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Friday, 29 April 2011

Ebooks versus Paperbacks: when business models collide

I’ve been having many discussions lately with various people about Ebooks and paperbacks, or as most people see it today, Ebooks versus paperbacks. There seem to be at least four main players in the discussion: publishers, authors, retailers, and readers.

I’m going to start – and finish – with readers, because they are why we authors write, even if they don’t actually drive the market place (currently big retailers and some publishers do that). There are many readers who are sceptical of the whole E-revolution.

“I like the feel of a paperback. I don’t want to read from a screen. I don’t have/want a Kindle,” etc.

All valid points. I used to be one of these. I only bought my Sony E-reader because my novel was coming out as an Ebook. But I travel a lot, and I was impressed how much the non-luminous screen resembled reading from paper. I got a ‘jacket’ for my Sony so it felt like holding a book. I travel internationally almost every week, and have lots of books stored on it. Frankly, I haven’t bought a paperback since.

But let’s assume that not everyone will want to read electronically. Let’s say 20% will. It’s already taken off faster in America than in Europe, but give it another year… Young people will be more inclined – many kids these days get taught at school using computers, have I-Phones, etc. They’ll say “What’s the big deal?” Demographics will most likely tilt towards Ebooks as time goes by.

A reader might say, “Hang on – there’s all these different models of Readers – it’s like Betamax and VHS all over again (younger readers, substitute BluRay and DVD).” Don’t worry, download Calibre Ebook Management (freeware) and you can mix and match.

“Why should I fork out $111 for a Kindle?”

I agree. They are all too expensive. Amazon’s Kindle is price-pitched to just undercut the competition (Sony, Nook, etc.) and way undercut the IPad. But Amazon should stick with their business model and go for economy of scale, and cut the price to $50. They’d recoup it in Ebook sales inside a month (as long as they don’t get sued for unfair business practices a la Microsoft). In any case, prices will come down, and software like Calibre will level the market, so that people can buy an E-Reader based on design options, rather than market share. 

Well-established authors can take it in their stride – they sell lots of paperbacks anyway, and their publisher will push the decision onto them, both parties ending up seeing an e-version as an ‘extra’, increasing market reach. Most authors however dream of seeing their work in print, on paper. Ebooks are still perceived by many authors, particularly those who are either as yet unpublished or at the start of their writing career, as somehow second rate, not the real deal (incidentally, isn’t it funny how environmentalism hasn’t affected writers much, given where paper comes from, even those authors who write about environmentalism…).

“How can I sign an Ebook for somebody?” I hear authors say (people in the US are working on it, by the way). “I want to keep the book industry alive, including the small indie booksellers, not just Amazon!” I hear another.

But smart Indie bookstores (aka survivors) and some libraries are already thinking of how to address Ebook demand. Think Starbucks, add E-Readers, and hey presto!

The real Ebook concerns for many authors are (a) money, (b) sense of achievement, and (c) lowering the general quality of literature. Money first.

“If my book sells as an Ebook for $2.99 how am I supposed to live on that?”

Well, it depends on the royalty rate. Most Ebooks today are digital versions of paperbacks which sell for 10-15 bucks (whether dollars, pounds, euros, etc.). The publishers, unashamedly, and with no justification I can think of, knock off a couple of dollars/pounds/euros and sell it to the reader as an Ebook as if they are doing them a big favour. Well, if it’s Iain Banks I’m buying, then I’ll probably fork out the money. But for a new (or new to me) author? Forget it. I already know that with Ebooks there is no printing cost, no warehousing cost, no distribution cost, and marketing is viral rather than paying reps to sell it to bookstores. So Ebooks should be considerably cheaper, probably 30% of the cost of a paperback. There is still the cost of proofing, type-setting (formatting, complex at the moment with up to nine different E-formats), and giving the author something to live on besides dreams. In the US, a market ‘correction’ has already occurred in some places – Ebook prices are coming down, and there are some stunning successes (Amanda Hocking being number one) of making huge amounts of money (self-published originally) by very low-priced Ebooks that sell in six figures (unfortunately, I don’t write about vampires as Amanda does). She’s cleaned up. Good for her!

