you can tweet from Glass).

In any case, while a blogger is going to be limited to only Glass-blogging on WordPress blog, readers will have the option of reading all their news feeds on Glass – at a price. Thanks to the recently launched Wearab.ly service (which first showed up in early November), readers can sign up to pay $11 a month for the privilege of reading blog posts on their Google Glass.

That’s a pretty high price tag, I must say, but the team at Silica Labs which developed Wearab.ly defend their cost with the explanation that their service converts the content into snippets which display better on Glass and other wearable displays like the Pebble smartwatch and the Sony Smartwatch 2, both of which are supported.

Wearab.ly is also trying to get publishers to pay $449 a month to get their content converted so it works better on wearable displays; I don’t see very many sites taking them up on this, not unless the Apple iWatch (or some other breakthrough product) makes an appearance.



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Court Dismisses Booksellers’ Anti-Trust Lawsuit, Amazon’s eBook Monopoly Allowed to Continue Unhindered

Posted: 10 Dec 2013 08:30 AM PST

In a 19 page ruling released 5833267013_759e7e2e00[1]late last week, Judge Jed Rakoff dismissed the ant-trust lawsuit filed by a trio of indie booksellers.

He described the claims made by indie booksellers Book House of Stuyvesant Plaza, Posman Books, and Fiction Addition as “threadbare allegations”, thus bringing to a close what had to have been one of the stranger lawsuits of 2013.

It’s been nearly 10 months since the booksellers filed an anti-trust lawsuit alleging that Amazon and the major publishers had colluded to shut indies out of the market. This suit argued that in agreeing to license content to Amazon which used Amazon’s proprietary DRM, the publishers had effectively shut out indies from a major part of the market. It also argues that Amazon had an illegal monopoly in the ebook market.

The booksellers’ complaint noted that the publishers had declined to negotiate deals directly with independent booksellers, forcing them to work through the ABA IndieBound program or through ebook distributors like Ingram/LSI. (Apparently the relevant fact that indie booksellers acquired their paper books via distributors and not directly from the publishers seems to have been escaped the booksellers and their lawyers.)

The plaintiffs also argued that the distribution contracts, along with Amazon’s decision to operate the Kindle platform as a closed ecosystem, showed that Amazon had monopolized or attempted to monopolize the ebook market. (The fact that the majority of the titles from the 6 publisher defendants were available outside the Kindle Store also seems to have been escaped the booksellers and their lawyers.)

Just to put this lawsuit in perspective, let me remind you that it was filed in the midst of an unrelated DOJ anti-trust lawsuit which proved that 5 of the 6 major US publishers had conspired with Apple against Amazon with the goal of raising the market prices of their ebooks. If someone could explain how 5 publishers simultaneously conspired both with Amazon and against Amazon, I would be willing to pay big money. Also, the DOJ disclosed in the summer 2012 that Amazon was investigated as part of the investigation into Apple and the 5 publishers. Furthermore, the DOJ declined to file a lawsuit against Amazon, reporting that they did not find any evidence of wrongdoing.

With that context in mind, it should probably come as no surprise that Judge Rakoff didn’t buy any of the booksellers arguments. Starting with the idea that publishers’ acceptance of Amazon’s proprietary Kindle DRM “suggests that there may have been oral agreements or discussions” between the publishers and Amazon, Judge Rakoff notes that “the evasiveness of this allegation is remarkable”.

The judge goes on to point out that the plaintiffs don’t claim that such agreements occurred, merely that they might possibly have happened and may or may not have included one or more publishers plus Amazon. He also notes that the booksellers failed to show that the publishers coordinated their efforts in any way, and that “plaintiffs have not alleged that the Publishers played any role” in Amazon having a closed ecosystem or that the publishers even gave a damn. The only claim made is that the publishers knew about the DRM and did nothing to stop it. The judge described this as insufficient.

Judge Rakoff next questioned the logic of the booksellers’ arguments, pointing out that “even the threadbare allegations the plaintiffs do make are undermined by the plaintiffs failure to explain why the publishers would even want to enter into the type of restrictive agreement alleged”.

Noting that the booksellers failed to make a distinction between DRM, closed DRM, and Amazon’s device-specific DRM (which restricts users from transferring an ebook between 2 Kindles on the same account), the judge pointed out that Amazon’s highly restrictive DRM runs counter to the publishers’ interests and adds that “confusion on this point pervades the first amended complaint and the plaintiffs’ opposition papers.” In other words, the booksellers didn’t really understand some of the key technical details they were arguing about.

The judge goes into extensive detail on how the booksellers failed to show any wrongdoing on the part of publishers, so much so that I can’t cover it in this post. For that reason I am going to skip to the second part of the lawsuit, which concerns claims that Amazon monopolized the ebook market.

Under the Sherman Anti-trust Act, the plaintiffs had to prove that Amazon had a monopoly and that the retailer had acquired or maintained that monopoly “as distinguished from the growth or development as a consequence of a superior product”.

The judge ruled that they failed to prove either point, and in fact the arguments made by the booksellers defeated themselves. Much of this second part of the ruling simply cites the first half and adds ditto marks, though there is one section that I thought worth noting.

For example, there was a mention that the publishers had 60% of the print book market, but no mention of their combined ebook market share. The judge noted that “Without more detailed allegations or explanation, the Court cannot reasonably infer that these two markets simultaneously are so different that e-books and print books are not acceptable substitutes, and yet so similar that the Publishers’ market share is the same in both markets.”

And in the theme of beating a dead horse, the judge also noted that if one multiplied Amazon 60% ebook market share with the publishers’ 60% share, the resulting 36% would fail to show market power. This naturally raises the question of just how a conspiracy between all 6 publishers and Amazon would have had a major effect on the ebook market.

The judge also addressed Amazon’s 60% ebook market share and points out that previous court rulings had created a precedent to the effect that Amazon’s alleged market share was not enough to prove monopoly – not without evidence of Amazon’s ability to exclude competition or control prices.

Basically the presence of Nook, iBooks, and the many other ebookstores launched in the past 6 years stood as proof that Amazon did not have a monopoly.

All in all, this ruling is an interesting read, and I am grateful to Publishers Lunch for posting it.

Publishers Lunch

image by brianac37

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