the nameless horror

Amazon.com, for all its glory, is one of the least transparent companies in the market. Shareholders aren’t even entitled to know how much stuff it sells, namely they have no clue, from the company, as to how many Kindle eReaders and Kindle fires are sold. Sure enough, the company quite often repeats that these are the products that sell the most; that they are seeing growth; that - and this is said often - they like what they see. But no concrete numbers are put forward, and at times there are pretty obvious clues that the truth is very far from the optimism expressed by management. This is one of those times.

To put it short. The Kindle eReader has dropped out of bed. It has fallen beyond the wildest dreams of Amazon.com’s management. They never told it to the market, but this is reality. I have proof, and the proof is undeniable. The drop in Kindle eReader sales came with the introduction of the Kindle fire, and the cannibalization has been nothing short of stunning, massive.

Via @david_hewson (and I know, before we start, that my views and David’s are very different on the subject, but that’s totally cool), we have a Bookseller piece in which the Publishers Association - an organisation surely in need of an apostrophe - calls for the fight against piracy to be escalated and for “authors to press the case against copyright theft”.

Incoming PA president Little, Brown chief executive Ursula Mackenzie said the PA needed to “ramp up” the fight against piracy “or to give it another name, theft”, and use authors to explain to consumers the amount of work that goes into the creation of published books.

Let’s dismantle this a little. The PA spent £196k on “anti-piracy measures” in 2011 - which may or may not be lobbying expenses and legal fees (DRM charges would be per-publisher, not for the association) - and recently welcomed the wholly empty ISP blocking of the Pirate Bay.

No surprise, then, that the incoming president trots out the old “piracy is theft” line. It’s not, and let’s be clear about that. If someone puts a copy of one of my books up for torrenting (or on Scribd or on Usenet) - and please, someone do; it’ll mean they’re being read - they haven’t deleted the original from existence, preventing it from being bought and enjoyed by other users. This is unauthorised copying. It’s a rights breach. It’s not stealing. It might impact my income (though that’s debatable, as we’ll see), but it doesn’t directly take money from my pocket and prevent me earning more through the sale of goods. It doesn’t even come close.

It also, crucially, doesn’t force anyone else to download that book. This isn’t the Napster era and there can’t be anyone alive in the developed world who isn’t aware that torrenting such a file is piracy. If they choose to do it, they know very well what they’re doing. Sure, they may justify it to themselves because the owner of the rights makes ridiculous money off them, or because the legitimate price is too high, or because they’re “trying before buying”, or because it’s a way of striking back against censorship of the internet.

But it’s their choice. Their responsibility. This is a crucial point, I feel, not only in piracy discussion but also in so many other areas where extra legislation and court mandates rule. Banning “happy hour” promotions in pubs, for instance, may make it more expensive for youngsters to drink themselves into violent, puking oblivion, but only enabling or educating those same youngsters to recognise that seeking said oblivion every Friday night might make you a bit of a twat, and making twat-free alternatives viable, is ultimately the only thing that’ll stop it. (I learned by doing, as many of us do.) Personal responsibility, no?

And if you then say, “But most people can’t be expected to do the right thing, not even most of the time” then you’re basically giving up on society and you should probably go and live in a cave somewhere. Some people will always be twats, and some people will always pirate everything they consume, but the trick is to ensure these remain a comparatively harmless minority.

Aside over - though we’ll touch on this later. Roll on.

The piracy argument is laced with assumption and very dodgy statistics, the former on both sides and the latter predominantly on the side of the “copying is theft” crowd. For example, in 2010 “copyright protection company” Attributor released a widely-publicised ‘study’ claiming that ebook piracy in the US “cost” nearly $3bn, with an average of 13,000 illegal downloads per book. (They assume $10 average sales price, so some elementary maths tells you that we’re dealing with 21,538 titles.)

$3bn. Wow. A lot of cash.

(If you don’t want to bother seeing how maths destroys this type of estimate, skip the bit between the horizontals.)

$3bn is a lot especially when you realise that the actual ebook market in 2010 was $900m globally, ~$750m in the US. That’s an 80% piracy rate. Endemic. And the result of all this terrible piracy? The ebook market grew by over 200% in 2010, and continued to explode afterwards, even though piracy hasn’t become any harder between then and now (despite court cases and blocks, the closure of MegaUpload et al., file-sharing sites continue to proliferate like mushrooms and blocks are trivially easy to circumvent; while, conveniently, often making it impossible to identify the user doing the pirating). DAMN YOU, PIRATES! We’d have sold $10bn worth of books in the US in 2011 if it hadn’t been for your horrible ways.

