September 28, 2011
The other day I had a phone conversation with the head of sales for my distributor. As readers of this column know, we had a good lay-down (i.e. sales to wholesalers and retailers), with about half the books going to airport stores. Information on retail sales (sell-through) has just begun to trickle in, and that information is incomplete: BookScan only tracks 70% of bookstore sales, and sell-through data at the airport stores won’t be available to us for several weeks. From what we know at the moment, hardcover sales look modest, but not discouraging, since first-time fiction nearly always requires building from the ground up.
Amazingly, ebook sales data — which you’d think would be instantaneous — take longer than selected hardcover sales data to be delivered. Even Amazon doesn’t report ebook sales right away. Based upon rankings, however, these sales seem commensurate with the hardcover’s so far.
I asked the sales manager how we might goose things and she suggested the dreaded low-priced or free ebook promotion. Why dreaded? “Selling” free ebooks is most effective for authors who have a big backlist; a painless introduction to one book may very well win over paying customers for the other titles. For a first-time author, however, the logic becomes fuzzier. One hopes to put the book in more hands in order to win the elusive word of mouth that all authors crave, but that word may never come.
I only have one book to sell right now, unless you count the short story I recently published only for Kindle (“The Dead Field”). So the free (or cheaper) ebook promotion that I’m contemplating may not work. We’ll decide soon whether to pull that trigger, but the mere thought of it carries my mind to a challenge all authors face today: the problem of cannibalization.
Out Come the Long Knives
Authors make noises about comity and fellowship, and you’ll see plenty of kissy-kissy at the average writers’ conference. But out in the marketplace, competition in fact is less than friendly. Oh, you won’t hear authors trashing one another very frequently, but when it comes to pricing, the long knives are out and everyone had better watch their backs.
The term “predatory pricing” wasn’t coined to explain the ebook marketplace, but that blood on the floor isn’t only in the pages of your favorite murder-mystery. Thus does the proliferation of free and cheap ebooks bring to mind what Benjamin Franklin said during the signing of the Declaration of Independence: “We must all hang together, or most assuredly we shall all hang separately.” Sadly, authors and publishers are heading down the latter path.
Every time we turn around, it seems that someone is trying to invent new ways of book distribution that destroy the economic proposition of authors and publishers; or arguing that ebooks should sell for next to nothing; or “selling” books literally for nothing; or enabling books to be lent out more easily for nothing; or flat out giving paper books away in order to promote them.
There is a school of thought that argues this pellmell race to the bottom benefits authors in some greater way. Part of this argument rests upon the idea that if enough people read your book and like it — even if they acquired it for free — they’ll spread the word to those who will step up and pay for it. Another aspect of this argument encourages the notion that giving books away is the cost of creating fame that can then be leveraged into money some other way (speaking fees?) for the newly famous author.
Although these arguments hold some truth, I fear that the benefits of FREE are grossly overstated. When a few people are doing certain things, they can be worthwhile. But when everyone’s doing them, you can easily set yourself on a path that ends in self-destruction.
The beggar-thy-neighbor policy we too often see today in book pricing strikes me as an application of Gresham’s Law: bad money drives out good. I don’t make this assertion as a judgment of writing quality, by the way. For “bad” in Gresham’s Law read “cheap.”
Leisure time might not exactly be a zero-sum game (we can probably create a little more now and then), but it’s damn close to one. There are now so many opportunities to read for free that a prospective book customer could troll from January 1 to December 31 without laying out a plug nickel in support of the writing business. Thus do free books drive out those that cost. Tell me: how is this good for anyone but unrepentant cheapskates?
Yet, shockingly, we regularly hear new ideas that threaten to create even more value destruction in the book business. Here are a few (new and old) that illustrate the trouble with free or near-free:
We learn that Amazon is exploring ways to offer a book “renting” service, a la Netflix streaming, whereby for a single fee one could perhaps download unlimited numbers of ebooks. GalleyCat notes that publishers “are concerned that participating in the program could create the impression among consumers that books have little inherent real value.”
Well, how could such a structure not create that impression? Imagine that for a relatively modest fee — say, two hundred dollars — I could march into any Broadway theater and take a seat any time I want and as frequently as I want. (Let’s ignore the fact, for the moment, that theater seats are finite and ebook copies are infinite.) Although the fee is twice the cost of a Broadway ticket, heavy users would quickly drive the value (fee divided by number of visits) way below its current price.
If something like an eighty-twenty rule applies to book readers (and it probably does — the majority of books are likely purchased by a minority of all book buyers), then a relative few readers would find a windfall in this model while conventional sales of books and ebooks would plummet into the abyss. At that point, authors who are now fighting over thin slices of pie could find themselves competing for crumbs.
In another post I explored the argument some make that ebooks should sell very cheaply. The analogy I used was cheese, where the cost of ingredients is an extremely small portion of the cost of the final product (not to mention a small part of the experience of eating the cheese). In that post, I further argued that publishers and authors must get away from allowing people to believe that the cost of cheese lies in its ingredients (milk and rennet) rather than the expertise and time invested in creating the product. Consumers are free to believe what they want to believe, of course. It behooves the industry to establish value in the consumer’s mind.
Unfortunately, publishers have allowed themselves to be worked into a position where ebooks are competing equally with hardcovers and mass-market paperbacks. This has disrupted a training of the consumer to associate a higher price with a more timely purchase. (Pay X if you want to read it when it comes out; pay a fraction of X if you wait until next year.) Once you let this horse out of the barn, closing the gate becomes a waste of energy.
