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Memo To Book Industry: Here’s A Better Way To ‘Window’ Your E-Books

Frankly, I am surprised that it took this long. But today, we read in the Wall Street Journal that two major publishers have decided to pull a music industry mistake. Simon & Schuster and Hachette Book Group have announced that they will not release most e-book editions until the hardbacks have been on shelves for four months.

And I quote David Young, CEO of Hachette Book Group, whom the article cites as saying: “We’re doing this to preserve our industry, I can’t sit back and watch years of building authors sold off at bargain-basement prices. It’s about the future of the business.”

Correction: This move is about the past of your business.

I’m just being a historian here when I point out that language like “We’re doing this to preserve our industry” is a classic symptom of what we at Forrester loving call The Media Meltdown. I wrote a whole report on this ailment and its many symptoms, chief among them is that media businesses attempt to preserve analog business models in the digital economy, even when analog economics no longer apply. This is exactly that scenario.

I have two very important messages to offer the book industry (most all of them clients, so I’m trying to be delicate here, the way a group of friends running an intervention for an alcoholic have to act even if it involves summoning tough love). The first message is the hardest to hear and it will make me some enemies. But the second message offers some hope and I encourage you book types to give it a fair hearing, because I have history and economics on my side.

Message #1: Dear book industry, I’m so sorry to tell you this, but your books really aren’t worth $25. Just like newspapers and magazines weren’t really worth what people were paying for them. And CDs, and DVDs. These were all worthy of a high price when analog economics were the only economics. When people understood that they paid $25 to get some paper, ink, and a binding, all of which had to be warehoused, shipped, and slotted on shelves in warm stores with Muzak and imported coffee odors wafting through.

A digital book suffers from none of those impediments. Therefore: it should be cheaper. Stop glorying in historical prices and accept the fact that a digital book should not cost $25 unless it comes with some awesome, exclusive premium that makes it worthy of such a price. Otherwise, $9.99 is darn awesome a price to pay, given how cheap it is to deliver an e-book (which has fewer bytes in it than a TV episode sold for $1.99 on iTunes).

I am no Chris Anderson. I am not telling you that content wants to be free. I’m just telling you that it wants to behave according to digital economics, not analog inefficiencies. I understand that you have the awful burden of serving both analog and digital economics simultaneously. That’s real life and I don’t pretend that you can go digital in a month, or even a year. So what’s a good publisher to do?

Message #2: You can actively “window” in a way that doesn’t alienate consumers. Just as I want you to charge a fair price for your digital content, I want you to be able to sell physical books for as long as a majority of consumers still want them. So here’s my proposal: Rather than creating artificial scarcity by holding e-books back four months, why not dynamically price your offerings so that a consumer who really wants that new Stephen King book on his or her digital reader can get it the same day as the hardback. Here are two possible, nonexclusive scenarios, both of which are better than what you currently have planned:

Bundle the digital download with the hardback. Having a hard time selling that hardback book these days? Bundle the digital version (at Amazon (NSDQ: AMZN) and Barnes & Noble (NYSE: BKS), they’d be happy to facilitate this for you). It costs pennies to deliver the digital version, it gives you a way to establish a relationship with the consumer since they’ll have to sign up to get the download, and it creates a truly multiplatform consumer experience that can’t be beat.

Offer a premium digital version to coincide with hardback release. Worried that $25 can’t compete with $9.99? It can’t, frankly, and 10 years from now, it won’t have to, but for now, manage that gap by offering digital content in windows: premium and basic. This takes a page from our recommendations to the music industry and it applies here perfectly. Offer a premium digital version (with a personalized dedication page from the author to the reader — automated, of course — an exclusive interview with the author, and some behind the scenes essays) for $19.99 that goes on sale the same day as the hardback. But make it clear to buyers that if they are willing to wait and don’t want the premium content, they can pre-order the $9.99 version right now, while all the marketing for the hardback is in full swing and awareness is at its peak. The money is already committed, and the digital book is simply delivered four months hence.

These options are 10 times more interesting to consumers than what you’ve given them today. Plus, they allow you to manage that awkward transition from analog inefficiencies to digital economics. You become a friend to readers in this scenario, not their headmaster or disciplinarian. We call that Media Rebuild, a phase beyond Media Meltdown and one we welcome you to if you’re ready.

James McQuivey is a Vice President and Principal Analyst at Forrester Research, where he serves Consumer Product Strategy professionals and contributes to the Forrester blog focused on that area.

This article originally appeared in Forrester Research.