Of course, Amazon has a 90-60% market share. In 2011, sensible vague customer estimates (since Amazon rarely release actual figures) would put Kindle sales for the same year at 10-12 million units, plus iPad (40 million in 2011, but not everyone uses the Kindle app) and, to a much lesser extent, phone users, minus those upgrading from one Kindle to another, or buying as a present for Christmas (4 million of those Kindles were sold in Q4) as they’d make few book purchases in 2011, and minus those iPad/phone types who also own Kindles, which for gadget heads is quite a lot. Let’s call that an assumed buyer base of around 25 million on a market of US$7.5bn.

If piracy equates to lost sales, and the piracy rate estimates were accurate, each user would actually want to be buying $300 worth of books per year from Amazon. Since average bestseller prices are no longer the $10 assumed in 2010 but are probably more like $5, that’s 60 books, or 1.2 books per week for the average reader.

But wait! 35% of ebook buyers account for 48% of market spending. That’s 8.75m users spending $3.6bn, or $411 per year each, or ~82 books per year, 1.5 per week, every week, all year-round. The other 16.25m users spend $3.9bn, $240 each, 48 books, or still just under a book per week. Every week. For a year. If they only buy from Amazon and don’t also purchase print books or, for those not on Kindle, books from other sources.

Multiplying up for all those $0.99 ebooks and adding in all the freebies Amazon and others offer and ohholyfuckingshit you guys with Kindles must be reading all the time, even if 80% of what you’re reading is pirated.

Or maybe the pirated books aren’t read on Kindles because pirates can’t be arsed with USBing files across, in which case the potential userbase rises and pirates would only likely have to read one book every couple of weeks. Still: voracious, voracious readers those pirates.

Skipping past all the maths and the assumptions and the rest, piracy estimates this high suggest that without piracy, the ebook market would have (easily, depending on whose figures you believe) eclipsed the print market in dollar terms last year. Despite having an actual market base that’s much smaller in terms of people with ereaders vs. those who rely on print.

Clearly, high percentage estimates are woefully inaccurate, as you’d expect for figures put out by people who make their money “fighting piracy”.

Going lower, the Fail suggests - unattributed - that 20% of ebooks are pirated.

This number, though seemingly plucked from the Mail’s arse, can only be more accurate, but ultimately, does this even matter? (Especially when if we’re talking 2011 figures, 20% piracy applies to 20% of the market, or 4% of overall sales. And especially when there is equally vague counter-evidence that heavy pirate consumers of media tend to be higher than average paid consumers of that same media. And before you scoff that that idea, bear in mind that despite “rampant” ebook piracy, the US market alone - others are coming from further back and growing faster - rose $600m in 2010 and $900m in 2011.)

There’s an assumption in talking figures that pirate downloads = lost sales. This is utter presumptive trash and has been dismantled at length in many better places than here. Some of those downloads equate to sales that might have been made, but every single straw poll conducted of people who routinely download stuff suggests they do so because (a) they believe they’re entitled to free stuff because it’s on the internet innit, or (b) the legitimate price is outside what they’re willing to pay, or (c) they’re not sure they’d like it anyway and don’t want to risk the cash and/or have never heard of whoever or whatever it is and want to have a look-see at it, or (d) whatever it is isn’t available legitimately where they are. (With the optional - there’d be a lot of overlap with the others - addition of a smaller fifth category, (e), who are sick of being treated like fucking criminals - via DRM, those “YOU WOULDN’T STEAL A CAR” ads, etc. - by content producers when they do legitimately purchase something when, famously, the pirated version usually strips all that garbage out.)

(A rejoinder to those ads and similar measures, incidentally, is that they’re like running a supermarket where you follow every customer around. Every time someone picks something up from a shelf and puts it in their basket you yell: “DON’T STEAL THAT! I’M WATCHING YOU! NO STEALING!” And, in DRM terms, then refusing to allow them to cook anything with those ingredients if the meal also involves food bought from somewhere else.)

