Windowing

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.

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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).

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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.

9 thoughts on “Windowing”

  1. I keep hoping more book publishers will adopt Baen's (a big science fiction/fantasy publisher) approach. They release ARCs (Advance Reader Copies) in E-book form a couple months before the hardback book for $15. Then once the book is released, they sell it for a little under paperback price.The truly impressive part is this: There is ZERO DRM on their books. Not only is there no DRM, they let you re-download any of your books in any format you like indefinitely. They also have a free E-book library, where you can download many of their works completely free of charge. It's much more convenient, and higher-quality, than piracy.

    The end result is me spending more money on their books. When I drive to the bookstore, I usually can't find the book I want anyway – so I end up buying nothing. With Baen's system, I happily read the first book in a series free, then buy the rest of the series online.

    The other advantage to their approach is that since their costs are moderate, if I want to loan a book to a friend I'll occasionally buy the digital copy, then order a physical book to loan out!

  2. A lot of medical textbooks already have the scratch-off panel approach. The codes are all unique (the scratch-off panel is actually on a sticker stuck inside the front cover), so can't be shared.You register the book against an email address and password – and people aren't keen on sharing those because if they're caught they themselves also lose access.

  3. I *adore* Baen, they've really captured the 'instant gratification' market (and utter fans) by selling ARCs. The lack of DRM is brilliant (given that it can be cracked with a small Python script) and they recognise that giving away the first book of a series is a great way to sell the rest of the series.I wish more publishers would take their lead.

    Of course, it also helps that Baen realises that SF/F is the only genre that has a vibrant piracy scene and so mitigate that…

  4. I'm not sure of the exact system but if you register the book against your friend's email then won't that still allow someone other than you to own* the ebook version?(*for various values of 'own')

  5. Baen a US scifi publisher sometimes put dvd's in thier books of the ebook ver. The books they sell both in print and by ebook don't generally cost a lot and u can get a monthly job lot of a mix of old and new books for around $15 and once you've bought em they remember so if u lose a hd for instance u can just go back a re d/l em

  6. Tom, what a great, great post. Intelligent and to the point. I'm not really familiar with all these goings on (and the little I do know is thanks to you) but I'm a consumer with an income and a credit card to spend it.I recognize all the categories of customers you mention, but like you would expect, things are more complicated than market statistics will make you believe.

    One example is myself: I love reading. It occupies 90% of my computer use. But even though I don't mind reading stories on the computer, it pains me to read books/magazines/newspapers in digital format if I can avoid it. That being said, I'm also big on instant gratification (something I was taught by the internet) and still I don't like hardbacks: I recently bought a book via Amazon and actually groaned in disappointment when I got the bigass package in the mail. I hadn't realized I was buying the hardback version. Hardbacks are too big, heavy and difficult to carry around to read everywhere, which is my main activity, reading-on-the-go. For that reason, even though I want the book NOW (and for that might yield to an ebook) I also don't want it in hardback format, so again it's either wait or, you guessed it, yield to the ebook. You can see where this is going for me, can't you? But I'm just a slightly weird customer in a sea of equally idiosincratic customers.

    Also, don't I remember something about the latest Dan Brown book? Did it not sell as many, if not more, ebooks on the day of release than hard copies? Or was that the audiobook (which is even more surprising)? Won't that make the publisher actually rethink the need for instant gratification vs hard copies?

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  8. Hardest part in publishing, is how many will purchase a creation in the different formats.I always divided buyers into 3 major categories, those that must be first [will pay the most for the privilege]

    those that must pay the least.

    then the rest , who may never buy but can always be temped.

    Then books come in different flavours.

    Bacon

    Some books are to be tasted, others to be swallowed, and some few to be chewed and digested: that is, some books are to be read only in parts, others to be read, but not curiously, and some few to be read wholly, and with diligence and attention.

    Sir Francis Bacon

    Thus the modern purchaser has more choices.

    Thus the Publisher has to be able to truly know his reader, as the first run must pay for all the inherent costs involved. The returns eat up costs galore, for ever lost.

    For example computer type books usually have two paragraphs of use, the rest has been said many times before.

    Many are just padding or waffle.

    The Market place is the ultimate judge, you can lead a readers to the cover, but it is very hard to force them even to peruse, let alone buy.

    Best seller , how many make it to list,

    http://en.wikipedia.org/wiki/List_of_best-selling_books

    No of books published and sold vs no. making the million in the first edition.????????

    Publishers always have high hopes of hitting the jack pot, see how many turned down J K Rowling .

    The e book will be a nitch item, it is just question of the level of satisfaction, once read will it be left for the mildew or will it find a place for future use and generate additional revenures..

    just a thought.

  9. I was stunnd to see that a book I wanted t buy from Amazon in e-book form cost FIVE DOLLARS more than the paperback edition. I'm still scratching my head at the thought behind THAT move…

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