15 Responses to “Memo To Book Industry: Here’s A Better Way To ‘Window’ Your E-Books”

  1. NP Dowling

    I wish I had seen this thread earlier. The economics of the publishing world is so old-fashioned. The illusion of the cover price was shattered once the Costcos and Sam’s Clubs of the world started having book runs in their stores, certainly in the US. In the UK they tried to preserve cover price with something called the Net Book Agreement, which mandated selling at cover. Price Club, now part of Costco, was initially only able to discount from cover to wholesale members (those who intended to resell the books in a retail environment). Ultimately, the format of delivery will be driven by the consumer, not the publishers.

  2. Copyright law serves many purposes, but the primary one seems to be to encourage and reward creativity. When copyright is no longer defended or defendable (as seems to be the case in music) most people will minimize the cost they pay to obtain the product and that cost will eventually be close to zero. At that point, creators shift their focus and begin to consider other ways of supporting their creativity. In the case of books, copyright can currently be enforced so publishers are trying to maximize their profit from the content they own. If a company has a monopoly on a particular product then they command a premium and try to maximize profit and defend their monopoly. In the past, publishers have obtained the right to monopolize the content they acquired. In the digital age, that will probably change and so the economics of acquisitions needs to change…

  3. Thomas Nelson is already experimenting with the idea of combining the atoms with the bits. Books in their NelsonFree program allow the customer to download a digital version and an audio version when they buy the paper version.

    McQuivey is right about creating different products. I just think that they should all be released at the same time. Readers want what they want, when they want it, and where they want it. That could be the hardcover for their shelves or the digital copy for their ereader.

  4. It seems to me that you just have to let companies who wish to stick their head in the sand and avoid the coming change die off and be replaced by smarter companies who are able to adapt.

    I’ll just vote with my wallet. If I see digital books I want, I’ll buy them, if I don’t or cannot find them, I’ll pirate them. I think you’ll find in the coming years most people will do this and stubborn publishers and therefore authors are going to lose out big time.

  5. Jim Linderman

    And furthermore….from the same place Jim Linderman Dull Tool Dim Bulb

    Ahh, Kindle. I’ll give in one day soon. I do not lack for reading material, the web has loaded the content of so many things my fingers wear out far before my eyes. But I thought I would address an issue seldom discussed, but will become increasingly evident as we progress. David Byrne on his blog recently said he enjoyed his kindle as he didn’t have to lug around books in his luggage. Well, neither did anyone else. Including baggage folks. No one has to deliver the book to his house either. No one has to print it. No one has to do the typesetting, the binding, the paper…Every step of production is gone or going, and all of them were good union jobs at one time. My first real job was paperboy. We don’t need no paperboys. We don’t need no mailman. We’re not going to need no librarian, except to scan our card keeping track of which computer we’re using. This analogy extends to so many once physical activities which provided jobs that it is scary. Whenever I hear a reporter claim “jobs will be back in 18 months” I cringe. There are no jobs coming back. Nothing needs to be done made, boxed, carried or delivered. So for now, I’ll just say “Kindle this, Amazon”…and I hope a certain percent of the cyber-royalties are going to food distribution…and that they pass a low requiring all Barnes and Noble stores be turned into roller rinks.

  6. Jim Linderman

    Jim Linderman from Dull Tool Dim Bulb
    So I saw Sherman Alexie on Colbert. He is a great writer with more guts in him than just about anyone I can think of, and if you don’t believe me find his ten minute lecture on you tube from 2001, you’ll see an example of the courage of a Native American. It is unfortunate he seems to be loosing some of his splendid Northwestern Indigenous patois, but that is beside the point. He doesn’t allow his new book to be sold on Kindle. For him, it’s about digital privacy and royalty payments for the most part, but here’s another scary little gem I came across.

    Say there is a “mistake” in the “first printing” of your book. Kindle plans on always selling the latest version. That’s right…without the permanence of the paper page they will be continuously selling the um…”corrected” version.

    When I was young, like all boys, I was mesmerized by the Hardy Boys. GAWD, I was horrified to find 30 years later while browsing the same book I had owned that the fellows had joined a ROCK BAND! In a book with the same title! Cripes…nothing is sacred. I don’t remember if they had their fat friend Chet playing the drums, but I think so. I shudder. I didn’t want my heroes to be practicing in the garage in a lousy group that probably sounded like the Monkees or the Jonas Brothers or whoever…I wanted them chasing scoundrels in outdated language and wearing outdated knickers while they chased them. It was atmospheric and exciting.

    Use a Nancy Drew analogy if you like.

    So what’s to prevent Kindle from “correcting” something stupid a stupid politician says in a subsequent “edition” of the one for sale today. Or changing (they’ll call it “updating”) a statistic to more “accurately” reflect a situation?

    There is a REASON books on paper stay the same. Because they are BOOKS.