Of those, only (a) are likely to include a significant number of lost sales. (b) can’t afford them, (c) wouldn’t take the risk on an unknown and (d) can’t buy. Note also that a person can be any combination of those four or five categories at various different times.

(a) are mostly children of the post-Napster internet generation. Which also means that they’re capable of using a search engine. Which means that they are capable of bypassing any IP block or user address log, attempt to chase one download provider offline (since another always crops up), and find DRM-cracked versions of whatever you’re selling. And the more you try to stop them, the more of a game you make of getting round it. Trying to stop these people pirating your stuff is akin to stopping people taking drugs by making them illegal. They don’t, frankly, give enough of a shit to care.

Most of the time.

This here is where our responsibility and education kick makes its return. There’s an assumed entitlement among some internet users - the (a) types, mostly - that because information should be free, so should any and all data and content. We already know how widespread the assumption of the cheap production value of an ebook versus a print book is, and how inaccurate it is. When people can see how great the human effort, time and passion put into a digital product is, they are more than willing, if they like what you’re doing, to throw money at it. If you don’t believe me, I suggest you never, ever visit Kickstarter because it’ll blow your mind.

Professional authors, by and large, do a good job of this. We blog, tweet, write at great length about the time and effort that goes into what we do. But we’re hampered because a lot of other authors do it for nothing (or at least nothing more than a hope and a dream). The difference between both types and what they do is very small if anything; after all, we were all unpaid and unpublished once. The difference is the input from publishers, and publishers don’t, to my mind, do anything like as good a job of explaining their part of the process. A handful of editors and PR people tweet, a smaller handful blog, but there’s a distinct corporate whiff about a lot of it - how often do you see your publicist enthusing about a book from a different publisher they’ve read and loved? - and it does little to explain the chain in human terms.

My last book, for instance, had one writer (yo!), one editor to fix it, one PA to that editor to handle a lot of the chatter between me and her, one freelance copy-editor, four professional proofreaders, one graphic designer, an unknown number of typesetters and layout and formatting cleverpeople, an unknown number of printers for the hardcopy version, and a further unknown number of other people who handled it from one part of the chain to the other, and one publicist to help sell it. Some of these people probably didn’t know much, if anything, about my book specifically, but some/many/all of them love writing, love books, and are both passionate about what they do, what they give to the reader, and also rely on that passion to continue to eat and pay the bills. But, with some exceptions, publishers rarely push that to the fore and humanise the job they do. They present as a brand, a corporate entity, and frankly, who gives two shits about one of those? I wonder how much education for our category (a) types in this regard £196,000 per year would buy you.

The answer to piracy beyond education is simple in my opinion. I’m going to borrow a quote from Jonathan Coulton, though I’m tempted just to mass paste half that entire blog post because it makes a massive amount of sense. It’s this:

Make good stuff, then make it easy for people to buy it. There’s your anti-piracy plan.

While (a) needs reminding that the makers of stuff are people too, and that either will or won’t work on them, (b) can’t afford it (easily), (c) isn’t sure they’d like it, and (d) can’t get it. You make your stuff affordable, make it readily and easily sample-able, and you make it available as widely as possible (and then don’t complain when people outside the catchment area you’ve given it acquire it illegally), and you sweep away a lot of the reasons for people to yoink stuff off the net.

Stop treating your regular customers like criminals - and doing that is a lousy incentive to bring people back into the legitimate fold, let me tell you - and making bullshit statements in support of easily-circumvented blanket legal measures which only make the tech-savvy types they’re targeted against more determined to give you the finger. Acting like your readers are hiring your books, not owning them, makes you - as a publisher, or a distributor - look like a tool.

For comparison, I downloaded a non-fiction tech guide from O’Reilly (OREILLY? YA REILLY! oh ho ho) a week or so ago. (For free, in this case.) As with all their books, I can download it in a bunch of different formats, as much (IIRC) as I like, and swap it between devices however I fancy. It’s also had an update and I’ve been emailed to say if I want to read the amended version I can download it again. Go me! (I’ve not actually done it because it’s too much hassle for my purposes and I’m not too worried by whatever changes there are; but it’s nice to know the service exists.) While I was aware of O’Reilly before this is the first time I’ve downloaded something from them, but I would happily do so - and pay for whatever it was - again in future because, hey, that’s good.

