Dire Warning to Publishers: The End of Hardbacks

According to the French publishing group Hachette: Hardback books could be killed off if Amazon’s e-books and Google’s digital library force publishers to slash prices, warns Arnaud Nourry, Hachette's chief executive.

Mr Nourry said unilateral pricing by Google, Amazon and other e-book retailers such as Barnes & Noble could destroy publishers’ profits (not to mention what is happening to bookstores).

He said publishers were “very hostile” to Amazon’s pricing strategy – over which the online retailer failed to consult publishers – to charge $9.99 for all its e-books in the US. He also pointed to plans by Google to put millions of out-of-copyright books online for public use.

“On the one hand, you have millions of books for free where there is no longer an author to pay and, on the other hand, there are very recent books, bestsellers at $9.99, which means that all the rest will have to be sold at between zero and $9.99,” Mr Nourry said.

Mr Nourry’s comments come as analysts predict a growth spurt for the still-niche electronic reader market, with wireless devices from Sony, Plastic Logic and others due to compete with the Kindle.

Financial Times reports.

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If true, bad for libraries

If this is true, it would be bad news for libraries, who tend to prefer buying hardbacks, since they last longer and can stand up to heavy use by patrons better than paperbacks....

explain this logic

mass market paperbacks are $4.50- 6.99, and never killed off hardbacks. Publishers still control what is published. If they want to release hardcover books 3 months before the electronic version, then that would help keep the value of hardcover books high. Just like with paperback editions of hardcover books, electronic editions should also suffer an embargo.

regarding libraries, we buy thousands of hardcover books every year, so publishers would still make money from us.

what publishers haven't realized is that the ebook market is like the heroin market: you give away books for free or cheap until everyone is hooked, then the price goes up. prices only go down in a free market long enough to destroy competition, then they go back up. prices always go up when competition goes down. if Amazon wins the ebook war, the kindle editions will go up to $19.95.

Debut pricing

Blog entry by Mike Shatzkin, publishing industry consultant, that looks at some current ideas he had about hardback/paperback/ebook pricing models.

Blog entry: “Debut pricing” for ebooks: a better idea than withholding them

Follow-up blog post Shatzkin wrote: Debut pricing: my idea, great idea, unfortunately can’t work

Goes to show that

the majority of the cost is actually their profit margin, not associated costs as they often claim.

They're not the same business model.

Sure, even an e-book has to be edited and formatted. Authors still have to be paid royalties. And publishers are in business to make money, after all. And maybe letting Amazon dictate price makes it rough for publishers. Maybe a $12 price would make a struggling publisher profitable, maybe not. But you can't tell me that an e-book should, by default, cost the same as a hardcover.

First off, in a consumer-driven market, you'll have a hard time getting mass acceptance of $300 readers if there's no discount on purchasing the books. Sure, you'll have technophiles who can't wait to get away from paper. But look at how fast the Kindle has been adopted.

Sony has had a reader around for years, but I don't see them very often on buses and in airports. Why do I see Kindles, which have only been around a year or so? The long-term savings on $10 Kindle books is how a lot of readers justify the cost of buying their hardware. This isn't a LeapFrog.

Next, depending on how the digital rights management shakes out, the end-user may not be able to sell -- or even lend -- a book he's done with. One more reason I wouldn't pay $25 for an electronic edition.

Then, as far as publisher and seller expense, comparing hardbacks to ebooks is not an apples-to-apples view.

New hardbacks are priced at $20 to $30 for several reasons. First off, you have to print the books. (Ebooks don't have that expense.) Then you have to ship 'em. (Ebooks have a much, much lower cost of delivery.) You also often have some middlemen between publisher and bookstore who need to make their margins. (Ebooks go more directly from publisher to final seller.)

Next, bookstores have to drop their prices to compete with each other. Stores with across-the-board 10% discounts are fairly common. Membership cards, educator or librarian discounts, and book clubs bring a good chunk of business down 20-25% below cover. Then, if a book is successful (NYT bestseller) or expected to be successful (the next in the Harry Potter/Twilight/etc. series), many shops drop the price 30-40%. A fresh-off-the-press book with a $25 cover price is suddenly going for $15.

Finally, whatever copies don't sell in the first six months go into the steady decline of the clearance racks. A year later, the same book goes for $3.99.

I don't have any hard numbers on the average production price of a hardcover book. But I have to guess that the early readers who pay $25 are balancing out those cut-your-losses clearance rack prices later.

Is it wrong for a publisher or a bookstore to charge a higher price up front when the average book goes into a stop-the-bleeding price decline a few months down the road? If you want to be able to go to a well stocked bookstore, they have to be able to make their money up front, when the book is new.

As with any physical product, getting the right balance of quantity and price is the game the producer -- in this case, the publisher -- plays with every factory run.

Then there's also the juggling act of getting the right quantities into the right markets. Amazon ships everything anyway, so they may be a different case. But even a national chain like B&N gets into trouble if they have to start redistributing books from someplace where a title isn't selling to another part of the country where it is. A seller might put a book on the discount rack rather than pay to transport it a second time. Paper is heavy.

So there's a reason printed books, especially new hardcovers, cost what they do. Hardbacks cost more to bring to market. Ebooks cost less. Amazon can argue with Random House and Penguin over pricing -- and I'm sure they do on paper as well as Kindle editions -- but I don't see a price difference in the two formats killing either one.

People have been predicting the end of paper for decades, now. And I'm still reading ink on a page as well as pixels on a screen. Just gives me more options.

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