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Bruce Chrumka
Posted on Friday, May 07, 2004 - 10:26 am:   

Hi Bob,

I've a couple of questions concerning some financial aspects of publishing in the Internet age.

1) Amazon adopts a Wal-martian type of discount marketing scheme as is well known. Living in Canada, the purchase of a book from Amazon tends to be quite a bit cheaper than ordering from the publisher directly though not for e-publications which remain at par. Can you enlighten me whether the publisher necessarily must discount sales made through Amazon (as I suspect) and despite this, is the inventory clearing still beneficial to the publisher albeit at a smaller margin?

2) I tend to purchase books from small publishers as well as encouraging our public library to score a few copies of the same title, and they're pretty good about it, usually picking up at least three copies of recommendations they deem suitable. Would the small publishers discount the total price on multiple copies of a title dispatched to public libraries? Is this a practice they would (in general) encourage to clear inventory?

Thanks, Bruce
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Bob K.
Posted on Friday, May 07, 2004 - 11:06 am:   

1. Amazon pulls from Lightning Source as their eBook distributor. Lightning Source insists on 45-50% wholesale; they get a distribution/digital rights management (drm) fee out of the remaining 55% and the rest of the purchase goes to Amazon. Amazon's margin is 20-35% depending on discounts. Amazon is a high-profile market, so it's important to have a presence there. Their terms are pretty standard for the industry, which stinks, because they're also standard terms for print publishing, and the economies of distribution are way different between the two. Publishing of any kind is set up to put the hurt on the small players. Consider the ISBN monopoly. To purchase a hundred ISBNs now, it's $800; to purchase 500, $1200; to purchase several thousand, not much more. The per-title cost is negligible for a big publisher, and painful for a small one. I covered some of this in a thread in Lucius' board. Anyway, buy direct from the publisher when you can.

2. In eBooks, libraries must be served through a DRM-enabled distributor to enable the lending features (the borrower's key expires after a set time and the book becomes inactive). Most libraries are served through Content Reserve, which has just instituted terms that effectively shut out small publishers. I don't know how library distribution works in print; I used to know when I worked for a small press, but I've forgotten.

DRM has proven to be a big pain in the ass that serves only blockbuster authors and huge corporations. eBook customers don't like it because it limits how they can use their books and occasionally shuts them out of their books entirely. Small publishers don't like it because it's become a mechanism for the big distributors to maintain and extend their monopoly; they make all the money for a tiny fraction of the effort that the publishers put in. Midlist authors shouldn't like it because 1) they make about 1/5th of the money from encrypted vs. nonencrypted books 2) the fees imposed to implement it eventually exceed sales and they get forced "out of print" in eBooks! So much for the dream of an egalitarian electronic publishing world.

Hope that helps and thanks for the question.

Best,
Bob


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Bruce
Posted on Friday, May 07, 2004 - 02:24 pm:   

Thanks Bob! Your message serves to underline what the standard reader, like me, doesn't know about the publishing business which is a lot. I think Jeff Bezos is plenty rich enough.

Cheers, Bruce
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Bob K.
Posted on Friday, October 01, 2004 - 02:59 pm:   

I just reread my post here, and I forgot to mention Mobipocket. So far, they're the good guys among DRM distributors; their margins are small, their drm is forgiving, and their format is cross-platform, which is why we'll be selling their books when we open our new site in two weeks (Oct. 18 is the day we're shooting for).

Bob

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