Publisher or Retailer?
Pages: 1, 2, 3

Publisher or Retailer: Part 3

Linda Laubenheimer wrote:

In light of Stephen King's experiment, it seems much more reasonable to charge less rather than more if you want to gain market share. Digital content, even books, is fleeting: why should it cost minimally less than the more permanent version? Think about video rental vs video sales instead of rock concerts vs album sales.

$x per Kbyte for DL, or on media with $x/K content + $y media & burn charge + $z shipping & handling. Author gets ~50% of the DL(content) cost. Format should be readable on any browser, with "decrypt" for a given publisher being a plug in.

If you look for 50% royalties, you are making a statement about the nature of the channels your book will be sold through: i.e., it will go direct to the consumer. Stephen King (and a few others) are a special case. They already have the name recognition to go direct. But does the average author? No.

50% royalty assumes that there is one level of middleman, perhaps--a publisher or retailer. But eventually, you will have three or four levels, just as you do in the p-book world. Publishers aggregate authors for retailers (who otherwise can't deal with all of the flood of product, and need some trusted sources to parse the flow for them.) Heck, even established publishers have to compete forcefully for the attention of retailers, and wholesalers exist to aggregate smaller publishers for retailers; retailers aggregate customers for publishers.

Middlemen of various kinds exist because of the fundamental mathematics of the situation. Right now, we're in an anomalous situation where there are relatively few ebooks, and consequent high visibility. Now imagine millions of ebooks, and tens of millions of readers. It gets ugly fast.

We saw the same rhetoric in the early days of the web. It was going to level the playing field, disaggregate all the middlemen, and make all e-publishers equal. This was true for a short time, while there wasn't much content on the web. Then we saw the emergence of a new class of middleman--catalogs and search engines. And note, if you aren't found on the first couple of pages of a search, you might as well not exist for a lot of people. Links help, but just as in the physical world, high profile publishers have emerged. If you write a tech opinion piece, it's far more likely to be read and linked to if it appears on slashdot or salon.com than if you put it up on your own random web page.

You might say that even if this is true, there are such savings from ebooks that royalties should still be much higher. I don't agree. As I've noted in previous postings, the savings from paper, print and binding are on the order of 15-20%, depending on the publisher, and the ADDED costs, are on the order of 100%. Building or buying the technology for eBook distribution is more expensive at this point than printing. Sure, you can throw up a PDF, but building something that really works for the medium is harder than that. You need mechanisms for e-commerce, for hosting the content, for continuous uptime, for customer service for readers who can't figure out how to make it work.

It's always harder and more expensive to do something on the front end, before norms are well established. I know this from painful experience. I started out publishing in 1985, with a print run of 100 copies of two little pamphlets. I was sucked into an existing system of retailers, distributors, existing pricing models, established ways of reaching customers. It took time, but the issue was never in doubt. By contrast, in 1992, I launched the first commercial web site (GNN, the Global Network Navigator, which I later sold to AOL). GNN was the first "portal," the first site on the internet to carry advertising, and the template for a lot of what followed. No one knew what to make of it. We had to do everything ourselves. We commissioned the first ever market research study of the net to convince advertisers that the net was going to amount to something. We had to evangelize the net itself. A very expensive proposition. Yahoo came along, got VC money, and outspent us. We sold/partnered with AOL, who screwed things up (on the way to being very successful nonetheless). But it wasn't pretty, and it wasn't easy.

Because of the expense in establishing a new market like eBooks, I wouldn't be surprised to see author royalties go DOWN, not up. Sure, individual authors will become publishers, just like I did in the print world, and Mitch Waite did, and Andy Shafran did. But the exception doesn't prove the rule. The rule will be that eBooks won't take off until there is a rich ecology of middlemen--all of whom will need to take a cut in order to provide the essential services they offer.

In short, when you're thinking about eBooks, be sure to leave room in your business model for lots of parties to have a piece of the pie. The system that enables the richest ecology of partners will likely be the one that wins, not the one that tries to collapse the system into winner-takes-all. Have you guys seen the miserable sales results from eMatter? I tried to warn Chris McAskill that it wasn't going to work, for the reasons I outline here. A slight shift of the business model, to enable more players, would have made all the difference. Maybe they'll get there yet, but if not, I see lots of other people, like Lightning Source, who understand that the eBook marketplace will require a lot of the same types of players as the pBook marketplace.