Ebook Drama Roundup

There’s been a lot of hang-wringing, railing, theorizing and punditry about ebooks lately: pricing, devices, formats and DRM. Here’s a roundup of just a fraction of the buzz.

On October 23, Crain’s New York Business ran a piece entitled Analysts Warn Booksellers Of E-Peril. Sounds pretty melodramatic, but as it turns out, all the worrying and worst-case-scenario discussions can affect stock prices. The article ran within a few days of the launch of Barnes & Noble’s "Nook" dedicated ereader, and according to the article, "The shift from digital to physical books will ultimately hurt traditional bricks-and-mortar book sellers, analysts said Friday…" The article goes on:

The company could become a major player in the digital book business, but that actually may speed the downward trend in its revenue and profit, said Credit Suisse analyst Gary Balter, who rates the company "underperform."

As the math currently works, each sale through a Nook is not just unprofitable but potentially replaces a higher-margin sale at stores," Mr. Balter wrote in a client note Friday. One obvious risk is that downloading books reduces the need to go into stores, he said.

Yet there’s a tiny ray of sunshine for B&N stock holders, in that the sale of Nook devices will temporarily increase B&N’s revenue picture. But that’s not necessarily a good thing for all the rest of us. On his Publishing 2020 blog today Joe Wikert wonders, Is the eReader Financial Model Upside Down?, saying:

I won’t buy a Kindle edition of a book that’s more than $9.99.  Why?  Besides the fact that I’m a cheapskate, I guess I’m still bitter about paying almost $300 for an original Kindle, so I expect to "make it up" with cheaper content.  I wonder how many others like me are out there.

I’d say quite a few.  Look at the Kindle book bestseller list.  Even though there are plenty of Kindle editions priced above $9.99 they rarely make the bestseller list. In fact, as I type these words 14 of the top 25 have a price of $0.00, one is $0.01 and the rest are at or below $9.99.  I only found three books in the top 100 priced above $9.99. Three."

Why can’t a device vendor go with more of a cell phone model, where the low price of the device is subsidized by the longer-term commitment to buying content?

According to Max Magee’s piece, Follow the Money: The ebook Pricing Wars, which ran on The Millions on May 28 of this year, Wikert is on target:

You’ve likely heard about Kindle owners who have balked at the idea of spending more than $9.99 for an ebook. With the Kindle going for $359, many Kindle owners have decided that their willingness to pony up the big bucks for the device was their side of an implicit bargain. In return, there is an expectation that ebooks will come at a discount to their physical counterparts, allowing Kindle owners to recoup their investment in the device over time. Any sign that this bargain is falling apart has been met with resistance by Kindle owners…

Okay, so publishers and consumers alike have a lot of financial concerns about ebooks. But what about the authors? J.A. Konrath has recently begun publishing some of his work for the Kindle himself, and on October 13 he posted a surprising comparison of Kindle Numbers: Traditional Publishing Vs. Self Publishing on his A Newbie’s Guide to Publishing blog. His conclusion?

My five Hyperion ebooks (the sixth one came out in July so no royalties yet) each earn an average of $803 per year on Kindle.

My four self-pubbed Kindle novels each earn an average of $3430 per year.

If I had the rights to all six of my Hyperion books, and sold them on Kindle for $1.99, I’d be making $20,580 per year off of them, total, rather than $4818 a year off of them, total.

So, in other words, because Hyperion has my ebook rights, I’m losing $15,762 per year.

Konrath is so pleased with his Kindle self-publishing results that’s he’s now beginning to dabble in iTunes ebook apps as well. Sounds pretty good if you’re an author, until you take a gander at Henry Baum’s piece, Ebooks are a Disaster, posted on Self-Publishing Review on November 4. Henry says:

I spent a long time designing the interior of my book – choosing fonts and font-sizes, etc. – only to have to delete all of that when creating the ebook. Given that people already chide ebooks for being a pale comparison to printed books, having an ebook be so different from the printed text is going to slow down converts to the platform.

The process of duplicating his interior formatting to the extent possible proved to be such a hassle that he eventually hired B10 Mediaworx to do the formatting for him, but even then it was no slide on ice. He adds:

We had a time of it, though, because the epub file wasn’t revealing the italics – which isn’t just a formatting problem, but an actual content problem. Italics can change the entire meaning. Turns out – after many emails sent back and forth – that the desktop version of Stanza does not work as well as the iPhone app, which actually does reveal italics in the epub file.  One example of the many possible ways that ebook formatting can go awry.

Unfortunately or fortunately for authors, depending on how you look at it, static text ebooks are just the tip of the digital book delivery iceberg. Last month I interviewed Al Katkowsky about the success of his iTunes book app, Question of the Day Book, and you’d have to be actively avoiding publishing news to avoid hearing about the Vook. Publetariat contributor Joanna Penn wrote about it on her The Creative Penn site on October 4th in a post called What is a Vook, and How Will It Change Publishing?

