The Merger Apocalypse

It has been a while since I wrote about ebooks and books in general. For the most part, nothing new or exciting has been happening once you move away from the hardware side of things. But the merger of Random House and Penguin is a comment-worthy event.

In the past, consolidation has been very bad for professional editors. Somehow these mergers and purchases needed to be paid for and with supposedly declining sales in bookworld, the way to pay for the merger was to cut expenses. The primary way to cut expenses has been to cut costs in areas that consumers do not see or notice until too late, thus primarily in editorial and book production.

Past consolidations have resulted in layoff of editorial and production personnel and in lowering of fees paid to freelance editors. In preconsolidation days, there was competition for editorial services, so freelancers could easily raise prices. In postconsolidation days, competition has been greatly reduced, there are fewer publishers to compete with each other for editorial services and thus the (successful) downward pressure on pricing. Freelance editors have little place to turn when where there was once two there is now but one job opportunity (publisher).

The merger of Random House and Penguin, who combined will account for approximately 25% of traditionally published (as opposed to self-published) books, is likely to spur a second merger, that of HarperCollins and Macmillan (or perhaps it will be HarperCollins and Simon and Schuster), who combined will account for at least another 20% of that market. And when pricing for freelancers is set, it will be set companywide — it will make little difference which imprint of the RandomPenguin colossus a freelancer works for, the pricing will be fairly uniform, and increasingly depressed. Or so experience says.

I understand why the merger is occurring: somehow a company has to combat Amazon and Apple and the most logical way is to make it so that Amazon and Apple cannot ignore the publisher’s demands because neither can forego stocking 25% of traditionally published books. (And let us not forget that Amazon is working to build its own publishing behemoth as a foil to these publisher tactics.)

Yet there is another possibility. What if one or both of these megapublishers — RandomPenguin or HarperMacmillan — decides to combat Amazon and Apple directly? It strikes me that the way to do it would be to buy Barnes & Noble. Buying B&N would give them immediate access directly to consumers. They could set terms for distribution with their captive company (bring back agency pricing) and tell Amazon and Apple they, too, can have access to these books but on the same terms as B&N. It would put the publishers back into control quickly, and B&N could be bought cheaply — a couple of billion dollars ought to do it.

Another possibility, although one that would likely have limited success, would be for publishers to start a “first edition” club only for brick-and-mortar stores. B&M stores would be given the exclusive opportunity to sell to consumers collectible first edition-first printing-author signed hardcover books that come with an included ebook copy. If done smartly, it could be an incentive for consumers to enter a b&m bookstore. I think, however, publishers would blow it simply because they seem to blow everything else.

The bottom line is that just as these consolidations are likely to be bad news for editors, they are likely, too, to be bad news for consumers and for sellers like Amazon and Apple.

The consolidation of the publishing industry has been ongoing for 30 years. The problem is that there are fewer large publishers to consolidate today than 30 years ago. It strikes me that if the Justice Department doesn’t think that Amazon dominates the ebook retail market in the United States and that it never did, it would be hard pressed to oppose these consolidations or even the purchase of B&N by a combination of the megapublishers because their market position would be less than that of Amazon.

Are we in for interesting times in publishing? I think more worrisome than interesting. If book quality is noticeably declining preconsolidation, what will it be postconsolidation? If editorial incomes are in decline, how much more rapid will that decline be postconsolidation? If book prices are on the rise, how much faster will they rise postconsolidation?

The question that comes to mind, however, is this: Would RandomPenguin have come about if Amazon were not acting like the Wal-Mart of ebook world? I have no inside information but I suspect that the answer is no, the merger would not have been proposed. I think it is fear of the Amazon vision of the future that is driving this merger, with the final straw being the court’s decision to approve the settlement in the agency pricing case. That settlement gives publishers little leeway against Amazon in the absence of controlling a large enough portion of the market that Amazon cannot do without that portion’s product, which would be the case with RandomPenguin controlling 25% of the traditionally published market.

The more I think about the megapublishers joining to purchase B&N, the more I think it would be a smart move. There are a lot of ways that publisher ownership of the chain could effect cost savings, and with good planning, the physical stores could be made relevant again. More importantly, B&N’s online store is already a well-established and well-known destination for books for consumers, which would relieve publishers of having to create a new online presence and drive traffic to it, a difficult task. And, as noted earlier, it would provide leverage for dealing with Amazon and Apple.

What do you think?

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On Politics: The Logic of the Illogical

As an editor, I constantly have to watch for author statements that are illogical. Unfortunately, that practice doesn’t stop at the workplace door; it carries over to election-year politics and makes me a wary consumer of political talk.

What brings this to the fore is a recent statement by the Republican (expected) nominee for president, Mitt Romney. As reported in the New York Times (“Romney Seeks Obama Apology for Bain Attacks,” by Michael D. Shear, July 14, 2012, electronic edition, p. 31), Mit Romney said on Fox News:

You just had very bad news on the economic front, with now 41 straight months with unemployment above 8 percent.

Romney made this statement in support of his demand that the Bush-era tax cuts on the income of the top 2% of earners be made permanent and not be allowed to expire come January because these 2-percenters are the job creators and to raise their taxes would destroy job creation!

This has been a constant refrain of the Republicans and the Romney campaign. What I would like to know is, “Where are these jobs being created?” In publishing, the jobs are being created in India, not America. In America, editors are both losing work and being forced to accept lower wages as a result of this migration of jobs from America to India. I do not see John Sargent, CEO of Macmillan, or Markus Dohle, CEO of Random House, or the CEO any of the other major American publishers — all members of the 2% club — promising, in writing, to create new American jobs if their personal tax cuts are preserved.