Let’s borrow from another ebook piracy post with a better title than this one that’s also worth reading:

Let’s talk about video games for a minute. In the last decade or so, game industry giants have implemented increasingly ridiculous DRMs to protect against piracy. This, of course, doesn’t work even if the DRM in question is a good bit harder to crack than the pathetic worthless shit that comes with ebooks (so you can imagine just how effective ebook DRM is, which is not at all: the average end-user can remove it without hassle). There are times when the DRM becomes so ridiculous that a game may be boycotted. EA and Ubisoft are especially notorious for this.

EA and Ubisoft have both removed DRM from some of their games. Why? Because, unlike the publishing industry–which appears to be populated mostly by tech-illiterate fact-phobic baboons (who often can’t even keep their ebooks free of formatting and typographical errors)–they realize the crucial, simple fact that they need their customers more than their customers need them. They need the goodwill of gamers. No matter how high-budget and hyped your AAA blockbuster title is, there will be other high-budget AAA titles… or even lower-profile but polished indie titles. Or free-to-play MMOs. Gamers are spoiled for choice and much of the mainstream stuff is fairly interchangeable, in much the same way that Voinov’s output is interchangeable with other sweaty sagas of identikit men who rape other men into true love, and likewise with all the paranormal romance, all the Dan Brown-esque “thrillers”, all the gritty grimdark fantasy. Readers have options. Writers are nothing if not disposable. Stop writing and only a handful of hardcore fans will give a shit. The rest of the world will move on to whatever it is that they want to read. There are so very many books released every month, a great deal more than games.

We are not, as writers, and consequently as publishers, entitled to earn money for what we do, any more than anyone else, especially in arty fields where worth is measured not in terms of raw materials and necessity (because in arty fields, necessity hovers around zero) but in terms of enjoyment. We’d like to, and I sure hope I can continue to do so myself, but the world doesn’t owe me or you or anyone else in publishing just because. It so happens we do pay, traditionally, but traditions change and tradition is a lousy argument for the retention of any practice. But while we’re certainly not entitled to reward, we can do what we can to make those who like what we do feel like we’ve earned that reward.

And that starts, not in the courts, but by not treating the very people you want to like you as though they’re crooks or cattle.

If you ask legacy publishing’s defenders, “Which is the monopoly: the entity that charges high prices and pays low royalties, or the entity that charges low prices and pays high royalties?”, you’ll be told by those defenders (tortured logic to follow) that of course it’s the latter.

Further to the last, Barry Eisler continues to give Amazon a reach-around with a succession of bizarre leaps of logic.

The answer to the above question, incidentally, is “neither option is relevant to the first part of the question”. It’s like asking “which is the monopoly: the company whose boss drives a blue car, or the one whose boss drives a red car?”

The correct answer is, of course, the one which is the only supplier (or, stretching the strict definition for practical reasons) more or less the only supplier, of a particular commodity. Which in this case is ebooks, and if Amazon regains the market share lost when Apple offered a sweeter deal to publishers, it’ll almost certainly be them.

In the meantime, the publishing establishment wants you to believe that in order to prevent Amazon from possibly one day charging higher book prices, the establishment has to charge you higher prices today.

No, the publishing establishment wants you to believe that in order to prevent Amazon from possibly one day paying its suppliers less to keep prices low with the risk of putting those suppliers - the publishers - out of business, the establishment has to try to stop the slide to bargain basement price demands and deals based thereon (though as the maths I did the other day suggest, they have more room for wiggle than they sometimes let on).

Amazon, as Charlie Stross correctly points out, is also on its way to being a monopsony, exactly like Tesco (and the other top few supermarkets) as Nick Harkaway says.

Whether Amazon’s monopoly or near-monopoly and monopsony position, should it regain it (and eyeing the DOJ lawsuit and grumblings in the EU it seems quite possible they will) will lead to exactly the sort of supplier-squeezing fuck-you demands supermarkets routinely make “because people expect low prices” is a matter of opinion and conjecture, and Barry’s entitled to that as much as the next person. He’s right that publishing has been, and largely continues to be, slow to innovate. Right, too, that DRM is bad - though as Stross points out, Amazon has been by far the biggest winner on that score - and right that industries change over time.

