Amazon loses about $2 for every e-book
tbiresearch.com
Amazon loses about $2 for every e-book
1–10 of 31 posts
Re: Amazon loses about $2 for every e-book
#2That'd help explain why they aren't paying affiliate commissions for e-books. Apparently being able to sell at $10 is seen as more effective at building a customer base.
Re: Amazon loses about $2 for every e-book
#3Money shot: In any event, in order for the e-reader market to thrive publishers must lower their wholesale prices so that distributors can turn a reasonable profit. We believe that if the price is lowered enough publishers may earn less per unit, but could ultimately earn more in overall revenue and profit through a greater number of sales.
Except they can't.
I gather (can't cite my source) that amazon were leaning on British publishers to give them an 80-90% discount off list for Kindle books. Normal trade discounts are in the 40-55% range; anything over 60% is harsh, 70% has the publisher losing their shirt (making a loss). Remember, about 10% of the cover price of the book goes to the author, and the publisher takes another 10% to cover editorial/marketing/production costs, even if you don't include covering chunks of dead tree with ink (another 10%). (Unfortunately, the "physical" production costs don't go away if you switch from paper books to ebooks -- publishers still have to run a royalty accounting system for authors who expect to be paid a percentage cut per book sold.) The other 70% of the cover price goes to the supply chain, or is split between the supply chain (aka Amazon.com) and that nice 30% discount Amazon gives you, the customer, for shopping with them. If they're lucky, the publisher can keep 10-15% of it for themselves -- and that's the profit their shareholders dine out on.
The major publishers are between a rock and a hard place over the ebook discount setup. Relatively nimble small players and startups such as Baen's webscription subsidiary (www.webscription.net) can add new boilerplate to newly signed book contracts that free them to pursue more ebook-friendly business models, but how do Penguin re-negotiate every contract for a backlist of on the order of 40,000 titles?
Amazon have built a business model on disintermediation -- they've replaced wholesale distributors and the bookstores they feed with a single hybrid entity, and therefore take the tranche of profit that would formerly have fuelled both those earlier types of business. But there isn't enough slack left in the supply chain to let them cut prices further -- not without eating into the author's cut (long-term fallout: fewer books get written), the publisher's cut (long-term fallout: fewer books get published) or the reader's wallet (books cost more).
I bloviated about this back in 2007 ... much less has changed since then than most people seem to believe:
http://www.antipope.org/charlie/blog-static/2007/03/why_the_...
Re: Amazon loses about $2 for every e-book
#4Money shot: In any event, in order for the e-reader market to thrive publishers must lower their wholesale prices so that distributors can turn a reasonable profit. We believe that if the price is lowered enough publishers may earn less per unit, but could ultimately earn more in overall revenue and profit through a greater number of sales. Except they can't. I gather (can't cite my source) that amazon were leaning o…
If Amazon can sell a paperback book for 8$ and they are they are taking a hit at 10$ per ebook then clearly there is a mistake somewhere on the supply chain.
Re: Amazon loses about $2 for every e-book
#5Money shot: In any event, in order for the e-reader market to thrive publishers must lower their wholesale prices so that distributors can turn a reasonable profit. We believe that if the price is lowered enough publishers may earn less per unit, but could ultimately earn more in overall revenue and profit through a greater number of sales. Except they can't. I gather (can't cite my source) that amazon were leaning o…
What I don't understand about all this is where the savings of lower marginal manufacturing cost per book go. Once a Kindle or Nook is out there, the materials cost of adding another book to it is nearly zero compared to printing and shipping a dead-tree edition, so why doesn't that lower the cost that Amazon pays? Is there a similar dynamic behind Amazon MP3 that's causing them to lose out for every album sold at near-zero marginal cost?
Re: Amazon loses about $2 for every e-book
#6I also think eBooks piracy is rampant. Unless people consciously choose to buy eBooks rather than download them illegally, it is difficult for the eBook industry to make profits.
tl;dr: Ebook piracy is everywhere. Its important for the industry to figure out a way to monetize eBooks.
Re: Amazon loses about $2 for every e-book
#7Money shot: In any event, in order for the e-reader market to thrive publishers must lower their wholesale prices so that distributors can turn a reasonable profit. We believe that if the price is lowered enough publishers may earn less per unit, but could ultimately earn more in overall revenue and profit through a greater number of sales. Except they can't. I gather (can't cite my source) that amazon were leaning o…
If Amazon can sell a paperback book for 8$ and they are they are taking a hit at 10$ per ebook then clearly there is a mistake somewhere on the supply chain.
Maybe you're confusing a "hardcover ebook" with a "mass-market paperback ebook". :-)
But seriously, I found the answer in Stross's full blog post: "Right now, many of the largest publishers charge a cover price for ebooks that is 80% to 100% of the hardcover price." One would think that once a book goes from harcover to paperback the publisher would reduce the ebook price to match, allowing Amazon to sell ebooks marginally cheaper than paperbacks without losing money, but maybe they aren't doing that.
Re: Amazon loses about $2 for every e-book
#8In the next years, any good book is going to be pirated in the net.In fact, it is today for those that know how to search.
Finding books are going to be easier as copying a book is made simpler and more people want to do it because they have e-reader hardware(people in the hundred of millions instead that in the thousands).
So people will have two options: 1)Decide to pay what the publishers want. 2)Decide it's too much and pirate it.
In the publisher wet dreams people don't have objection to pay the same quantity of money for something that has distribution cost, material cost, manufacturing cost that for something that has virtually null copy cost. People are not stupid.
What I think it will happen is this: Authors will start selling directly, as with music there is no need for publishers now.
Re: Amazon loses about $2 for every e-book
#9In the next years, any good book is going to be pirated in the net.In fact, it is today for those that know how to search. Finding books are going to be easier as copying a book is made simpler and more people want to do it because they have e-reader hardware(people in the hundred of millions instead that in the thousands). So people will have two options: 1)Decide to pay what the publishers want. 2)Decide it's too m…
In fact I bet my two dollars Apple is going to start the authors ebooks market with the Apple tablet making it outdoors-friendly and using their app store tech.
Re: Amazon loses about $2 for every e-book
#10Don't worry, they will make up with the volume :)