Having made this nearly fatal error, the big publishers, in their defense, are now trying to hold the line on price. Yet they are being undercut daily by wannabe bestsellers who clamber for a seat at the table. In this environment, the Big Six (and well established authors) may resent having to spend money propping up the value of ebooks, an effort from which, if they succeed, every petty little author will also benefit. But they are the only ones with the power to attempt this rectification of the value chain. The longer they wait to get going with a massive campaign to establish the ebook value proposition, the more everyone gets hurt.
‘Selling’ Free Ebooks
We have watched for some time the pricing of ebooks at nothing on Amazon. This is akin to the old loss-leader retail model of giving something away (or nearly so) in order to entice customers through the door. (Amazon itself has done this for years by discounting paper books.)
As I mentioned above, for authors with a big backlist, this can work and has worked as a pain-free introduction to their other works. You like the free book, you buy the backlist. For those with a thin backlist or none at all, however, it represents a devaluation of the product. Worse, it likely cannibalizes the sales of first-time authors or those with a thin backlist. Unless he’s independently wealthy, it’s just about impossible for a seller of anything to compete with FREE.
Sometimes we must accept imperfections to our business model because attempting to overcome them is impractical or cost-prohibitive. Speaking strictly in business terms, one problem of paper books is that they last forever and can be consumed ad infinitum through lending or re-selling.
The reason this is a problem is that the publisher and author see no money directly from the re-sold or lent book. Why we would seek to replicate this situation by allowing ebooks to be lent out is beyond me. Sure, there’s the now-tired argument that these borrowers will get turned on to other books by that author or that the borrowers will themselves turn on other readers. But in reality we don’t know whether a reader who reads for free will recommend the book to others or not. What we can say with near certainty is that the borrower will not go on to purchase that particular book and the author will derive zero income directly from that borrowed copy.
Last year, a friend of mine participated in a group reading at a bar where there was a cover charge for members of the audience. The authors performed without compensation. Some of them donated dozens of books to be handed out to the first hundred or so people through the door. In other words, nearly everyone who attended got a free book and an evening’s entertainment. The authors got bupkis.
This struck me as exactly the wrong way to do a book giveaway. Why? Because a book is not a can of Coke. You taste a free Coke and you like it. Having emptied the can, you go to the grocery store and purchase six more.
But, with few exceptions, most people don’t read the same book twice, let alone over and over. (And, even if they did, they already have their copy!) Therefore, you are counting solely on the shaky proposition that someone who received a free book will (a) bother to read it, (b) like it, (c) think to tell some friends who… (d) will feel motivated enough to purchase their own copy and (e) then start a chain reaction that sells at least a hundred more books, in which case you are…where? Answer: at break even.
More likely, you have driven the value of your product down near zero because something that everyone gets for free becomes virtually worthless by definition. The only way to give away cultural product and make money on that product is to create scarcity.
Which brings me back to those Broadway seats. In the theater there is a marketing technique called “papering the house,” which is a euphemism for giving away free tickets. The thing about a theater performance, of course, is that the show must go on. And the second the curtain goes up, empty seats become worthless.
So when Broadway producers give away what would have been an empty seat, they have no downside risk (they already wrote off the value of that seat) and big upside potential (the person in the free seat might go on to talk up their show). Therefore, to pursue the Broadway analogy for book promotion, you should give away copies of your book en masse only at the eleventh hour — say when the paperback is about to replace the hardcover, driving the latter’s value near zero.
In other circumstances, you should only give books away when there is an opportunity to create scarcity. That’s why I have empowered several cooperating book blogs (not gonna list them here, but you can Google) each to give away a single copy of the Primacy hardcover. If the product being given away is scarce, it maintains value for those who would purchase it.
In that vein, earlier this month I also offered ten books to entrants in a Goodreads book giveaway and garnered more than fifteen hundred sign-ups. Of course, not everyone who entered will purchase the book, but it struck me as the right way to do a giveaway because it maintained the book’s value while drawing attention to it.
The problem, however, is that I wasn’t the only guy conducting a book giveaway. At any moment, there are hundreds, and for all I know it’s the same two thousand people entering every contest.
So did my foray into giveaways actually sell books? Honestly, I’m not sure I’ll ever know. Even when “free” isn’t trouble, it’s troubling.
Trapped in the Prisoner’s Dilemma
Book publishing has become something of a free-for-all, but does that mean that all we produce needs to be free?
When I was in the retail business we hated our big competitors but we most feared the amateurs — those stores whose owners were in business for their own entertainment rather than to make money. Though the big competitors might be able to undercut us with their efficiency, at least they knew the difference between competing for profitable business and giving away the store.
Too many authors today are giving away the store.
Sadly, I don’t have an easy solution to the problem of free. It feels a lot like the famous logical puzzle of the Prisoner’s Dilemma, whereby each prisoner acting in his perceived self-interest ends up making things worse for both. In casual usage, says Wikipedia, the Prisoner’s Dilemma describes a situation “in which two entities could gain important benefits from cooperating or suffer from the failure to do so, but find it merely difficult or expensive, not necessarily impossible, to coordinate their activities to achieve” a better outcome.
Thus, with the glad-handing and happy talk of the writers’ conference behind them, do all authors suffer from our lack of true cooperation. You sell for fifteen dollars and I’ll sell for nine. You sell for eight and I’ll sell for three. You sell for two and I’ll GIVE MY BOOK AWAY.
Alas, at the end of this downward spiral, we’re all likely to hang separately.
Last week: Publishing Primacy — Folio 27: Report from the Round File
Next week: Publishing Primacy — Folio 29: Hand Selling
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