But he’s wrong to couch arguments in terms of the money paid for or from ebooks, with Amazon existing as a glimmering beacon of hope in an expensive, poorly-paid authorial wilderness, with everyone else the grasping, greedy claws of the grey-suited “establishment”, because even ignoring the fact that he - and plenty of others who’ve done very well out of Amazon - have become shiny-eyed evangelical mouthpieces for the Great New Way and the language reflects that, those terms are often irrelevant (unless you’re asking “who will currently pay you the most royalties and generally charge the lowest prices (if you accept their weird-ass contract)?” in which case, rock on).

Amazon’s undoing, or the source for most competition, might prove for instance to be its own KDP offerings. To borrow from Stross’s remarks to Macmillan on DRM, “Amazon’s inclusion of masses of self-published material in the Kindle store has made it impossible for heavy consumers to browse it effectively.”

And that lack, just as everything else - monopoly position, author squeeze, more books, fewer books, etc. - could or could not happen regardless of which company pays the most and charges least, or which one sprays liquid customer service from every golden orifice, or which one tickles your private bits with a delicate feather while you shop.

The most thunderous argument in Amazon’s favour is that the market has spoken, and demands cheaper product. This one I find utterly bizarre. We know very well, in this post-crash age, that the market can be an idiot.

Dear @Natwest_Help -

Your bank has a system whereby if post sent to an account’s address is returned for any reason, a “return to branch” marker is put on it and no more post is sent. This is very sensible. Kudos!

What is not sensible is:

• No message is sent to the account holder - bearing in mind you have my two phone numbers and my email address so it shouldn’t be bloody hard - to inform them that it’s happened. (Hell, you could write to the blocked address saying “if you are the account holder and this has happened in error then please…” without breaching security since in order to get the marker removed you need to go to the branch in person, with photo ID, your card and PIN etc., to have the marker removed.) This is insane.

• Calling it a “return to branch” marker when as far as I can tell, post isn’t then stored at the branch to be reclaimed when the account holder uses their psychic powers to realise what has happened and comes to have it put back to normal. Instead, everything needs to be sent again. Which if the reason you realised something was up because you had reached the end of a chequebook with no auto-mailed replacement arriving and you have wedding stuff to pay for, and because your bank card expires in a fortnight and shouldn’t the replacement have arrived by now, is a real pain in the arse.

• … particularly when, as now, you discover that what the computer system in branch told the CSA when you wanted to double check everything would be arriving (“No, the most recent card we have listed is the one that’s going to expire, so there should be no problem. Contact us if it’s not arrived by the 25th so it can still arrive by the month’s end if there’s an issue.”) is completely different to what the computer system for the helpline then says when you call because it has yet again failed to appear (“One was sent on the 10th. Oh, and it says here it’s been activated.” - cue lots of hunting through transactions since then to check no one’s spending my cash). (There is, as yet, still no sign of that chequebook either.)

• Requiring the account holder to use photo ID in addition to card and PIN to remove the marker to have stuff sent to the account address again (note that this wasn’t a change of address; the listed one was correct and I haven’t moved in a good while) when, if I were a thief with just the card and PIN, and a couple of weeks left in the month to do it, I could empty the account of all its contents. This is total security theatre. Speaking as an account holder - one who thought “nah, why would they need that when I’m not trying to change any details?” and consequently had a self-imposed walk in the rain for nothing - the ‘cleaning out my account’ effect is a lot more serious to me than the ‘having post sent to an address on file a thief might have access to’ effect, since the first renders the second void.

• Not informing the account holder when post is stopped. I know it was the first one on the list, but this is so mind-blowingly stupid I felt it needed mentioning again. Your customers are not telepathic. At least post a message after login to your online system; that would work nicely. Send a carrier pigeon. A cryptic series of puzzles, each more fiendish than the last. Anything.

Yours, etc. etc.

Me.

Update: 26/4: The phone CSA didn’t just cancel the missing and apparently activated bank card (if she did), but also the soon-to-be-expired one that I do still have. The only way I can now access the account is to walk into town carrying a hundred forms of ID and a pint of my blood in order to carry vast amounts of cash around on my person. Or else abandon the idea entirely and switch to a barter economy and give people turnips in exchange for goods. I’ll need to grow the turnips first, but that should be a quicker process than waiting for the bank to fix things.