In response to a recent solicitation I received asking me to make a campaign contribution in support of Romney and the Republicans, I wrote back with this offer:

I will make a contribution if you will answer these questions directly and without obfuscation: If keeping the tax cuts on the wealthiest 2% of American society will create jobs as you claim, why haven’t those jobs been created in the past decade while the Bush-era tax cuts have been in place? Why, if these wealthy 2-percenters create jobs, did we have significant job loss during the current life of their tax cuts? How many new American jobs have the Koch brothers, and John Sargent (Macmillan CEO), and Markus Dohle (Random House CEO) guaranteed — in writing — to create within the next 12 months (and how many new American jobs did they create over the past 4 years) as a direct result of the reduced personal rate of taxation they received from the Bush-era tax cuts?

I am still waiting for a reply, and I’m not holding my breath.

The reality is that the claim that reducing taxes for the wealthiest 2% of Americans increases American jobs is illogical, whether made by a Republican or a Democrat. It is a remnant of the flushdown economics of the Reagan era and ignores the fact that jobs grew under Reagan only after Reagan increased taxes and continued to grow (with resulting budget surpluses) under Clinton when tax rates were both raised and significantly higher than under the Bush-era tax cuts and current rates.

Interestingly, Obama, who should be attacking this kind of illogic, doesn’t seem to fight back by demanding that Romney and the Republicans put their cards on the table face up. It seems to me that Obama should be demanding real numbers from the Republicans. Make the Koch brothers pledge in writing to either create 100,000 new American jobs within 6 months of the election if the tax cuts are extended — regardless of whether they are extended by Romney or Obama — or agree to pay a $5 billion penalty. Require other 2% recipients — such as the John Sargents and the Markus Dohles — of the benefits of the tax cut to make the same pledge to create a specific number of new American jobs or pay a significant penalty, and have enough of them make the written pledges so that American unemployment will be reduced to less than 2%. Then I’ll buy the argument that these are the job creators, as will all other Americans!

The reality is not only will the 2-percenters not make such written pledges, but that they are not job creators. They are money makers and obligated to make as much money at as minimal a cost as possible, which means exporting American jobs if it is cost-effective to do so, which is what they have been doing all through the Bush-era tax cuts.

I have noted that Romney and the Republicans are very careful to talk about “job creation” but not “creation of American jobs”. The implication is that the jobs that the 2-percenters create are American jobs; the reality may well be different.

The Republican rhetoric also ignores the realities of the business world. Consider the recent $7+ billion loss suffered by JP Morgan Chase as a result of bad trades. The losses were incurred by a small group of individuals but already threaten the jobs of thousands of ordinary employees who had no connection to the loss-making trades or the division of Chase that made them. Yet, Romney and the Republicans want to give Jaime Dimon, CEO of JP Morgan Chase, a tax break because he will “create” new jobs. What will he do? Hire another valet? Tax breaks for Dimon have no effect whatsoever on whether JP Morgan Chase hires or fires employees.

How much more misleading can the Republican discourse be? Not much, but it sure makes for good bullet points on Fox News. Most of the 2-percenters are employed by a corporation or a foundation or some other business organization whose job-creation decisions are made independently of the personal finances of these 2-percenters. Yes, there are some exceptions, but not many.

The Romney-Republican argument on taxing the top 2% of Americans belies another premise of their presidential campaign: to-wit, that Romney really understands how jobs are created. Jobs are created by the masses spending more money and buying more goods and services, not by a 2-percenter suddenly deciding to trade in last year’s Lamborghini for this year’s model. Economic recovery is not in the hands of the few; it is in the hands of the masses, which is why consumer confidence measures are so important.

It isn’t clear to me what it will take to get voters to look beyond the twitteresque rhetoric and demand that politicians put up or shut up. Nor is it clear to me what it will take to get the Obama campaign to put the Romney and Republican campaigns’ feet to the fire. But in both instances, I hope that such a test occurs because the decision we have to make in November could be catastrophic for America if it is the wrong decision, especially if it is a decision made on platitudes rather than fact.

The Value of eBooks: Is $2.99 The New Value

One excuse the big publishers used for going to the agency model of pricing was that Amazon’s $9.99 price for certain bestsellers was undervaluing the books and would establish expectations in ebookers regarding maximum pricing. So, if that is true, how do these very same publishers justify putting certain ebooks on sale for $2.99 or less?

This question popped to mind when Little, Brown, a subsidiary of Hachette, put City of Veils by Zoe Ferraris on sale for $2.99. This is the second mystery book by Ferraris featuring the same Saudi Arabian investigative team. (Although this is not a review of the book, it is worth mentioning that it is a 5-star book that offers both a fascinating insight into Saudi culture and a great mystery.) City of Veils is neither the first nor the last ebook by one of the Agency 6 to be put on sale for $2.99 or less; such a sale seems to be a regular happening. (The first book in the series, Finding Nouf, is listed as discounted to $11.16 from the list price of $13.95, with neither price being a price I would pay for a fiction ebook.)

Which makes me wonder about the “value of ebooks” and whether we are seeing the erosion of price to where, eventually, Agency 6 fiction ebooks will be regularly priced at $7.99 or less and frequently on sale for $2.99 or less.

There has to be something magical about this $2.99 price point. Why $2.99 and not $4.99? Or $3.99? Both prices would be substantial discounts off the list price and even off the standard 20% to 25% discount price. I suspect the answer lies in what experience is rapidly showing as the price point for maximizing volume of sales. I also suspect that publishers are finding that ebookers are unwilling to pay more than $2.99 for an introduction to a previously unknown author. Yet, I don’t see any evidence that after the introduction to a new author, ebookers are running to spend $11+ for other ebooks by the same author — I know I am not.

But regardless of the motivation, isn’t this $2.99 price point setting an expectation among ebookers as to what the correct price for an ebook should be? I find that it cements my belief that ebooks should be both DRM-free (which Tor, a Macmillan subsidiary, will be doing shortly) and list priced at no more than $5.99 and frequently discounted to $2.99 (or less). These Agency 6 discounts are also cementing my belief that I will only rarely pay more than $2.99 for any ebook.