    Bravo George !
    Perhaps we do James McQuivey an injustice but in his taking a rather Philistine view of the value of creative arts he risks commoditising cultural products. By his simple equation “Number 5, 1948″ by Jackson Pollack should be sold for $1.40 rather than $140 million after all ’tis only paint splashes on canvas and wood.
    I am reminded of the libel trial when John Ruskin asked of James McNeill Whistler,”The labour of two days is that for which you ask two hundred guineas?”
    Whistler: “No. I ask it for the knowledge I have gained in the work of a lifetime.”
    And whilst there may be a very very few writers ‘held back’ the rapacious publishers the Internet does provide a platform, unfortunately one that appears to be taken up by ill-educated semi-literates who wouldn’t know the difference between a Becket and a bucket and who appear to vie with each other to prove that ease doesn’t replace expertise!
    The music industry did prove one thing, that an industry that could consume such a volume of coke and alcohol was definitely ripping off the public and had too much cash swilling around. However the literary world is/was free of such excesses. Oh! apart from Baudelaire, Burroughs, Coleridge, Freud, Huxley, Kerouac, and Southey and Thomas De Quincey and Branwell Bronte ( and his sisters!).
    In England we are a little more Luddite in our views of ‘new technologies’ but then again we have been through it all before. Americans are viewed by many “to know the price of everything and the value of nothing !” and the view that success is measured by selling millions of copies at 99c is a pretty shallow measure of the value of the creative mind.
    Great writers craft great works, bedroom monkeys merely hit the keys!

  8. I will someday be able to overcome my reaction to the arrogance that seems to be a required element of any person from the digital world trying to explain to us mortals how the world really works and what the future will bring. I am working on that but it is influenced too much by having heard the arrogance of so many other advocates of “the next new thing” who all seem to subscribe to the same theory—their idea will replace everything like it in the world to come. In many cases “new things” do just that when the idea and the work needed to be done can be done better by the “new thing”.

    In the case of e-books versus any other format of books you have to look at history and at the intrinsic value to our culture of written communication just as you would look at art as a value. Does the photograph replace a great drawing or painting just because it is digital and crisp? And look at music, not as a commodity but as a value to our culture. Records added the capacity for millions to hear what only hundreds could hear at a performance. The ability to transfer that digitally further transforms that value. But we have not yet devised the way to compensate the institutions and the creative people behind any of this in that chain of activity, and until we arrive at a true cost that incorporates that primary resource we will lose symphony orchestras and small bands and perhaps discourage a Mozart or Lennon in the making. So it is with books. Have any of the digital folks ever made a comparison of what the compensation is at all levels of creating a book and matched it with the comparable digital product? No overnight millionaires there. Have all of the resources involved in producing an e-book been included in a loss-leading price of one merchant with deep enough pockets to sustain loss? I doubt either has been done. And let’s not even begin to explore what we would do if the power goes down or we have to figure out how to fix a problem with an electronic manual instead of a physical book.

    I have been around long enough to have seen a couple of revolutions and been part of one. When
    paperback books first arrived they were regarded as “not real books” and it was even suggested in one case that I experienced where I was told in a traditional bookstore that it would be good “to move on” as I tried to sell them some new paperbacks. What I came to learn is that not so many things in this world are either/or. I think e-books are a brilliant new direction for books, but as ANOTHER format, not as a replacement of physical books. They will find their use and their level if we work our way through finding out where they work best and what purposes they serve that are superior. I don’t think this is served by the arrogant dismissal of publishers or writers to try to find that level with the tools they have available. Book people have always lived in a marketplace with hundreds of thousands of ideas competing for the tens of thousands of ways of connecting writer to reader and it is not in their nature to resist a new way that works. What is wrong with letting e-books compete in that marketplace as a format? There are better options to come on all sides but I think the time for arrogance is done.

    Written on the (fifth Macintosh I have owned since 1986) with my head well above the sand. The air is fresh here as I look up in the sky and don’t see the flying cars and personal transport packs that were to become part of our future…it is s good day to put aside arrogance.

  9. I’m an author and I am more than happy to sell my ebooks for $2. Why? Because this model is massively beneficial to society as a whole. Right now there is massive inequality in the distribution of wealth amongst writers. From the very few who make a fortune, to the many many talented writers who do not make a penny because the traditional publishing industry will not allow them through the front door. The ebook revolution tears down the barriers; it levels the playing field. Now any person is empowered to write a book and publish it for whatever price they like. If the big publishers continue to charge high prices for their books then they will be overcome by the independents whose writing is just as worthy, maybe moreso.

