Sorry folks, another crosspost from Paper Not Included, my mea culpa this time is that I'm recuperating from a pair of nightshifts that were less that smooth. Something ambulance based tomorrow though.
Windowing makes ebooks more like DVDs than CDs
I got into a discussion on Twitter last night with someone who I respect about ebooks, made slightly difficult by constraining myself to 140 characters and by fitting my tweets around work. And it being silly o'clock in the morning when my brain turns, not so slowly, to mush.
He was suggesting that when you buy a hardback book there is within it a 'scratch panel' with a code for the ebook version. While I completely agree with the idea, and it has been one I've suggested in the past, I was trying to make the point that, especially when ebooks are concerned, the publishing industry isn't exactly the most sane creature.
For the record, I don't think that publishers will want to do this because it is too easy to buy the book and then email the code to someone else – or put it on a 'book swap' website where such codes could change hands. The publishers would then see this as a 'lost sale' and therefore 'lost profit' rather than as a marketing tool.
Our brief discussion then turned to whether ebooks are to MP3s as physical books are to CDs.
I maintain that ebooks are to DVDs as physical books are to films at the cinema.
You see, the publishing industry, like the film industry has long had a point of 'windowing' releases. That is, a film is released in the cinema – stays around for a few weeks and then only after a few months does the film get released as a DVD or digital download.
On the other hand, CDs are normally released at the same time as MP3 downloads.
Turning to publishing, like films at the cinema – hardback books are released first and it is only much later they are released as a paperback book.
This is known as 'windowing', and it is used to ensure that one section of the market, the section that is willing to pay more for first access, or for the 'experience', don't instead decide to turn to a less profitable product.
In the publishing world the profit margin on a hardback is much more than that on a paperback (although the risks are greater), it is a poorly held secret that while hardbacks cost three times that of a paperback they do not cost three times as much money to make and distribute.
This then is why many publishers are looking at a distribution scheme where the hardback is released first, and the ebook is held back until the paperback version is released, or even held back until later.
Is this sane?
Without the figures available I can only speculate – but I would imagine that the algorithm that the publishing house comes up with is perhaps lagging behind the real social change that the internet and social media has wrought.
I would guess that most people who buy hardcover books are those that simply cannot wait until the paperback to read the book by an author, or are huge fans of the experience of reading a book – the sheer physicality of a hardcover. These people will pay triple the price of a paperback for the same 'content' in order to read it as soon as possible – I know I have been that person in the past.
Then you have the second market – those that will wait until the paperback is released. This section are more wary of spending a lot of money and will happily put off that instant gratification in order to get a bargain.
The third market are those that will wait until they can borrow the book from the library, or will buy the book when it appears in a second hand bookshop. Publishers get no money from these people and so they are ignored, or marketed at in order to become members of the first or second market.
Where we stand now we have a new 'fourth market' with ebooks – people who don't care about the physicality of books and who want instant gratification. The jury is still out on how much money that they want to pay (this returns to the argument of 'how much should you pay for an ebook', do you pay near hardback prices for that instant gratification, or do you pay less because you are buying a product with less functionality?).
So, how do you window ebooks so that they don't gouge your physical books sales? Can you make the ebook price enough that you recoup any hardback sales lost, yet don't discourage people from paying that amount for a non-physical product?
One key question is 'how is the first market who buy hardbacks split?', Those who want the experience, the pure artifact of owning a hardcover will never buy that as an ebook as it doesn't have anything that they want. It's those that want that instant gratification that may start switching to ebooks, and publishers want to keep the profit that those people bring them.
It is simplistic to say that ebooks 'cost nothing'. Sure, the 'per unit' cost of an ebook is next to zero – once you have an ebook format you can sell a million copies for the same cost as selling a hundred copies – but the real cost is in getting to that finished ebook format. This means copyediting, author's advances, marketing and the myriad of other costs that go into making a book. It is this initial outlay that publishers look to recoup with those initial sales of hardbacks (because remember, the profit margin is higher on them).
So, what for the future?
I see publishers continuing to do one of two things, they will either 'window' their sales – making ebooks available only after the paperback version of a book is released, or they will embrace the 'variable pricing' model initially releasing an ebook at the same time as the hardback for hardback like prices. Then when the paperback is released they cut the price of the ebook for something more like a paperback price and then finally, after selling the majority of their paperback sales, they will lower the cost of the ebook even more in order to make the last bit of money from those who are only willing to pay secondhand book market prices.
This, in part, is why publishers are embracing the 'agency' model of ebook pricing that came to a head with the fight between MacMillan and Amazon, brought on in some part by the imminent release of the iPad.
Is this sane? Well it makes sense in some part – but then it ignores in part the influence of social media in book buying – and that is a subject for a later date.