The price point problem is exacerbated by other steps publishers are taking. I recently preordered Spycatcher with a bonus excerpt by Matthew Dunn, published by HarperCollins, one of the Agency 6, for 99¢. (The bonus excerpt is from Dunn’s forthcoming new novel Sentinel, which can be preordered for a whopping $12.99!) At the same time, Spycatcher without the bonus excerpt is available for $9.99. This type of discounting with bonus material included happens regularly. My question to publishers is this: Why would I ever consider buying Sentinel for $12.99 or Spycatcher for $9.99 — neither book nor the author being previously familiar to me — when I expect that at some future date I will be able to buy them for significantly less?  Doesn’t your offering one of the books for 99¢ create an expectation in me, the ebooker? And even if I can’t buy them in the future for $2.99 or less, why would I buy them at all — regardless of how good a read the introductory book is — at a price that has already demonstrated as far too high?

If there is any validity to the complaint of Amazon’s $9.99 price point setting consumer expectations at a price that is unsustainable by the publishing industry, how are publishers fighting that expectation by offering ebooks for $2.99 or less? Why is the publisher’s tactic sustainable but not Amazon’s?

Valuing of ebooks is difficult. Yes, there are costs that can be objectively measured but those per-unit costs diminish with volume sales. I grant that each ebook cannot be looked at in isolation as best-selling ebooks need to subsidize those that do not sell well so that overall there is an industry profit. Yet, where previously the argument was that no ebook should be sold below a price that sustained the industry, which price was somewhere north of $9.99, Agency 6 publishers belie that argument by demonstrating that at least some ebooks can be sold for significantly less without damaging the industry. That action reraises the issue of what is an ebook worth?

The industry has put itself into a straitjacket of its own making. Originally publishers planned to window ebooks. Windowing of ebooks allegedly would let publishers subsequently publish the ebook version of a pbook at much reduced price, more in line with ebooker expectations. But after much protesting from ebookers, publishers ultimately went to simultaneous release. Unfortunately, with simultaneous release, publishers decided they could not price the ebook much lower than the pbook for fear of cannibalizing pbook sales, losing money, and devaluing the book.

Then to shore up the value of ebooks, agency pricing was instituted. It was touted as necessary for the health of the publishing industry — from author to publisher. Now, within the past year, these same publishers are regularly pricing some ebooks at $2.99 or less, shattering the justification for the higher agency pricing.

In the end, I think publishers will find that $2.99 is the magic price point for ebooks. The combination of the self-publishing phenomenon that ebooks have produced, the use of the $2.99-or-less price point by self-publishers, and the apparent willingness of at least some of the Big 6 publishers to discount ebooks — even if for just a limited time — to that price point, will create an expectation in ebookers that publishers will be unable to combat. We may be a few years away from seeing that magic price point, but I suspect it is coming on fast.

The Department of Justice vs. eBooks I

As most of you already know, the U.S. Department of Justice (DOJ) has filed a lawsuit against Apple and 5 of the Big 6 publishers alleging collusion in the establishment of agency pricy pricing (see “Justice Dept. Sues Apple and Publishers Over E-Book Pricing; 3 Publishers Settle”). In several of the forums I participate in, ebookers are celebrating the expected lower ebook prices.

Yet, there are several things worth thinking about and noting. First, Random House, one of the Big 6 publishers, and Smashwords, the leading indie author distributor, both of which have agency pricing, are not named defendants in the DOJ lawsuit. That signals to me that the problem is not with agency pricing, but with the collusion aspects.

Second, the 3 publishers that settled with the DOJ, which settlement, it is worth noting, is not effective until approved by a court, are restricted from instituting agency pricing for 2 years, after which they can reassert agency pricing as long as they don’t agree over dinner to do so. This, too, indicates to me that agency pricing is not contrary to the law or necessarily thought to be anticonsumer by the DOJ.

The third notable matter is that the publisher with the greatest moxie, the one that first stood up to Amazon, Macmillan, is not settling with the DOJ and intends to fight, as do Penguin and Apple. That means that the DOJ case is not so strong that it cannot fail once tested. And should it fail, so will the settlement agreements with the 3 settlers fail. It appears that in Macmillan’s case, CEO John Sargent is alleged to have attended only 1 meeting with his fellow CEOs, which means that the DOJ will have to demonstrate that it was at that meeting that the collusion occurred, not an easy task unless the settlers will testify that that is when the collusion came to fruition and that Sargent was present when the decision was made. Hachette, one of the settlers, claims there was no collusion, so it makes me wonder how the DOJ will sustain its burden of proof. Allegations are one thing, proof is another. Simply that there was an opportunity to collude doesn’t prove there was collusion.

There are other problems with the lawsuit. It has been too many years since I last practiced antitrust law (last time was nearly 30 years ago), so I’m not current on the state of the law and I admit that I’m not sure exactly what the DOJ must prove to prevail, but it is clear to me that the Republican-dominated U.S. Supreme Court doesn’t look favorably on these lawsuits. It was a Republican court that upheld resale price maintenance agreements, which has the same effect — setting a floor price below which goods cannot be sold — as the agency pricing system.

An interesting legal question, which may or may not be relevant to the DOJ lawsuit, is this: What constitutes the market? If all ebooks constitute the market, then ebooks are interchangeable commodities, an idea that is resisted by publishers and authors and even by many consumers. If the market is an individual title because you cannot substitute Dean Koontz for Stephen King, then wouldn’t the DOJ have to prove collusion among publishers to set the price for Stephen King, not collusion to set the mechanism for pricing of all ebooks? Of course, there are numerous variables to the market scenario, but they make for a fascinating legal chess game.

But all of this aside, the bottom line is that agency pricing is not illegal even in the eyes of the DOJ. Which leaves a lot of questions. For example, will Random House abandon agency pricing or continue with it? What about Smashwords? (Smashwords has already announced it will retain agency pricing and oppose the settlement agreement during the comment period.)