Back to royalties. Traditionally, give or take, a paperback author gets ten per cent. So, say a book costs $10, then each sale brings the author $1. So, say an Ebook costs $3.99. The author should get 30-40%, so at least $1 and probably a bit more. First, the publishers have to accept the 30% lower limit, and probably 40%, rather than the 25% which is being mooted right now. 25% will not be enough for the author unless the Ebook is priced higher than the reader will buy it for… And if you don’t accept these economics, add electronic piracy into the equation. Remember Napster? Remember how expensive ITunes used to be? The prices now for buying music online have been driven down by a number of factors, but one is piracy. There is a ‘switchover’ point at which a person thinks, well, that’s a reasonable price for something, so I’ll pay it, rather than commit a very ‘minor’ crime (not minor to me, by the way) by clicking on this illegal (and untraceable) download button. It’s shocking that petty crime for many of us is relative rather than absolute, but there it is. Until online music stores dropped their prices, piracy was widespread. Same with new films, etc. (e.g. around 12 million illegal downloads of Avatar last year). So it will be with Ebooks. The writing is on the wall (and/or in the digital ether). Hackers will always be one step ahead, and unscrupulous people are always looking for the next thing to make an illegal buck (or million) out of. If Ebooks are priced right, there won’t be (much) of an illegal market.

Back to authors, and sense of achievement. At the moment I don’t have a paperback out there, just an Ebook. When someone reviews it and says they couldn’t put it down, that they can’t wait for the sequel, do you think I lie in bed thinking, “If only they’d read it in paperback?” I admit that I’d like to see it in paperback, because a paper book is an artefact, a cultural icon with an identity we have an unidentifiable relationship to, so I do understand. But above all, as an author, I want my writing to be read. This is particularly the case for new authors trying to break into a very skewed and cautious industry, where agents and publishers are looking for the next big one, or playing it safe with known successes. Their fear is well-placed – a good many publishers and some retailers went out of business during the recent economic crisis, and a good many editors lost their jobs: one reason I understand the big publishers holding onto high Ebook prices now, trying to re-capture some of their lost profit, or just to pay their staff and overheads. But the large publishers are still looking for big game, or for 2-for-1 deals they can sell to the hypermarkets. There are some new E-publishers out there, like the one I went for (Ampichellis Ebooks), who have divorced themselves from the previous paper-based business model, and who are prepared to try out new talent. These are the new ‘Indie’ E-publishers, and any new author who has spent a few years with a good novel (one which literary consultancies say is good enough to be published) but who can’t find an agent/publisher because it’s ‘not quite what they’re looking for right now’, should consider this path. Get on that train while it’s pulling out of the station. As my E-publisher (Robert Brown) said to me one day: “Fed up of hearing what publishers and editors and agents think of your writing’s suitability for the market? [Incidentally, agents and publishers are at least as much, if not more, interested in your ‘platform’ for selling than your writing capability]. Want to see what readers think?” A good point, which brings us to…

Lowering the quality of literature. This is a natural concern, but relates to self-publishing more than it does to E-publishing. E-publishing just makes it a little easier. Anyone, more or less, can take a manuscript these days, and publish online, e.g. Smashwords being one of the better places to do it (set up by a writer for other writers). These online venues allow (pretty much) anything – good, bad and terrible, to go online. But you don’t have to read them. You can choose. You, in this sense, means you the reader, not you the publisher acting in the reader’s (or in some but not all cases publisher’s) best interests, nor the supermarket chain’s interests, etc. And of course there are quality E-publishers who reject many submissions, and work hard on getting re-writes, on proofing and formatting etc. But again, there is a market void here. There is currently almost no viable, independent Ebook review system. And we need more Indie Ebook stores. They will come, because markets abhor a vacuum. Favour the bold and the quick…

Ebooks also offer tremendous advertising potential, as yet unrealised by publishers. Maybe that’s a good thing, but someone will spot it sooner or later (quite a few writers have spotted it already, because they’re interested in sponsorship).

So, to wrap up, Ebooks are currently seen by most publishers as an add-on. The Ebook is part of the ‘traditional publisher’s’ paper-based business model. But the Ebook market deserves its own business model, because the digital world and digital products are so agile. Ebooks are faster and cheaper to produce, distribution is virtually instantaneous, Ebooks need never go out of print, they don’t need trees, etc., and especially for youngsters (and they’re the ones who have/will have the disposable income), the E-Readers (or I-Phones) look ‘cool’.

When business models collide, the result is a market correction or a new business model, and a shift in perspective. Ebooks have to reflect their true cost and value to the reader, but give the author enough back, which means lower Ebook prices and higher royalty rates. We need more ‘pure’ E-publishers and independent Ebook stores, and they need to set up Ebook review systems to be taken more seriously and to ensure there are some basic levels of quality, and also to tell the growing population of readers of Ebooks what is good to read.

So, I’m a SF writer, so you may think I’m biased, but answer me this – in fifty years, what do you think the Ebook market share will be? Now, hold that number in your head, and think fifteen years… That’s one generation.

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