DRM…Does it Really Matter?

The argument goes on and the longer it does I am coming to the conclusion that DRM may be the idiot child we don’t like to talk about. By this I mean, that the point of DRM is actually misleading the industry. For years those in the pro-DRM corner argue that it wants to protect the rights (intellectual and artistic) of its authors and fight piracy. What are the realities of this stance?

How does DRM stop piracy? In reality it doesn’t. Any person with thirty seconds to spare can find freeware on Google to remove DRM from eBooks. What the real issue here is consumers rights to transfer the product between systems and machines. The industry wants to enforce license control. If a publisher can force a consumer to repurchase as a by-product of this action then ‘all the better’. Yet, how many in the pro-DRM corner can put their hands on their hearts and say they have never copied CD content to an iPod or taped a TV programme or passed a physical book to a friend or resold a book. We never own the content, we merely buy the license to view, read, listen or experience. I wonder if the industry has ever calculated the impact of book sharing against loss of potential sales.

I am not saying that there is not a real threat; and the area this ‘threat’ comes from is a new generation that has grown up seeing the Internet as nothing more than a free shop where digital content is never purchased. How much of the purchasing demographic are represented by these freeloaders is not known but it is significant. This is where the argument is both won and lost for DRM. In trying to shackle this group - who in reality will spend the thirty seconds or so needed to find freeware to break DRM - we are hand tying honest consumers who wish to purchase eBooks but swap them between machines and maybe even friends, in the same way we do with physical books.

It is strange that we have no qualms about people lending books to friends and giving them away once read. I think we will have to adopt the same mentality for eBooks. After all, word of mouth is one of the strongest forms of publicity available. Many pop groups have adopted the same thinking, knowing that they can build a fan base this way and that sales do actually follow. I am not advocating the wholesale piracy of eBooks, far from it; but being pragmatic. The industry needs to come to terms with a solution which is realistic enough to know that those who want to copy digital content (no matter if it is a book, film, news or music) will do so. The vast majority of us are law abiding citizens and realise that if revenue is severely impacted through outright piracy that there will be no money available for new talent to come through.

Where does that put the publisher and the author, both of whom want to ensure that they can sell eBooks at a price which encourages book lovers to purchase digital content? I as a publisher have no qualms with eBooks being swapped between as many machines as the purchaser owns. He/she should also have access to their content for as long as they wish with the ability to re-download as often as required. I do have issues with people copying and reselling content purely for their own financial gain thus depriving the publisher and author of making a fair living.

So, DRM...is it necessary? Can we adopt new methods which encourage file sharing without impacting on revenue? The industry must target the person who sees no wrong on copying content and reselling it and it is here that the law must also protect the industry and the author.

eBooks and the Agency Pricing Model – Getting the Balance right

Wow, this year has passed with the alacrity of an elephant downhill skiing with a force ten gale behind it, blasting it down a near vertical drop.  So far it has been an interesting year, with lots of developments on the digital publishing side of books. 

The current arguments about retailers accepting the ‘agency model’ dominates the current buzzvine in never-neverland or ‘the world of publishing’ as we more commonly know it.  Do publishers have the right to set the prices of their eBooks?  To that question I adamantly say ‘yes’, but only if they are being sensible about the pricing of eBooks.

A couple of months or so back I posted a video talking about the pricing of eBooks and invited the Amazon eBook forum to take part in a discussion about pricing.  As you can imagine things got pretty heated, pretty quickly. At the time I said that if I felt our eBooks were priced to high I would review the situation.  Our eBooks, typically are priced at £4.95 against a price of £7.99 for the paper version.  This debate and the current arguments on pricing has indeed made me review.

I think consumers do have a strong argument that eBooks are overpriced but the argument has to be balanced against many factors, especially for smaller publishers who invariably have higher over-heads.  Out of the sale price comes a cut to the retailer, a cut to the distributor or aggregator, a portion to compile and conversion of the original file (Yes, this is a one-off fee, but still has to be accounted for). Most importantly, the author royalty payment which is between 45 and 50% net at Caffeine Nights has to come out of what is left.  Then there is marketing and promotion to be accounted for before the publisher get his/her reward. 

