Amazon loses about $2 for every e-book • Hacker News Board

Re: Amazon loses about $2 for every e-book

#11

Post by [deleted] » Sun, Dec 06, 2009, 8:10 PM UTC

wmf wrote: post #7

Retric wrote: post #4

Earlier quoted context omitted.

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 marg…

[deleted]

Re: Amazon loses about $2 for every e-book

#12

Post by anurag » Sun, Dec 06, 2009, 8:39 PM UTC

We ran some numbers comparing Amazon's ebook pricing to BN, Sony and other retailers, and found that Amazon's prices were the lowest (or matched the lowest) for 74% of the 11K ebooks we looked at: http://inkmesh.com/blog/2009/11/30/amazon-barnes-and-noble-s.... So not only is Amazon losing money on ebooks, it is also competing mostly with itself in pushing ebook prices even lower.

Also worth mentioning - 92k of the 350k Kindle titles available on Amazon.com are priced above 9.99, so Amazon might not be losing as much money as the original study suggests.

Re: Amazon loses about $2 for every e-book

#13

Post by patrickgzill » Sun, Dec 06, 2009, 9:12 PM UTC

cstross wrote: post #3

Money 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…

Your percentages are WAY off.

Bookstores get 40% off, distributors such as Ingram or Baker and Taylor get 60%. So distributors have to run all aspects of billing and order fulfillment and shipment in return for 20% .

Anything over that you have to buy non-returnable or do via special sales (book clubs for instance get more of a discount but buy non-returnable and minimum order size 5000 or 10K books at a time) usually direct from the publisher.

10% of the cover price does NOT go to the author, unless he is a bigshot (famous/celebrity) or has a surefire franchise (Stephen King level).

Usually, assuming the publisher is fair, the author gets a percentage of the NET amount the publisher gets. Royalties are easy to calculate these days thanks to software for publishers that keeps track of that. Example: $19.95 retail, publisher gets $12.00, author at 10% gets $1.20 (not $2.00 ). Sometimes foreign language rights are handled differently, sometimes they are the same.

Amazon is making the argument that ebook pricing is highly elastic - that if ebooks on LISP programming were 1/10th the price, I would buy 10 times as many of them.

Yet books and ebooks have to compete for time and attention against TV, Internet surfing, movies, and my need to sleep; which no doubt explains publishers' wariness.

Re: Amazon loses about $2 for every e-book

#14

Post by mattmaroon » Sun, Dec 06, 2009, 9:22 PM UTC

People always apply the laws of supply and demand oblivious to other factors. They say "well if we just lower the price, more people will buy these books".

That isn't necessarily true because people can only devote so much time to reading. Much of the investment a person makes in a book isn't money (at least not directly) it's time.

It's entirely possible that the price of books is set by other factors, such as competing books. People may largely decide they want a book, then shop around, and buy one. Which one they buy may have to do with pricing, in fact that may be the key factor in pricing (if I'm on the fence about two books, I'll go with the one that costs lest).

So you can't simply assume 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." It's quite probably untrue.

I'd actually argue that if you want to sell more books, you should make them shorter. Fewer pages will get the reader through it faster. I'm sure this will only work to a point, as nobody wants to pick up a "book" that feels more like a "pamphlet" but perhaps digital media (where all of your ebooks weigh the same as the Kindle you read them on) will change that too.

Re: Amazon loses about $2 for every e-book

#15

Post by eru » Sun, Dec 06, 2009, 10:02 PM UTC

patrickgzill wrote: post #13

cstross wrote: post #3

Money 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…

Your percentages are WAY off. Bookstores get 40% off, distributors such as Ingram or Baker and Taylor get 60%. So distributors have to run all aspects of billing and order fulfillment and shipment in return for 20% . Anything over that you have to buy non-returnable or do via special sales (book clubs for instance get more of a discount but buy non-returnable and minimum order size 5000 or 10K books at a time) usuall…

Real books do not necessarily have to compete against TV, Internet surfing etc. Nobody cares whether you read the books you buy. And most people seem to have a backlog of unread books in their shelves.

Re: Amazon loses about $2 for every e-book

#16

Post by Estragon » Sun, Dec 06, 2009, 10:21 PM UTC

xcombinator wrote: post #8

In 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…

  any good book is going to be pirated in the net.In fact, 
  it is today for those that know how to search.

How?

Re: Amazon loses about $2 for every e-book

#17

Post by ktrough » Sun, Dec 06, 2009, 10:21 PM UTC

This article says that as wholesale ebook prices drop (the predicted trend) authors will as a result make less money. I'd like to point out that this is an incomplete statement. They should have said authors will make less money PER UNIT. It is unknown if the overall ebook price reduction will result in a similar overall number of units sold, or whether the ebook price reduction will allow the author to penetrate the market more effectively getting improved sales numbmers. This could easily result in MORE money to the author for the title even though the royalty per e-unit is less.

I'd rather sell an ebook to everyone who reads english for $1/e-unit royalty than have a New York Times number one bestseller print book with a good contract even with the massive royalties that go with print. Electronic distribution simply cannot be beaten.

Re: Amazon loses about $2 for every e-book

#18

Post by cstross » Sun, Dec 06, 2009, 10:29 PM UTC

xcombinator wrote: post #8

In 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…

Authors will start selling directly, as with music there is no need for publishers now.

I wish there was no need for publishers. Unfortunately, publishing is not isomorphic with printing/distribution. Editorial services and book design are pretty much vital to the process of turning a manuscript into something people are willing to pay money to read, and marketing is necessary if you want to convince folks to read your book, rather than Dan Brown's.

We may see a realignment of the way publishing services are applied to books (e.g.: author hires editor and PR folks to work for them, or literary agents hire editors and turn into virtual publishers -- they've got the accounting infrastructure to handle royalty payments), but we already have authors selling directly, and there's a reason most readers usually avoid self-published books.

Re: Amazon loses about $2 for every e-book

#19

Post by eagleal » Sun, Dec 06, 2009, 10:42 PM UTC

Don't Amazon covers the loss from ebooks with Kindle (ca $250)?

If Amazon sells 500.000[1][2] Kindles at $250, and sells 1 million ebooks with a loss of 2$ at piece:

$120m in Kindles

-$2m in ebooks

1. http://mediamemo.allthingsd.com/20090203/citi-says-amazon-so...

2. http://www.businessinsider.com/2009/2/amazon-sold-500000-kin...

Re: Amazon loses about $2 for every e-book

#20

Post by netcan » Sun, Dec 06, 2009, 10:48 PM UTC

patrickgzill wrote: post #13

cstross wrote: post #3

Money 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…

Your percentages are WAY off. Bookstores get 40% off, distributors such as Ingram or Baker and Taylor get 60%. So distributors have to run all aspects of billing and order fulfillment and shipment in return for 20% . Anything over that you have to buy non-returnable or do via special sales (book clubs for instance get more of a discount but buy non-returnable and minimum order size 5000 or 10K books at a time) usuall…

You put your finger on it. Price elasticity. That is the claim Amazon is making.

Personally I think they are right. There is some elasticity. If I could buy books at 3-5, I would buy a lot more. @ $20+, I think abut it.