A more important question is this: Several of the Big 6 have — so far — refused to sign renewal contracts with Amazon because of demands made by Amazon. In the absence of agency pricing, will some or all of the Big 6 refuse to renew agreements with Amazon? Would such a refusal affect both pbooks and ebooks or just ebooks? If they do not renew the agreement, what can Amazon do about it?

The settlement agreement says that publishers cannot prevent a retailer from discounting the publishers ebooks except that it can require the retailer to make a profit across the publisher’s line. I find that an interesting proviso. Consider how secretive Amazon has been about how many ebooks it really has been selling. Amazon has only been forthcoming with broad numbers and in a few cases announcing that an author has joined the millions club. Will Amazon, who is not a party to the proceedings, voluntarily share sales information? I doubt it.

Yet the sharing of that information is necessary to make the exception meaningful. If the wholesale price, that is, the price the ebooksellers have to pay the publisher, of the new James Patterson ebook novel is $13 and Amazon sells it for $10 and sells 1 million ebook copies for a $3 million loss, somehow Amazon must sell enough other books in that publisher’s line to overcome the loss. How is that going to work?

Will Amazon offer the first 10,000 units of Patterson’s ebook for $10, the next 10,000 units for $16, the next 10,000 units for $13, and so on? Customers will be thrilled. Especially if they can buy the same ebook someplace else for $13 when Amazon wants $16.

Another problem with the settlement is that it does not — and cannot — establish a wholesale price for not-yet-published books. The DOJ could say that current agency-priced ebo0ks’ wholesale price is 70% of the current agency price, because that is what the publisher has been willing to accept. But what about future ebooks? The DOJ is not in a position to dictate individual pricing, so there is no reason why publishers cannot raise list prices to $30 and set wholesale prices at $15. The settlement speaks to discounting, not to setting of wholesale price.

There is more to say, but it needs to be said in another installment of this article, so this will be continued in my next post.

How Do You Do It? Amazon vs. Publishers (I)

I have been following the story regarding Amazon’s foray into publishing. It reminded me of an old (early 1960s) hit by Gerry and the Pacemakers called How Do You Do It? So let’s set the question with Gerry and the Pacemakers.

As the song asks and says, “If I only knew, I’d do it to you.” And that is the crux of the matter in the latest nose thumbing by Amazon.

If publishers cannot figure out what is happening, cannot see the upheaval that is coming, then perhaps they should fold their tents and slither away in the night.

The truth is that the publishers do have an ultimate weapon, a “nuclear bomb” so to speak, at their disposal if they are willing to stand up and use it now, before it is too late.

It is clear that the future lies in ebooks. eBook sales are growing, paperback sales are declining, and hardcover sales seem to be remaining steady. Although I think publishers should begin to pull the rug out from under paperbacks, perhaps it is too soon. But the one thing that it isn’t too soon for is to put an end to the ebook format war.

By format war, I mean both the underlying format and the DRM wrapper. It is time for publishers to go the route of DVD producers and enact a single standard that all ebooks adhere to and that all retailers must abide by. Doing that now is the only way to tame the Amazon tiger.

In no other field has a retailer been able to set its own standard. If you notice, the DVDs that Amazon sells, just like the TVs it sells, adhere to the same format and copy protection scheme as those sold by Best Buy, Barnes & Noble, Walmart, and any retailer you can name — but not ebooks. In ebooks, we have two different formats — ePub for everyone except Amazon; mobi or a derivative for Amazon — and multiple copy protection schemes — a base Adobe DRM for everyone except Amazon; a proprietary scheme for Amazon.

Now that Amazon has decided to challenge publishers at their own game and has begun signing authors to Amazon exclusives, the publishers need to strike back while they can. For now, as Amazon’s dispute with Macmillan over agency demonstrated, Amazon needs the publishers more than the publishers need Amazon. Yes, Amazon has the largest market share, but that can be changed. Publishers need only to find some backbone.

Once Amazon starts signing frontlist authors to exclusive contracts, publishers will be in trouble. The way to head that off is to make it mandatory that every bookseller sell ebooks only in ePub and only with a standard DRM scheme. Doesn’t matter what the DRM wrapper is as long as everyone uses it, just like it doesn’t matter what the copy protection scheme is for DVDs because everyone is using it.

Amazon is at its most vulnerable now. That status vulnerability will change, eventually disappearing, as Amazon expands its publishing base. Amazon will become a vertically integrated company that handles ebooks from beginning to end. When that occurs, there will be no need for the traditional publisher and other bookstores will be at Amazon’s mercy.

Yet it is now that publishers can act to preserve themselves and bookstores by simply leveling the playing field. Just as publishers were able to force feed Amazon the agency system, they can modify that agency system to require that ebooks be sold in ePub with a publisher-approved DRM wrapper. Amazon needs content to survive and it is in the process of developing its own content. Because it is just starting the process, now is the time to strike.

Following this path has one other benefit. It will allow the publishers to create the ebook version themselves and be sure that errors aren’t introduced in Amazon’s conversion process (or if there are errors, that they appear universally in all ebookseller versions). Of course, this would mean that publishers would need to proofread and edit, but there is always hope that they might do so. This would just be an incentive to do so.

Alas, I expect publishers to wring their hands, palpably worry about their future, and do nothing. Their past practice indicates that they always do too little too late, and there is no reason to expect otherwise now, even though they can see their future demise if they open their eyes.

Never Give a Sucker an Even Break!

In 1936, in the movie Poppy, W.C. Fields tells his daughter, “If we should ever separate, my little plum, I want to give you just one bit of fatherly advice: Never give a sucker an even break!” It appears that Apple has adopted it as its motto for the 21st century, at least in regards to ebooks and publishers.