I agree some costs such as conversion and file production are one-off but many are not and when a retailer takes anywhere upwards of 30% to 60% and the distributor also takes at least a similar figure, there is not much left to pay the author or the publisher.  Small publishers won’t see the sales of the Stieg Larsson’s or James Patterson’s of this world, nowhere near it, but they do provide a valuable service and feed the market with new and up-coming talent.  For this service to continue there has to be a realistic price attributed to eBooks.  This is the question most publishers are struggling with.

eBooks, unlike their paper versions also carry VAT – a cost in the UK which is also due to rise by another 2.5% in January 2011, so 20% of the rrp will go straight to government. Whilst this can be claimed back if you qualify, smaller publishers may not initially do so.

For me, if I set an eBook retail price of £4.99 all of these factors have to be accounted for, but the bonus is that this is still a new channel, a new market which, even though eBooks have been with us for over a decade, is suddenly opening up and becoming viable. So one may argue that it is ‘extra’ revenue.  This is not entirely true, as there has been no real statistics to show the impact against actual physical paper volumes.  Having said that it can be assumed that the majority of eBook sales will be new money. 

Selling through Amazon we (Caffeine Nights) can actually be more competitive and see a decent return even when, like we have with Amazon, decided to reduce our standard eBook price from £4.95 to £3.95 or $7.99 to $5.95.   This is more possible because Amazon also acts as the distributor, thus saving the publisher extra fees.

I do believe it is the right of the publisher to set the rrp but it has to be done to ensure that the consumer is not exploited.  Many consumers have bought Kindles or eBook readers at great cost and don’t want to be blackmailed by publishers. Some leading publishers are selling eBooks at parity with their paper counterparts, this is ripping off the consumer and should be stopped, now. 

For this fledgling industry of eBook publishing to thrive we need competitive pricing but we have to listen to the consumer too.  It is odd how many of these publishers are quite happy on the other hand to give away paperbacks to supermarkets at ridiculously low prices, this is a double insult to the health of the industry as consumers then have an unrealistic expectation of prices and how much it costs to produce a book and many actual book stores are closing through lost sales. One may argue this is being hypocritical but supermarkets are not bookstores, they do not make a living by offering mass choice especially when it comes to books.  In fact they offer the direct opposite, a very limited choice, mostly of mass market titles and general pap.

Publishing is eating itself by being greedy on one hand and simply insane on the other. £1.99 paperbacks, mass pulping, stupid transportation costs and environmental impact because of over production of titles with no discernable market, leaves some publishers with the only option of pulping or giving books away in a supermarket.  All of these things are killing the industry and now the confusion over eBook pricing just confirms that this industry needs to take a long and seriously hard look at itself to avert an impending crisis.  

The Elephant in the Library

A Nielsen report shows 39% of iPad users regularly read books on their machines.  Viewed in context this is a great boost for eBooks even though it means 61% don’t…yet.  There could be a number of reasons holding back a large proportion of these consumers from fully realising the potential of the iPad in terms of an eReader.

Many will have no interest in reading this way instead preferring paper or even reverting to e-Ink machines such as the Kindle. Others probably don’t read…period.  The upshot of these stats though is very encouraging considering Apple shifted 7 million units since the launch earlier of the iPad in 2010.  If nearly 40% are purchasing eBooks regularly then the adoption of eBooks as an everyday media format is secure.

Pricing of eBooks will remain a hot topic to many publishers it is the elephant in the library.  Another recent survey showed that 62% of consumers are not prepared to pay for online content, a figure close to the 61% of iPad owners who are not using their machines to read books. I doubt there is correlation or if there is it would be interesting to know what the reason is that is stopping people either paying for online content or downloading eBooks.

Although eBooks have been with us for well over a decade now, the next two to three years are the vital time to ensure electronic books become established in the psyche of readers and general consumers alike.  How many people will wake up on Christmas morning to an iPad or Kindle and begin the experience of digital reading, and of those how many will receive eBooks as gifts and recognise the value of an eBook in the same sense as if it were a paper or hardback volume?

If we get the pricing right and the consumer recognises the value of an eBook, then the elephant in the library may roar its delight rather than create an obstacle we all want to skirt around. 

Why you should have to buy eBooks but what should you really expect to pay?

Many publishers have been asked to quantify why they charge what they charge for eBooks and many are keeping quiet.