Copying this from @LucaVeste’s Facebook stream, because the typing was lengthy and the numbers interesting. This article suggesting that, for a publisher, an ebook is only ~10% less expensive to produce than a print book has been doing the rounds. You might be forgiven for thinking that this means the sale price of each should only be 10% (or less) different to make the same profits for all concerned, but this isn’t - I think - the case.

Disclaimer: Some 14 years ago, I worked at Gardners Books, the UK’s biggest book wholesalers, doing goods-in in their warehouse, and my wholesale price mark up numbers are based on what they used to be then. As far as I know they haven’t changed, but just so’s you know. (There’s a further disclaimer about publishers doing their own distribution way down at the bottom, along with the likely effect this has on the numbers.) Obviously, I also earn a living writing.

The point to remember when reading this article is this: publishers don’t get 100% of the sale price you and I pay for print books, and 10% less doesn’t mean a 10% RRP drop.

A £10 print book needing to pay off £100k in production costs will probably need to sell not 10,000 copies but somewhere between 20,000 and 27,000 (ish) copies as wholesalers pay publishers 35%-50% of the cover price on average per book, and though some publishers sell direct presumably to avoid this AFAIK the old way is still mostly how it’s done. Of a £7 mass market paperback, the publisher therefore gets £2.50-£3.50. Let’s assume they price to make a small profit on each sale because they’d be in deep financial schtuck if they didn’t, and assume that, at the high print run, mass sale, cheap deal end, a book costs £2 to make all told (even allowing for royalties being based as I recall on sale price, not wholesale price).

In addition to the print and distribution costs, they also need to factor for returns and pulping because of the deeply strange way books are sold, and I don’t know if that’s included in the 10% figure, but let’s run with it. To get the same profit then from an ebook they’d need to sell it to wholesale (Amazon, who I would imagine demand wholesale-equivalent percent-of-RRP since they do with everything else) at £1.80, and then factor their profit margin per unit, for a total £2.30 price sold to wholesale. At “30% of sale price is profit for someone” (depending on how much of a take Amazon wants to make; for agency books it’s set obviously) that’s a £3.30(ish) ebook for you, the consumer, as compared to a £7 mass paperback, or a slightly more expensive (£4-4.50) ebook that wasn’t likely to sell as many (possibly then plus a VAT extra, 20% of price to wholesaler; Amazon’s in Luxembourg and I can’t remember how VAT translates for export) .

The “10% cheaper” thing initially seemed like a £7 book would be £6.30 in digital, but that ignores the usual supply chain mechanics. The actual sale price would be half that of the print version for the publisher to come out the same.

(Of course, Amazon doesn’t need to make the same profit or markup on its ebooks as compared to its physical ones (even though it no longer tries to stock everything in-house) since their wholesaling overheads on digital books amount merely to server space and tech support spread across the hundreds of thousands of ebooks they store, so for any given book, functionally zero cost. They can, with non-agency deals, discount more heavily (comparably) than they can on physical books, driving the (comparable) price downwards if they so want. No doubt then leading to attempts to gouge that £2.30 that goes to publishers. (And boosted by extra income they get for co-op promotional shite and all the other buggering around that publishers have to pay for.))

Now the second disclaimer: We’re assuming my maths is correct and the state of distribution is roughly what it was (Gardners was putting its second warehouse floor on when I worked there 14 years ago; they now cover half an entire industrial estate complete with airport-style skyway with book conveyor belt over a dual carriageway, so I assume they’re not about to go bust unless as a result of burgeoning ebook sales - I could easily be wrong though).

I know that one of my publishers used, or partially used, their own distribution system to sell to stores - because it broke a couple of months before I had a book coming out and one of their other authors threatened them with legal action for lost income (I’m guessing Penguin, therefore; everything went wrong there) - but if there’s still a wholesale trade in play, that’s the mark up, and that mark up goes when you switch to digital. Considering that warehousing and customer order-filling is quite labour intensive, I wouldn’t be too surprised if those publishers who do do their own distribution wouldn’t have similar costs (say another couple of quid a book) because while Gardners have done very well for themselves out of it - largely in the early days by massively exploiting their workforce, true - I can’t imagine it’s a hugely profitable business overall on an individual per-book-sold level, so costs for (say) Penguin would be about the same - less complex throughput but much more stock warehousing.