I’ve got to give credit where credit is due, and Apple deserves credit for great design. Apple’s approach is like wrapping a Volkswagen Beetle in a Lamborghini shell and proclaiming the new car to be a $100,000 car. Apple gives you a great shell but the components are often mediocre at best. And when a design flaw is caught out, the usual response seems to be it’s the customer’s fault — never give a sucker an even break!

Let’s face it — the iPad is really a so-so device. Pretty to look at, but not a great computing experience, especially when compared to notebooks that permit multitasking. Perhaps this will be cured in the forthcoming version 2, but even if it is, Apple still will be a company that treats its customers and partners as suckers — suckers who will part with hard-earned dollars in exchange for good design, mediocre performance, and anticonsumer restrictions. Just consider Apple’s recent insistence on getting a cut on all ebook sales.

The initial culprit in the current ebook fiasco was Amazon who spread its tentacles to far too quickly, giving Apple the opening it needed to give false hope to publishers and consumers that there would be another, better way. Regular readers of my blog may recall my post from 9 months ago, The Decline & Fall of the Agency 5, in which I wrote:

April 2011 is the month to prepare for armageddon in ebookdom. It is when the 2010 agency model pricing scheme will be buried by publishing’s 2010 savior, Steve Jobs and Apple. You read it here first.

All the stars and moons and planets will align and the caterwaul of panic will be heard throughout ebookdom, because that is when the Agency 5 — Macmillan, Simon & Schuster, HarperCollins, Penguin, and Hachette – will realize they have been snookered by the snooker master.

…

In April 2011, publishers will discover that the iBookstore is a losing proposition. Oh, Apple will have sold many millions of iPads, fulfilling expectations for a successful tablet, but the buyers, it will soon be discovered, either aren’t buying ebooks at all (maybe 1 or 2) or what they are buying they are buying from Amazon or Barnes & Noble or Smashwords.…

Well, I wasn’t spot-on, but pretty darn close. iPads did sell millions and the iBookstore is a loser. iPad owners who are buying ebooks, emagazines, and enewspapers are buying them through the Amazon, Barnes & Noble, Kobo, and publisher apps, not from the iBookstore. But Apple has moved to close down any pipeline that bypasses the iBookstore by making it impossible for those apps to remain in the Apple iOS system.

So, tell me again how much of a friend Steve Jobs and Apple are to publishing and to readers. How did Apple become the publishers’ white knight? How did Apple save publishers from the clutches of Amazon?

Publishers certainly have had their comeuppance. What was supposed to save the industry has turned out to be less a saving grace and more of another poke in the eye. The Agency 5 can sit back and be satisfied that what ebooks they are selling they are selling at their dictated price. But if they look at Random House’s ebook sales (remember that Random House was the only one of the big 6 not to embrace agency), they must look with jealous eyes.

So how did Apple’s “generous” offer in April 2010 help the Agency 5? It appears to have put them against the proverbial wall and offered them a rotten carrot — never give a sucker an even break! The Agency 5 will have to pay yet again (i.e., in addition to lower sales for going the agency route) for siding with Steve Jobs when the various ebook apps, including the Amazon, B&N, and Kobo apps, disappear from the iOS. Because of their greed and reluctance to embrace ebooks, the Agency 5 have shot themselves in the foot yet again. They bet on Apple and the iBookstore and the only winner was Apple.

The harder it is for people to buy ebooks, the fewer ebooks they will buy. Yes, I know the Agency 5 would prefer to sell fewer ebooks, but they are already doing that. This latest Apple move simply makes it more difficult for a large segment of the reading market to buy ebooks, a segment that no publisher can afford to ignore in the long run. It seems that no matter what the Agency 5 do in their attempt to thwart the rise of ebooks or to control pricing and sales, someone is waiting to prove to them that they really are fools for not embracing ebooks and trying to exploit the new market to its fullest — never give a sucker an even break!

On many levels I am glad to see the Agency 5 suffer from this blow; it seems to be fair payback for Macmillan’s and Simon & Schuster’s refusal to sell ebooks to libraries and for HarperCollins’ new change to library licensing terms that restrict the number of times an ebook can be lent even though libraries are paying 60+% more for an ebook version than for the hardcover version of the same book. (One example: A library can buy John Grisham’s The Confession in hardcover for $17.37 and lend it out hundreds of times. In ebook, a single license costs $28.95 and if the new HarperCollins license terms were applied, it could be lent only 26 times. In addition, while libraries have to pay $28.95 for an ebook version, the consumer, whose taxes support libraries, can buy the ebook version for $9.99.) It also seems fair payback for the outrageous pricing the Agency 5 have imposed on their ebooks.

It is clear to me that with each misstep that the Agency 5 takes, the more likely it is that increasing numbers of ebookers will remove DRM and share ebooks. When you make an enemy of someone whose good wishes you need, you invite them to retaliate as best they can. In the case of the Agency 5, the best way to retaliate is to not buy their books, or if you buy them, to remove the DRM and share them.

When will publishers ever learn?

On Books: Brandon Sanderson and David Weber — 1 Up, 1 Down

If you recall, a few weeks ago I wrote The Problem Is: Publishers Don’t Read eBooks! in which I swore I would not again buy a TOR/Tom Doherty/Macmillan book in both hardcover and ebook formats. Well, I did, and I was shown, yet again, that TOR/Tom Doherty/Macmillan only cares about something other than quality. Maybe I learned my lesson this time.

I am a big David Weber fan, ever since I was introduced to the Honor Harrington series. Because Weber is a favorite, I buy all of his new releases in hardcover so I can read them and add them to my permanent library, something I can’t do (i.e., add them to my permanent library for eternity) with a DRMed ebook. But Weber’s newest book, Out of the Dark, was released just as I was leaving for the Finding Your Niche conference. I wrestled with not buying the ebook version (the hardcover was already on its way as I had preordered it) but I lost the match and bought it in ebook form so that I could read it while at the conference.

