eBook Readers & the Publishing Industry

I’ve been wanting an eReader for a while. When the Kindle first launched, I was in awe. I quickly sat down and calculated the number of books I buy in a year and compared that against the cost of a Kindle and the savings of buying an e-book for $10 vs. the hardcover price. Let’s just say there wasn’t much of a savings. I finally got to touch a Kindle at GUADEC this summer, and my mind was made up that I had to have an eReader in the near future.

I love tech gadgets and am an early adopter. I also love content and media, and own hundreds (if not over a thousand now) music CDs, hundreds of movies (including Blu-Ray that I bought over 2 years ago), and tons of books. My bookshelves are full to bursting in my office, and I have boxes of books stored in my closet without room to display them.

I’ve waited patiently debating an eReader. I travel once or twice a month for work, and having an eReader would definitely save space. This week, my flight was delayed hours on Tuesday, and then canceled later that night. I had finished the book I had brought an hour after getting to the airport, and then bought another one swearing in my head the whole how I wished I had a an eReader.

The good news is that when Barnes & Noble announced the nook last month that I pre-ordered one. As much as I love Amazon (I buy almost everything there now – movies, music, books and electronics) I found the nook more aesthetically pleasing as well as it was running Android, and the formats they’re using seem a bit more open than the Kindle. (My nook is supposed to ship tomorrow, still crossing my fingers with all the delays they’ve had for the last week or two!)

But now comes word that the publishing industry doesn’t get it and is fears change and the changing financial models. It’s rumored that Amazon loses $2 per eBook bought, and now we are hearing the publishers want to delay new releases 4 months after the hardcover comes out but before the paperback comes out. When will content companies figure out that not giving consumers what they want is bad for business?

There are authors (Iain Banks, Chuck Palahniuk, Neal Stephenson, Neil Gaiman) that I will always buy the physical copy. I want to continue to build on my collections and there is a tactile difference in having a physical book. But I will buy many more books once I have my nook. I’ve already been adding to wishlist on bn.com for the moment my nook arrives. I have dozens of posts tagged “books” in my RSS reader that I want to buy. The fact that they’re slightly cheaper as an eBook and no shipping is nice, but having immediate wireless delivery right to my eReader is even better.

So the publishers are worried that Amazon (and to a lesser degree Barnes & Noble) have set a pricing ceiling of $9.99 per book. We’ve been through this argument before – the record industries felt Apple had set a similar ceiling that songs were only worth $0.99 and now we’ve seen new releases and popular tracks increase to $1.29 this year. And that’s ok. I worked in the retail industry for 15 years and have been through anti-trust training a couple of times. The publishers can set their price and the retailer can sell it for whatever they want.

If the publishers are so worried, why are they not raising the cost of the books? If Amazon is losing $2 per book, that means the cost to Amazon is $12. If the publishers raise it to $15, it will make the retailers re-consider whether losing more money is acceptable. While the publisher can’t dictate the actual retail price sold, they do have options. And lowering the cost after it’s been released a while happens all the time across all retail categories. There is no reason that months after the release the cost comes down and the retailer can re-price, at say, $9.99. This is seen all the time in the movie space, though rarely in music. Now that we are starting to have competition in the eReader space there are all kinds of tricks the publishers can do to partner with the retailer to save the retailer money on the back end as well, including marketing development funds, sell through credits and more.

But for the publishers to flatly state “We won’t release an eBook for 4 months” won’t make consumers happy. Nor, in my opinion, will it make consumers buy a hardcover once they’ve invested $200-$400 in an eReader. I’ve learned this lesson – I rarely buy a movie on new release day for $20-$30 when I subscribe to Netflix and know if I wait 3-6 months I can probably get it for $10-$15 on sale (I just got Watchmen on Blu-Ray for $10 last week!).

At this point, it’s difficult to read the future. These statements from the publishers could just be posturing as they dig in for negotiation with the retailers. But I’m not hopeful. There are plenty of lessons for content providers to learn from in the music battles of the last 10 years. And if there is one lesson they should employ, it’s to extend and embrace the new models rather than try to prop up a dying business model. Change is hard – and if consumers want to buy more books because they have an eReader, it’s in the publisher’s best interest to figure out how to do that, rather than making it harder for consumers to buy from them.

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