There is a misconception that eBooks cost nothing to produce and it could not be further from the truth. There is physical costs in time, effort, production and distribution associated with eBooks. Each eBook has to be totally reset for eBook publication and conversion into different formats, this is a time consuming and expensive process.  And that is before we begin to include other costs such as promotion, advertising and marketing. Even more expensive.

Because we have lived in a world where up until now there has been availability of many free eBooks and many sub-standard eBooks which have had very little cost associated, consumers have been happy to download them for free and this has led to a false expectation that all eBooks should be free or only cost pennies.  The market has grown up considerably in the last six months and consumers have to make the transition too.  Quality products which are well produced and marketed have to have a reasonable cost attached.  The cost per title also includes the cost to the reseller usually between 35 and 60%. Authors have to be paid for their hard work and publishers should also be rewarded for their hard work too. So £4.95 for an eBook which retails at £7.99 for the physical paper version is a good balance.

Some publishers are charging too much for their eBooks and consumers will vote with their wallets and rightly so but an eBook which costs a third to a half less than the paper version is a price which will make the market sustainable and allow strong growth, leading to more choice for consumers.

POD and Pad…Welcome to the future of publishing

There is an interesting and level-headed article in this week’s Bookseller by Tom Tivnan exploring the virtues and adoption of POD.  Something we at Caffeine Nights have been extolling since we began.  It would appear that many major publishing houses are now finally looking at the benefits.  Like all environmental changes for good it won’t be driven by a need to make the world a better place but by finance and the market.  For smaller publishers such as us, POD is actually a more expensive option per title with lower financial returns but we are driven by other motives such as the desire to change the industry.

What is driving this change among the establishment is linked to the arrival of the iPad, the new Kindle and the buzz around eBooks.  Publishers are waking up to the fact that they need to be able to respond and compete. Having thousands of copies of titles sitting in warehouses with no prospect of knowing if a demand will ever be created to sell those titles is not efficient.  We have sais this for years.  The truth is our way of working is harder and requires a more consistent approach with the media, stores and the buying public to ensure we create and sustain demand.  We like hard work and know what is required.  It will be interesting to see who else does.

Carry on up the jungle…

So Amazon are finally opening a UK eBook store and launching 2 new eReaders. They say they will set the price of the eBooks for sale, which is a little typical of its approach in publishing.  It is clear they wish to dominate and fully control the market.  I wonder if they are going to allow UK based publishers who don’t have a US presence or bank account into their exclusive little club or if they are going to continue excluding publishers even to their official UK store.  It will be interesting to watch what they are going to do.  Apparently the new store will have 400,00+ titles on it.  As a UK based publisher, today was the first I heard of the store, so I know our books are not (initially) going to be on it which is a shame. Our only route to getting onto the Kindle in the US is currently through Smashwords, maybe our books will be included through this route but its about time Amazon opened up to the fact that there is some pretty decent British based publishers out there who want their eBooks available through it store. It would also be nice if they allowed publishers to set their own prices.  Our eBooks retail at £4.95 which we believe is a fair price against our paperback which retail at £7.99.

Book to The Future

The launch of the recent Futurebook monthly events should tell the organisers of book fairs that the demand and thirst for knowledge for information on digital publishing under one roof is great.  Bar Chocolate in Soho was packed to the rafters on Thursday evening, so much so that many spilled onto the street outside for room, air and a place to network.   

Many thanks to Sam Missingham from the Bookseller for having the foresight to organise the event and I look forward to attending future meetings.  It is clear that the industry needs an organised digital book fair to discuss many of the topics buzzing around the ether in a small bar in Soho. For now the regular ‘Book to the Future’ meetings can suffices in terms of an exchange of knowledge, it is also clear that The London Book Fair (LBF) might not be the vehicle for such an event. For the past three years the LBF has pandered to the old guard with just a cursory nod toward digital publishing.

I think we need something new, something organised from outside the mainstream.  The establishment have had their chance to embrace digital and some of them are doing a great job with it while others are content to bury their heads in the sand. It would be great of course to have the full support of the proactive embracers of new publishing technology for a Digital London eBook Fair.

Publishing needs to move forward and examine all the opportunities open to it in terms of delivering content.  From augmented reality to fully immersive and interactive eBooks.  A forum to showcase technology and discuss the future book is needed. I know it would be hugely popular.