Publishers Simon& Schuster launched 4 ‘vooks’ last week, a combination of book and video to create a new medium for the reading/watching experience (video on What is a Vook here).

They are available in the Apple app store for the iPhone and are aimed at handheld devices, although are not compatible with the Kindle or Sony e-reader as they don’t do video. You can also buy them at Simon & Schuster’s website.

Following a video clip of Vooks in action, Penn notes:

  • There are opportunities for new sources of revenue for both publisher and author. The authors are getting ebook royalties (whatever that means!) but Jude Deveraux wrote her novella in 6 days and then worked with a film-maker. This is clearly not the 5 years Dan Brown took to write “The Lost Symbol”! These vooks may not replace the mainstream novel but they could represent a smaller, short story based product that could make authors money in between novels.
  • The ‘vooks’ have launched on Apple’s app store, and so the possibility of creating one as an indie author is there. This week I am interviewing Winged Chariot, who publish children’s books on the App store. I will be asking them how to create an app and will be posting more on this. I am determined to have my books as iPhone apps, but not for a huge price. I’ll let you know what I find out!

So authors, perhaps especially indie authors, have a brave new world of publishing opportunity at their feet, but it’s a world that demands that authors have either the techno-savvy to develop their own book "products", or the money to hire out for techno-savvy. Now if only we could get a handle on Digital Rights Management (DRM), that process whereby publishers and device providers collude to prevent consumers from sharing, moving, and generally doing whatever they want with their purchased ebooks.

The Nook ereader device introduces a new wrinkle in that discussion: ebook sharing. On October 25, Medialoper’s Kirk Biglione wondered, Is Book Sharing Really a Threat to Publishing

Although ill-named, the Nook is a worthy competitor to the Kindle, offering a number of features not found on the Amazon device, including LendMe, a feature that allows for controlled sharing of ebooks. While the sharing feature comes with a number of limitations, it would appear to be a small but important step towards making DRM-restricted content slightly more flexible for consumers. There’s just one problem — publishers want no part of the Nook’s LendMe feature.

Publishers Lunch reported last week (registration required) that many large publishing houses have indicated that they won’t participate in the LendMe program.

Later in the article, Biglione adds:

What Unnamed Publishing Executive seems to fear most is a sense of consumer entitlement. If consumers have the right to share ebooks now, they’ll expect to have that right until the end of time. Never mind the fact that consumers share print books all the time…If the history of digital media has taught us one thing it’s that media companies see the digital future as an opportunity to exert extreme control over how consumers use and interact with content.

It seems reasonable for publishers to want to protect their livelihood, but they may be barking up the entirely wrong tree if  a recent report out of Norway on the music-buying habits of filesharing pirates is to be believed. As reported by Ars Technica on April 20 of this year:

Researchers examined the music downloading habits of more than 1,900 Internet users over the age of 15, and found that illegal music connoisseurs are significantly more likely to purchase music than the average, non-P2P-loving user.

As a legalized version of file sharing, LendMe may have the potential to actually spur more ebook sales. And ebook sales are most definitely on the rise according to quarterly reports by the Inernational Digital Publishing Forum (IDPF). On January 21st of this year on the Smashwords blog, Smashwords founder Mark Coker says of the quarterly report for period ending December 2008:

The IDPF today reported ebook sales were up 108% for the month of November, 2008 compared to the same period a year ago…

Dig beneath the surface, and the numbers are striking. Ebook sales are surging while the entire trade book industry suffers a decline…

For the five years between 2002 and 2007 (Click here for data, opens a PDF), overall trade book sales averaged an annual increase of 2.5% (lower than inflation, which means unit sales probably decreased), while ebooks for the same period turned in a 55.7% average annualized increase.

Granted, the robust sales growth for ebooks was off of a tiny base to begin with. But…fast forward to October of 2008, the date for which year-to-date sales are reported on the AAP web site , and you see overall trade book sales for the first 9 months of the year were down 3.4% while ebook sales were up about 58%. So the rate of ebook sales accelerated during the first 9 months of 2008 compared to the previous five years.

More interesting, for the month of October the AAP reported overall trade book sales suffered a 20% drop in the year over year monthly comparison, while ebook sales accelerated to 73% growth.

It seems that what we’ve got here is a mix of good news and bad news caught in a whirlwind of flux and guesswork. In the final analysis, I think there are only three things that can be said of ebooks with any certainty:

1) Digital books are here to stay

2) Publishers will not succeed in realizing the full potential of digital books until they can better comprehend the potential of the numerous media available to produce digital books, and consumers’ expectations of both the media and media providers

3) We have yet to see the best or final incarnation of the digital book; in the Vook and today’s ebook apps, we’re witnessing the infancy of a new type of book that is much more about dynamic content than it is about any specific delivery system (and we’re not just talking electronic files and gizmos – paper bound between two covers is a content delivery system, too)

Whether you’re a publisher, author or reader, you have a stake in the future of digital books and your opinion is no less valid than those of anyone quoted here. So, what do YOU think?