Exactly what was wrong with Brandon Sanderson’s The Way of Kings ebook is wrong with Weber’s Out of the Dark ebook: no one read it for errors after converting it to ePub (and probably not after converting it to any other format, although I don’t know that for certain). I can hear the call of TOR: Suckerrrrr! Suckerrrr! How difficult is it to fix problems like “A” rather than “a” in the middle of a sentence?

Enough — let’s move on to a review.

Brandon Sanderson’s book is an interesting read. The Way of Kings is disjointed in that you go back and forth between characters and scenes without something connecting them. What is the relationship between the various characters? Where will their paths intersect? The answers lie in volumes 2 and 3 of the trilogy.

At first I was concerned that I wouldn’t stick with the book — it is long, 1008 pages — because of the disjointedness, but instead, I found myself compelled to keep reading. The Way of Kings demonstrates why Sanderson is the new force to be reckoned with in fantasy fiction; it’s just too bad he is hooked up with such a sloppy publisher. Sanderson’s narrative is compelling and interesting. Each segment almost stands on its own and someday I will discover the connection between the characters who appear to be the primary characters of the story. In the interim, however, I’d give The Way of Kings 4 stars (out of 5). The writing is taut but leaves too much up in the air to warrant 5/5, plus Sanderson needs to take some responsibility for the poor ebook formatting. He and/or his agent should have insisted on review-before-release rights.

David Weber’s new book, Out of the Darkness, however, is a major disappointment. Here is hoping that subsequent volumes live up to the PR claims.

Weber’s new series was touted as another Honor Harrington series, implying that it had the punch and quality of the Harrington books. Sadly, it has the punch and quality of a wet noodle in a paper bag. I expected the book to at least match the Harrington books but hoped that after years of honing his writing craft, it would be even better. It is much worse than even the first Harrington book.

In Harrington, Weber created a character about who we could care; one who was interesting in her own right and who had interesting and compelling associates. Out of the Dark, in contrast, has no character about whom I care. The plot is somewhat trite and too much of the text is an exposition of military hardware, as if the hardware was to be the star of the series. I didn’t read the short story that was the original basis for this series (I’m not a lover of the short story form), but perhaps this worked better as a short story and should have been left there. Or perhaps Weber has too much to do in writing additional volumes for his other series, such as the Safehold books and the Disciples of Harrington, whose books are of infinitely better quality.

Combining the poor quality of the ebook with the less-than-stellar story, I would give this book — by stretching a bit — 2 stars (out of 5). I think if Weber wants to salvage his reputation as a master of military science fiction, he needs to work hard to improve this new series in future volumes. For those of you unfamiliar with Weber, this is not the book to buy. Better to read nearly any other of his novels. For those of us who are Weber fans, the only reason to buy Out of the Dark is to have a complete collection of Weber’s novels; otherwise, best to pass on this book.

Like Sanderson, Weber, too, needs to insist on review-before-release rights for his ebooks or find a more caring publisher. The combination of a lackadaisical novel and poor ebook quality could start a decline in interest in Weber’s work, especially when a novelist like Sanderson is available.

eBooks in a Textbook World

Education is a splendid thing — except for the textbooks that students have to buy. When I was in school, high school and college, many, many years ago, it was rare that for there to be a single book for a course. Not only were they heavy to carry, but they were expensive — and they are still heavy and expensive today! (I haven’t forgotten what it cost to buy the texts my children used.)

eTextbooks can be the salvation for students, at least on the weight side of the equation. It is just a matter of finding (or building) the right reading device and converting all of the textbooks to etextbooks. An easy solution to a big problem — right?

Well, no.

eTextbooks could be an easy solution to a weighty problem except that the track record of publishers’ quality control efforts is mighty poor so far and I have no confidence that editorial quality will be different in etextbooks than it is for fiction ebooks.

Fiction books are the easiest of all books to make ebooks (I’m not talking about authoring/writing, I’m talking about conversion, editing, and proofing). Nonfiction is much harder, and I’m willing to say that course books, especially in the sciences and maths, are a magnitude harder yet.

We all know that publishers aren’t doing a fantastic job with ebooks now. I’m nearly done with the new Brandon Sanderson epic The Way of Kings, for example, and have found quite a few errors (I admit, however, that I haven’t checked the ebook version against the pbook version to see if the errors also appear in the pbook, but regardless they shouldn’t appear in either), some of which led to my earlier article, In the Face: eBook Errors. If Macmillan can’t get an expensive fantasy novel right, how can it be trusted to get an important educational tool right?

There are many reasons why a conversion process can go wrong, many of which argue for choosing the PDF form of electronic publishing of a textbook, but everything boils down to a publisher’s financial commitment to its product. The first mistake publishers make is to believe that editorial quality control can end once a pbook version is created — they do not think of the ebook version as being a wholly new creation that has its own complexities. Consequently, editors and proofreaders are hired once in the process, before publication in any form, rather than twice, once before the pbook is produced and once after the pbook but before the ebook is produced.

The second mistake that publishers make is not to value editorial quality control. A higher value is placed on the visual than on the content; that is, relatively a publisher will spend more on design than on making sure the content is solid. The rationale for this is easy to grasp: good design makes a reader want to pick up the book and can facilitate the reading (I still recall ordering a pbook, sight unseen, because of the subject matter and when I received it, finding it was unreadable because the design was so poorly done — wrong font and leading, for example, can exasperate the reading experience).

But editorial quality control has been the silent stepchild; people do not realize how bad or good the editorial quality control for a book until they buy the book. Editorial quality control is not what attracts a buyer to a book; it is the design that does it. And that was/is the story of pbooks.

eBooks, as ebookers know, present a different story because samples are available and design is so uniformly poor that people rarely choose to buy/not buy based on it. In eBookville, editorial quality is king, yet publishers haven’t come to this realization — yet — which is the problem with etextbooks. Until publishers do realize that editorial quality is king in eBookville, how can one trust the content of an etextbook? The steps between the pbook creation and the etextbook creation are likely to have been passed over, leaving the pbook as the definitive version and the etextbook as the sorry sister.

