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Wednesday, September 2, 2009

Will E-Books Kill the Hardcover Book Trade?

A provocative article appeared a few days ago in the Financial Times entitled Hachette Chief Hits Out at E-Books. The thrust of the article boiled down to this:

Arnaud Nourry, chief executive of the French publishing group (Hachette Livre), said unilateral pricing by Google, Amazon and other e-book retailers such as Barnes & Noble could destroy profits and kill the lucrative trade in hardback editions.

Is this true? Well, time will tell and no one has a crystal ball. But I really doubt it.

One of the things people overlook when thinking about E-books is that almost everything needed to produce a traditional hardcover (or paperback) is also required for a digital book--except the printing and shipping.

In other words, publishers still have to acquire books (that takes time and money), accept and schedule (time and money), developmentally edit (time and money), proofread (time and money), format (time and money), arrange for photos, charts, maps, etc. (time and money), and other internal endeavors (time and money) just to have the right text in the right format with the right bells and whistles at the right time by the right author.

Oh yes, add in all the traditional overhead costs (rent, salaries, taxes, etc.) and the fact that authors have to be paid a royalty, and in some cases, an advance against royalties.

E-books can be made available today for $9.99 or thereabouts only because there are wider and more profitable margins available elsewhere (i.e., hardcovers) to cover the costs of producing the final product (which let's face it, is information and not a "book") for the intended audience. The entire pie (all traditional print sales outlets) subsidizes one very small slice of the publishing model (digital books).

Mr. Nourry continued:

"On the one hand, you have millions of books for free where there is no longer an author to pay and, on the other hand, there are very recent books, bestsellers at $9.99, which means that all the rest will have to be sold at between zero and $9.99,” Mr Nourry said.

Again, I find this difficult to swallow.

If the dominant gorillas Google (there is something evil about that company) and Amazon drive down the pricing and slash the margins for publishers, at some point the laws of economics come into play. Who is going to be able to produce E-books for that retail price (zero to $9.99) and still be able to slice off all the production costs and have a viable operation? I don't know how to make that business model a viable one.

Publishers won't be able to do it. How much can you pay bestselling authors in advance if the book tops out at $9.99?

Just like one leg needs the other for a body to walk, I don't see how the world of E-books exists on its own without accompanying hardcovers, paperbacks, specialty sales print books, and so forth. Perhaps some publishers could make it work, but I think the vast majority could not possibly do it.

If hardcovers eventually die a very visible death from this digital axe to the neck, the cataclysmic event will take down a large percentage of publishers with it. That would leave Amazon and Barnes and Noble in the unenviable position of having killed off the many geese that used to lay the golden eggs that allowed everyone to thrive.



Nick said...

Well put. I think eventually e-books will control more of the marketplace just because that seems like the track of "progress." But that might take 50 years to achieve. I have thought about getting an e-book reader but that's mostly so I could carry a Civil War library on a battlefield, it would not replace a single volume in my library. Right now the cost doesn't justify the benefit, for me.

Mark Wilensky said...

I have read several of these articles over the last couple of years, and there is always one glaring omission; kids. Kids buy a lot of books (all you have to do is tally up all the sections in any bookstore, museum shops, etc. and note the age groups they are attracting). I know of no child, tween, or teenager who owns or even talks of owning an electronic platform for reading their favorite books. (Yes, lots of kids read...do you remember the book flyers you would get at school? They still exist.) And the young audiences love to share what they are reading.

I see valid uses for ebooks, but can't imagine a scenario where they would replace owning something of weight and substance. Besides, I can mistakenly leave a book out in the sun, or on a public table, and not have to worry about calling my insurance company if it goes missing. I wonder what the research shows in the Highlighter industry?