Moss Rock Review – February 2010

Competition and consumer pressure bring good news for authors and our planet

Apple’s iPad breaks Amazon’s control over eBook sales — authors to get higher royalties, publishers will set pricing

In the week before Apple’s Steve Jobs introduced the long-awaited IPad tablet, Amazon knew its near-monopoly (90%) of eBook sales was in danger. Up to that point, with strong sales of its Kindle reading device, Amazon had bullied publishers, dictating sales terms. Amazon theoretically “bought” the eBook from the publisher at a “wholesale” price, and could sell for whatever price it wanted (maximum $9.99). Publishers who wanted a retail price of $29.99 or more for a new bestseller were angry. Authors were receiving far less money from the sale of an eBook, compared to a printed book.

In a pre-emptive move, Amazon announced it would double the publishers’ margin from 35% to 70%. But it remained fixated by that $9.99 eBook price point, which was key to Amazon’s plans for rapid sales growth of Kindles and eBooks in general.

Announcing the iPad, Job noted that publishers (“content providers”) would receive 70% and could set the price, though he hoped they would stay below $14.99. Publishers and Apple would operate under the “agency model” of selling, whereby the publisher owned and controlled the pricing of the product until it was bought by a consumer, at which point the vendor (Apple) was entitled to a 30% commission.

Emboldened by the new competition, US publisher Macmillan threatened to withhold all its new books from the Kindle until months after the release of the hardcover edition. Amazon retaliated by removing the “buy buttons” at its website on all Macmillan printed and eBooks. A day later, Amazon capitulated and announced it would adopt the agency model too, so Macmillan (and presumably other publishers) could set the retail price.

With authors’ agents circling, Macmillan announced it would boost its authors’ royalties to 25% of its revenue, which becomes roughly 17.5% of the retail price. Presto! Within a week, authors’ royalty percentages on eBooks had nearly doubled.

Grassroots Facebook campaign forces change at US bookstore chain

As the huge Borders bookstore chain tries to avoid bankruptcy, it has been closing nearly 200 Waldenbooks and Borders Express stores. Employees were appalled by orders to dispose of hundreds of thousands of books and other products. Instructions were to rip off the covers of the books to render them unusable.

“Why can’t these be donated to libraries and other charities?” they asked, but were refused permission to do so by the Borders Group head office.

So they formed a Facebook campaign (see www.DonateNotDumpster.org) to protest, and began inviting their friends to email to Borders executives. Thousands joined the protest, many writing on the Facebook page’s wall threatening to never shop at Borders stores again. Employees at other locations posted photos of dumpsters full of new stationery and coverless books. Organizers learned the overprinting of books, and subsequent destruction of unsold copies, was endemic to the book industry, and demanded Borders address this underlying problem as well. The book industry’s own analysis pegs overprinting at more than one billion books annually. This grassroots Facebook campaign was exposing an environmental scandal.

After articles in The Washington Post and other media, Borders scrambled to put a good face on an embarrassing situation. It would now recycle paper waste instead of sending it to landfills. It would donate unsold stationery and other products to Gifts in Kind International, including books that were not “returnable” for credit. [Returnable often means sending back only the cover, to get a credit.] Borders claimed that the “returnable” books problem was the publishers’ fault, but it would initiate a dialogue within the book industry about changing practices that cause so much waste of money and natural resources.

The Facebook campaign has now broadened its focus. It wants consumers to email to the heads of the major publishers and large bookstore chains, demanding an end to overprinting and the waste of unsold books. The initial responses from publishers have been to blame the retailers for being reluctant to adopt a “firm sales model.”

Yet one can hope the publishers will feel emboldened by their recent decisiveness around eBook sales models, and step up to fixing their one-billion-book public relations nightmare. In this era of grassroots Facebook campaigns, bad business practices are becoming harder to hide.

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