Book publishers are the latest media enterprises to be hit by the digital one-two punch – facing a revenue squeeze from their content moving to electronic distribution, while being berated for not embracing their fate.
The New York Times has a report on Stephen Covey, the business author, transferring e-book rights from his print publishers Simon & Schuster to Amazon for publication on its Kindle reader.
Mr Covey will reportedly gain more than half the net proceeds paid by Amazon in royalties to Rosetta Books, the e-book publisher through which he made the deal.
Meanwhile, in another corner of the NYT, Nick Bilton complains bitterly on its Bits blog about publishers, led by Simon & Schuster, deciding to delay electronic publication of books in order to preserve hardback sales, in the manner of the “windows” for release of Hollywood films to the box office, DVD etc.
Mr Bilton, a co-founder of a hacker collective in Brooklyn, argues:
“The publishers seem to be picking a fight with the wrong team: their customer. They are punishing the people who buy their content instead of making it simple for those customers to hand over their money, instantly, from any location in the world.”
This is painfully naive. It is not the consumer about whom Simon & Schuster and others are picking a fight but a distributor with market power in a nascent digital industry.
The idea that book publishers are failing to act in their own interests because they somehow do not want to serve their customers, or because they do not “get” electronic distribution ignores the business reality they face.
Publishers supply books to Amazon at the same wholesale price – about $12 per title – as to physical stores, so an e-book sale is currently worth the same as one on paper.
However, they are rightly afraid that Amazon will use its discounting strategy of charging $9.99 for popular titles to strengthen its grip on electronic distribution. Having gained market dominance, they fear, Amazon will force down the wholesale price to start making profits on book (as well as Kindle) sales.
This might turn out to be good news for the consumer in the long-run because books will be cheaper and authors will continue to be well-paid for popular content. That squeeze will affect intermediaries such as book publishers, just as the digital revolution severely hurt music publishers.
An alternative is outlined here by Rory Maher and Henry Blodget. The believe the wholesale price will fall but publishers will preserve their margins and the squeeze will instead fall on authors’ royalties.
In any case, why is it illogical for publishers to defend their own business interests against those of Amazon, which is a public company trying to extend leverage over them to benefit its own shareholders? I am afraid I plead guilty to not getting it.
(A disclosure: my employer Pearson owns not only the FT but also Penguin, which once published a book co-written by me and Nick Denton, the digital publisher).