Edit 19/5 @ 10am: On Facebook, Vincent points out that price can vary enormously according to expected sales because even at reduced earnings, publishers can still make their money back, and also points out the infinite shelf life of ebooks. Both are true.

That said, the first is true (to the extent of a publisher’s cash reserves being able to support it in the meantime) in print as well, and the second is sort of true in so much as in print the vast majority of a book’s sales - barring an unlikely lucky boost from some outside source (a movie gets made, a following develops somewhere else that then feeds back into an originally nothing-doing territory a la Dan Brown, etc.) - happen in the first month to six weeks or so. This is when discovery is at its highest, in stores, from reviews, from advertising, and after the initial surge it drops away quite sharply. While digital doesn’t have quite the same “front of store table display vs. back of store on a shelf” eyeball-attracting variance, the same ‘co-op’ promotional tactics are employed - and paid for by publishers - and I would be hugely surprise if there wasn’t a similar curve to commercial ebook sales. (Not so much perhaps with self-published books in the early days, where the slow clawing-out of a market niche I imagine has, if anything, the reverse.)

The following is hopelessly simplistic (it ignores hardback for a start) as there are many, many differences between the different revenue and cost streams for publishers, but for our purposes, hey…

If a book costs £100,000 to make, edit, print, etc., and anything (minus percentages to third parties) beyond that is profit, and a publisher expects to make £2.00 back per unit in terms of covering their costs, they’re expecting (presumably) to sell 50,000 copies. They crunch some numbers and (I assume) figure they can still get those sales with 50p profit for them thrown in, and thus negotiate to sell to wholesale at £2.50 per unit. The book sells as planned (ha!), some on the longer tail, most in the first six weeks, and earns the publisher £125,000.

There is nothing at all to stop them thinking they can sell not 50,000 print copies @ £2.50 but 500,000 copies @ £0.25. Their total earnings are the same. This applies in print just as it does in digital.

In practice, they don’t; if that book shifts 500,000 copies and earns them a big, fat profit, that profit in part pays for the many other books they print which don’t earn back. There’s an old saw about the movie business that only 1/10 (someone correct me if I’m wrong and it’s 1/100) films earns money for the makers, so they need a few big, reliable blockbusters, as well as the by-luck surprise hits, to cover all the costs of the other things they make. But if they don’t make the other films, they’ll miss out on the 1/10, some of which can be very big indeed, and one flop can ruin them. Book publishing’s not quite as mental as the movie business but I wouldn’t be too surprised if the ratio of profitable:not was similar.

And while they can bank on an infinite shelf life, they can’t put their earning-out point too far down the road because they have ongoing costs and if they don’t continue to meet them they could go out of business before they hit that point. I don’t know where it gets set (and again, hardback income throws our basic little model for a loop anyway), but it won’t be and can’t be very far ahead.

While the price-per-unit could vary a lot according to expected sales, in the old days at least the percentage-of-RRP terms they’d offer to wholesale varied mostly (but not exclusively) between 35% (more niche commercial titles) and 65% (for really big numbers stuff). Assuming those numbers are the same, and I’d be surprised if they’ve changed much, it seems that however they do their maths, a publisher wants to get back ~£2.00-2.50 per successful book, more for smaller ones, in order to feel happy. That’s why I based my figures on that as a “cost”.

Assumptions, assumptions. As they say in Monty Python & The Holy Grail, it’s only a model.

While we’re talking Amazon, and while Apple and publishers are locked in somewhat ludicrous court battle over agency pricing and collusion (as if they needed to collude to agree that Apple’s long-standing standard practice was more attractive than Amazon’s shit-on-a-stick; that’s another argument for another day), let’s get legal for a moment.

This isn’t going to turn into an Apple vs. Amazon post - really - but I need to mention this for context. A while ago, when iBooks Author was released, half the internet briefly took up arms against perceived wrongs in the iBooks licensing agreement, believing, wrongly, that it enforced a single-point-of-sale rule on books listed through iBooks. Apple quickly amended the license to emphasise that the restriction applied only to .ibooks files created with iBA, and the controversy died.

But what of Amazon’s license agreement for Kindle Direct Publishing? There certainly hasn’t been the same level of uproar over it - indeed, most KDP authors seem happy with their terms. Odd, this, because it’s a very strange beast.