When our children are being taught, we “trust” that what they are being taught is accurate. We have neither the skills nor the aptitude to ascertain the verity of every taught “fact.” The Texas State Board of Education review committee’s “reviews” in recent years amply support this premise of lack of aptitude and skills in all taught subject areas on the part of the general populace; we are specialists in narrow areas of knowledge. Consequently, we “trust” the books our schools use, which means we “trust” the publishers.

Yet, publishers cannot be trusted to get the fiction ebook right. On what basis can we trust publishers to get the etextbook right?

The solution for publishers is relatively simple, albeit not painless. First, treat the etextbook as a wholly new enterprise — from scratch — rather than as a simple extension of the pbook version. Second, have the etextbook undergo a complete editorial quality process of its own — editing, proofreading, design, reproofing. Third, start hiring professional editors at professional editor pay scale and stop thinking that and acting as if editorial quality and least-expensive editor are synonymous — they aren’t. As with all else in skilled services, you get what you pay for. (For some musings on professional editors, see Great Expectations: A Recipe for Disappointment and the linked articles noted in it.)

Maybe then etextbooks will be trustworthy. Maybe then the trickle down theory will work as publishers learn the value of editorial quality and let that trickle down to ebooks outside the etextbook world. One can always hope that a light will shine in the publishing world to lead the way to editorial quality.

The Problem Is: Publishers Don’t Read eBooks!

Okay, I admit I don’t know that 100% of publishers don’t read their own ebooks — heck, I can’t even swear with certainty that publishers even know how to read — but I am certain Tom Doherty Associates/TOR/Macmillan’s publisher didn’t read the ebook version of Brandon Sanderson’s new release The Way of Kings before releasing it on the unsuspecting public.

Let’s set aside the little errors that are in the ebook. Those can be excused because they are little (e.g., a dropped “a” and “the”), they are few (at least in the first third of the book that I’ve gotten through), and no book is perfect. I’m even willing to ignore the confusion engendered by the way the story is put together. (Interestingly, rather than off-putting, I find the confusion to be a compelling reason to continue reading the book. The confusion is a result of various substories that are not yet woven together so it isn’t clear what the connection or the purpose of the characters and their stories are in the whole-cloth tapestry. But the book is well written and interesting, which acts, at least for now, as a counterbalance. However, the book is more than 1,000 pages long and I’m only through the first third, so my perspective might well change or, more likely, I may lose patience with this random flow.)

What gives me a clue that the publisher probably didn’t read the ebook version before release — and probably neither did the book’s editor nor Sanderson — are the illustrations. At the opening of the book, in the front matter that few readers read, but which I do (yes, I’m peculiar in this regard; I tend to read every page of a book — including the copyright page and the dedications and acknowledgments, as well as every footnote/endnote, which is why footnotes and endnotes are such a sore point with me [see, e.g., Footnotes, Endnotes, & References: Uses & Abuses]), Sanderson makes a big deal about the illustrations. As it turns out, he is right to do so — or at least I think he is; I can’t tell — I can’t read them, and if I can’t read them, neither can the publisher, the editor, nor Sanderson, which leads me to believe none of them read the book in its ebook form before releasing it for me to buy.

One example: In one of the stories/chapters, the characters discuss “the Code” that governs military men — or at least the righteous military men. The code that a dead king lived by and his brother lives by and wants his son to live by. But where is “the Code” outlined for the reader? In an illustration that cannot be read!

This is the problem with ebooks. Publishers, editors, and authors treat them as Cinderella stepchildren — as a way to do the work of increasing revenues without being given an opportunity to shine on their own — you know, scrub my floors, make them shine, but don’t walk on them. The consequence is that what should be an excellent reading experience becomes an annoying one. The neglect becomes evident, and the $14.99 the publisher demands for the ebook version becomes a sore point. In my case, it becomes a double sore point because I bought both the hardcover version (where the illustrations are readable) and the ebook version, as I noted in The Lure of eBooks: Gotcha!. I might have done this again with another TOR/Macmillan book, albeit reluctantly, but now you can bet I won’t. Rip me off once, shame on you; rip me off twice, shame on me!

Alright (before complaining and saying it’s “all right”, see On Words: Alright and All Right), we know that Macmillan really hopes ebooks don’t succeed but it’s time to recognize that that battle is lost — ebooks are here to stay and represent a growth opportunity for traditional publishers if done right. It’s getting to the done right part that appears to be difficult.

To do ebooks right means one cannot simply take the pbook version, convert the electronic files used to create it to ePub, and declare we have an ebook. Instead, before the declaration of success, someone needs to read the “ebook” carefully to make sure that not only is it not riddled with the types of errors that show an uncaring, amateur job (see, e.g., On Words & eBooks: Give Me a Brake!) but that items like illustrations are recreated to fit the parameters of ereading devices. I understand if an illustration can’t be made readable on every cell phone screen — there certainly does come a point when a screen is simply too small — but there is no excuse for not making illustrations readable on the “standard” 6-inch eInk screen. The only excuses are laziness and a disinterest in making the customer’s experience a positive one. Haven’t the Agency 5 already done enough to alienate the consumer with its pricing model? Must it shove the blade in deeper with a twist by also ensuring that important elements of a book cannot be read?

The cynic in me says that TOR/Macmillan did this deliberately with Sanderson’s book — an attempt to get consumers to buy both the ebook and pbook versions. But I really do know better. It wasn’t deliberate in that sense; rather it was deliberate in the sense that Macmillan is still trying to fight the battle it has lost and cannot ever reverse the tide of — the rise of ebooks at the expense of pbooks — and by a deliberate policy of not caring enough to have the publisher, the editor, or even the author read a prerelease ebook version on a standard 6-inch eInk device.