  10. I DON’T WANT A HARDBACK BOOK. I know some people do, but I’m going digital to SAVE SPACE in my house, so I have room to move around. I prefer eBooks. Bundling won’t work for me and if you make me wait for an ebook? I’ll move on. If you charge too much for an ebook, I’ll move on.If you charge more for the book, I’ll SO move on and never come back.

    Call me crazy, but I thought the customer is “always right.” I’m the customer. I love books, but there are a lot of them out there competing for my reading time. You make me wait, you lose me.

  11. hankmitchell

    Leah, value and price have nothing to do with each other when you have unlimited suppy and digital economies, most authors would probably appreciate a larger royalty check than the prestige of a high unit price. if i was a author/historian i would rather sell everyone in the US my book for 99¢ rather than sell a few copies to college students for $89

  12. James,
    You are missing a key point; the cost of a book has little to nothing to do with manufacturing costs! Your whole argument is based on the cost of a digital file (the size of it, the delivery, etc), and that completely misses the issue. If a historian takes 15 years to develop a book and collect thousands of images (each of which requires permission and a fee), or a horticulturist commissions 100 artists to hand-draw plant species in their region, or a publishing pays a travel editor to visit a city/country and create really current, down-to-earth coverage of a destination that product (book, pdf, mp3, etc) has inherent VALUE. It’s not that publishers are ignorant and resistant (well, some are), it’s that they are watching all content be devalued and equated with the cost of printing, binding and shipping. They are two separate issues, and you are confusing them here, as most people with this point of view do. The options you present are interesting, but your argument is poor. I would also like to point out that a large percentage of the staff at publishing houses are not employed because of production. Even without printing there would still need to be editorial, marketing, sales, finance, subrights, and other supportive roles. Publishing was unnecessarily ‘fat’ in the past, and the economy has forced a reasonable ‘contraction’ within houses, but if we only focus on the loss of printing and production as a rationale for the value of content we miss a HUGE piece of the puzzle.

  13. Intersting stuff… and no doubt time will prove right much of what you say.
    But you can’t compare a book with a tv programme.. merely on byte size! A tv prog will have already been paid for (maybe many times over) before it gets to e-sale. Its writers will have been catered for.
    A book, however, is a stand-alone and may well have taken the writer two years to finish. The only way the writer gets some sort of payment is via some sort of publishing.
    (And just to be a bit tecchie: the information density of a book is much higher than a tv prog, I would suggest.)
    I self-published my own first paper book. I’m now considering self-publishing a couple of e-books. Any views, anyone?

  14. bookateur

    James McQuivey’s recommendations toward the end of his piece merit some serious consideration by the publishing community, provided you can make past the condescension and over-simplification that precede them. But that is the customary pose these days, the blogosphere equivalent of playing to the gallery. (The comparison of “book types” to alcoholics may take the 2009 Most Felicitious Speech Award.)

    The idea of bundling ebook and hardcovers as a way to preserve simultaneous publication has real merit. Our own research at Verso Digital, a vertical ad network catering to the book publishing industry, indicates that 27% of book readers are prepared to pay a modest premium over standard hardcover prices for such a feature. The notion of adding digital-content enhancements, exclusive to the e-book edition, currently is receiving careful consideration by some of the same publishers who announced their delayed e-book policy. There is an industry-wide opportunity here.

    It is important to note that Hachette, S&S and now HarperCollins are most concerned about cannibalizing initial sales of their lead titles–bestselling franchise authors or those with breakout potential. Why? The first reason is financial. The costs of hardcover publishing are heavily front-loaded, everthing from author advances, editorial and marketing overhead, to operational and administrative infrastructure. All these costs are incurred before the first paper edition is bound, or ebook downloaded. For an industry that survives on razor thin margins and single-digit ROI in the best of times, those relatively richer hardcover unit contributions are critical to a quicker recoupment of those expenditures.

    The second reason has to do with the peculiar structures and traditions (heaven forbid!) of the publishing world. Ebook sales do not currently count toward the national bestseller lists. The ebook marketplace is just too fragmented, or secretive (read Amazon) to allow for reliable data collection at this time. This is a critical deficiency. What drives hardcover bestseller performance is sales velocity, units sold per week. Anything that potentially cannibalizes those unit sales, even ebook sales at 2-5% of the total, can dramatically alter a title’s ranking on the lists. Bestseller status conveys all kinds of tangible benefits (in-store discounting and enhanced shelf space, added promotional investment by the publisher, etc.) that accrue not only to the current title, but to subsequent books by the same author. These are deeply practical concerns and publishers are not behaving illogically, or imprudently in this respect.

    Publishers are struggling mightily to integrate ebooks into the publishing ecosystem, a world that continues to be full of nuance and complexity, and where even the most innocent-looking creatures may turn parasitical if one lets his guard down.