Most of us know about the “Matching Competitor Prices” rule in the KDP pricing terms. The rule has changed somewhat over the past year; it used to be a rule in the license itself that you guaranteed not to list something for sale cheaper anywhere else, and if Amazon found you had they could drop the price to beat it.

(As per this similar dissection of the agreement, the old version of Section 4 was:

You must set your Digital Book’s List Price (and change it from time-to-time if necessary) so that it is no higher than the list price in any sales channel for any digital or physical edition of the Digital Book.

But if you choose the 70% Royalty Option, you must further set and adjust your List Price so that it is at least 20% below the list price in any sales channel for any physical edition of the Digital Book.

That clause has since been dropped.)

It all happens now in the new section 5.3.2:

To the extent permissible under applicable local laws, we have sole and complete discretion to set the retail price at which your Digital Books are sold through the Program.

You provide a list price, but if Amazon need to sell cheaper “to match a third party’s sales price for any digital or physical edition of the Digital Book” they can do so. (Whether or not this affects your royalties depends on whether it was a 35% (it doesn’t) or 70% (it does) royalty book.)

So what exactly is a “Digital Book” as defined by this license? Apple very neatly confined their more draconian requirements to the .ibooks file created by their software. Is this something similar? (If you’ve never used KDP, you upload a .mobi or .epub file.) What’s Amazon’s take on this?

Badly defined.

This Agreement is a binding agreement … with respect to your participation in the Program and your distribution of digital content through the Program (all such content, “Digital Books”).

Content. But what, exactly, is the content by which a book is defined? If you sell a short story through Amazon for $0.99 (or for free via Amazon Select), and then include that same story in a collection at a higher price, does this give them leave to match the collection to the lower price? (Not that they need your permission, as the agreement makes clear, but they pay lip service to justifying such decisions in terms of competition with either other parties or other national versions of Amazon.)

(While we’re at it on content, let’s not get into the business of their actual content guidelines, which make the recent Smashwords erotica kerfuffle look tame. (And again I’d point you to the third part of the ePublish a Book article for why it’s especially bad.)

To use an analogy, if you sold a regular, a Blu-Ray, and a collector’s super-special director’s cut special edition of a movie under the same terms, is the content the same? The latter two certainly share elements of the same content, but the Blu-Ray “contains” massively more data (which, if a film is a series of images means a lot more “movie”) and the special edition has all sorts of extra material. In both cases the content of what’s on the disc is very different. Each, one might say, should be a different Digital Book under the license terms. What constitutes an “edition” of content isn’t defined.

(They might argue that both were different editions of the same thing, and with at least some justification - but my point is that the definitions they use are missing or totally inadequate. And open to abuse by Amazon, while if they monkey with your pricing it’s your earnings that take the hit.)

So far, so economics, and maybe I’m making too much of it. It’s not the weirdest part of the agreement, though. That’s this:

7 Confidentiality. You will not, without our express, prior written permission: (a) issue any press release or make any other public disclosures regarding this Agreement or its terms; … [a lot of stuff about Amazon Confidential Information which means, apart from anything else, anyone discussing their sales figures without prior written consent from Amazon is technically in breach of contract] … Without limiting the survivability of any other provision of this Agreement, this Section 7 will survive three (3) years following the termination of this Agreement.

This agreement, as previous linked, is a publicly available document. A publicly available document that its signatories are forbidden from discussing under what is effectively a lengthy NDA or face termination of their account (or, in theory if the expense was justified, legal action) if Amazon object at all because they’re breaching their contract.

(Yo.)

I’ve never had anything like that in a contract I’ve signed with a publisher. There’s no such clause in the contentious iBooks Author license. Quite why it’s in here in the form it is… well, I’m baffled. I’m also completely unable to think of any happy, cuddly reason to have it there in any form at all.

(Bear in mind that this is an agreement which - in theory at least (I doubt it’d survive a court challenge) - can be changed for anything other than rights & royalties at any time, effective immediately, without Amazon needing to notify you directly; the onus is on the user to check the terms haven’t changed, and continual use of the program signifies acceptance of all changes whether you’ve noticed them or not.)

This is the glorious author-friendly, reader-friendly, digital future. Hooray.

By foolishly insisting on DRM, and then selling to Amazon on a wholesale basis, the publishers handed Amazon a monopoly on their customers—and thereby empowered a predatory monopsony.