I will think at least twice, probably many more times than twice, in the future before I buy another TOR/Macmillan ebook, especially one at any price higher than $5.99, because as I said before: rip me off once, shame on you; rip me off twice, shame on me — and leaving important illustrations unreadable is a rip off at $14.99!

The Screw You eBook Deal

Every week it seems something new is happening in eBookland to set the ebook cause back a decade or two. Always at the forefront of the reversal of fortune is greed.

This week’s menace to eBookland is literary agent Andrew Wylie and his new publishing venture Odyssey. Wylie could have summed up his actions in simple terms: to disserve both his clients and the ebook-buying public. What, you ask, did he do? He agreed to give Amazon exclusive rights for 2 years to his authors’ backlist titles; Wylie will publish the books and exclusively sell them through Amazon. The backlist includes authors like Philip Roth, Ralph Ellison, and John Updike.

This is tragic on many levels. First, unless he has been given exclusive information by Amazon, he really doesn’t know how much of the ebook market Amazon “dominates.” All Amazon says is “we’re #1” but has yet to actually prove it. Everyone assumes it is true, but without hard data, it is just an assumption (and you know what assuming does — it makes an ass of u and me!).

Second, even if Amazon has the largest single-vendor market share, it isn’t certain that how dominant a market share it has when all players are considered. Everyone assumes it does, but no one really knows — Amazon hasn’t put any real numbers on the table, just the hype, which makes me suspect that that’s all it is –hype.

Third, contrary to what Wylie thinks about his backlist authors, there is nothing out in the open that demonstrates that they are worth the $9.99 that is planned to be charged. What data does Wylie have to demonstrate that $9.99 is the ideal market price point for decades old books? I might reread Ellison at $1.99, but not at $9.99 — he (and Roth and Updike) just aren’t that good. Wylie complains about the Agency 5 pricing and then proceeds to draw a number out of the air himself.

Fourth, 2 years is a long time to exclude all other ebooksellers from having the ability to sell these books. It ignores the thousands, if not millions, of readers who do not buy from Amazon and who do not own a Kindle (and who do not want to read on their PCs or cell phones). If Wylie were my agent, I’d be looking for another one. As a writer I wouldn’t want thousands (millions) of potential readers excluded. As icing on the cake, no one knows whether at the end of the 2 years Amazon has an option to extend that exclusivity. It would fit Amazon’s usual tactics.

Fifth, if Wylie’s goal is to sell as many of his client’s books as is possible, why would he give exclusivity to a company who uses a format that is incompatible with every other ebook-reading device? I hear the pundits now: Because Amazon has an application that lets you read on nearly every device imaginable, just not other dedicated ebook reading devices.

This argument intrigues me. I understand James Patterson or Stephen King taking this position because they are currently writing bestsellers. The likelihood that someone will agree to read the latest James Patterson novel on their mobile phone or their PC is decent — not great but decent. But will these same people want to read a long ago Roth or Ellison or Updike novel that way? I have my doubts. I don’t personally know anyone who reads a book sitting at their desk on their PC or on their cell phones for pleasure (although I am assured that there are people who do), because that is what we are talking about — pleasure/leisure reading.

The argument also discounts all the people who buy ebooks at, for example, Barnes & Noble, which also has applications for various devices and keeps adding them. Are we to be an ebook world of Amazon only, perhaps a little B&N, but no one else?

Sixth, is the arrogance factor. Wylie doesn’t like the Agency 5’s pricing. Fine. Most ebookers don’t either. But you tell me how giving Amazon 2-year exclusivity at $9.99 sends any message of dislike about Agency 5 pricing to the Agency 5 — or even to the consumer. The only message I get is the one to the consumer, which is “screw you! If Amazon is willing to pay enough for exclusivity, I could care less whether you can read my author’s books.” Reminds me of an old radio ad: “Money talks and nobody walks!”

I admit that John Sargent’s (Macmillan) response was laughable in light of his own actions as a founder of the Agency 5. But even so, his response was on target. This exclusivity deal is not good for anyone. Is the goal to discourage reading and drive sales down? If so, these long-term exclusivity deals are a good step in that direction. People are interested in buying books only if they are available when they want them, in the form they want them, and at a price they are willing to pay. Wylie’s exclusivity deal is a 3-strike out: the books aren’t available to many readers in a form they want at a price they want to pay for ghosts from the past — $9.99 is the price point for new bestsellers, not old books from has-been authors.

And did Wylie give any thought to what state of affairs he is helping to create in the long-term? If giving a 2-year exclusive deal to Amazon is his idea of long-term strategic thinking on behalf of clients, he needs to get off his meds. Giving Amazon these kinds of deals plays into Amazon’s long-term goals of dominating ebook publishing and being able to dictate all terms. Every exclusive deal adds a nail to the coffin of marketplace competition because once Amazon sews up a significant portion of the market in these kinds of deals, Amazon will be able to dictate terms — all other competition will have been buried because they can’t get product to sell and they won’t be able to sell for less than Amazon. (That is also one of the problems with the Agency 5 thinking but at least they make their books available to everyone.)

Now that I have castigated Wylie, a punch needs to be thrown at the Agency 5 who brought this about. What did the Agency 5 think Amazon would do in reaction to their concerted efforts to control pricing? Amazon has done the smart thing for Amazon (although not, ultimately, for the consumer) in pursuing these exclusivity agreements. If anything will undermine the Agency 5, it is these deals. Unfortunately, consumers will be collateral damage. The Agency 5 thought Apple would be their savior; they were willing to overlook the fact that Steve Jobs and Jeff Bezos are identical twins. And so they pushed Amazon and now Amazon has pushed back.

Wylie has made what I consider to be a fool’s deal, but the deal is of the Agency 5’s making. “You shall reap what you sow” should become the motto of the Agency 5; Andrew Wylie should resurrect as his motto “Money talks, nobody walks.”