Macmillan CEO addresses pricing

[Jesslyn]

http://blog.macmillanspeaks.com/macmillan-ceo-john-sargent-on-the-agency-model-availability-and-price/

The only comment that I can make (sans profanity) is that he very neatly avoids putting the NYT bestseller and $9.99 pricing together.  Apparently Macmillan bestsellers will be $12.99.
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After the events of the past several weeks, I have been in touch with many of you. It has become clear to me that there is far too little accurate information available in this time of unprecedented change. The issues we all face together are complex, and no news story or 140-character snippet can adequately address them. Therefore, I propose to write you occasionally, when I get a sense that there is a need for direct information.
The first topic is the e-book agency model, and how it will affect our business in the near term. Starting at the end of March, we will move from the “retail model” of selling e-books (publishers sell to retailers, who then sell to readers at a price that the retailer determines) to the “agency model” (publishers set the price, and retailers take a commission on the sale to readers). We will make this change with all our e-book retailers simultaneously.
Rather than address the long-term or author royalty consequences of the change (I’ll save that for next time), I’ll focus on the two major effects at retail. Note that these changes will apply to every e-book retailer with whom we do business:
1. Availability. All the new adult trade books for which we have the rights to publish in e-book format will be available at the first release of the printed book. We will no longer delay the publication of e-books (read: no windowing). Readers were clearly frustrated at the lack of availability of new titles, and the change to the agency model will solve this problem. We are also working hard to make more books available in digital editions. The consumer will have broader choice and much greater availability.
2. Price. We will price our e-books at a wide variety of prices. In the ink-on-paper world we publish new books in different formats (hardcover, trade paperback, and mass market paperback) at prices that generally range from $35.00 to $5.99. In the digital world we will price each book individually as we do today. Generally e-book editions of hardcover new releases will be priced between $14.99 and $12.99; a few books will be priced higher and lower. This is a tremendous discount from the price of the printed hardcover books, which generally range from $28.00 to $24.00. E-book editions of New York Times hardcover bestsellers will be priced at $12.99 or lower while they are on the printed list.  E-book editions of paperback new releases will be generally priced between $9.99 and $6.99.
For physical books, the majority of new release hardcovers are published in cheaper paperback versions over time. We will mirror this price reduction in the digital world.  It is too early to estimate the timing of the price reductions for those cases in which we do not issue a paperback edition. If we do issue a paperback, we will drop the digital price to $9.99 or lower at publication date (if not before). The price differential between the book and the e-book will become smaller at the lower price points.
There has been a lot of concern from e-book readers that $9.99 books will no longer be available. Most Macmillan e-books will still be priced below ten dollars. Our e-book sales over the last year clearly indicate that only about a third of our e-book business is in the digital versions of new release hardcovers. Unit sales of older books far exceed our new release hardcover sales, so the $9.99 and lower prices will continue to represent the largest portion of our business.
In short, we will continue to do what we have always done: provide the reader with a vast selection of great books over a wide range of prices.
I have not addressed illustrated books or books for young children. That will be a topic for the future as the technology advances beyond e-ink screens. I hope this has been in some way helpful. Please remember that I can’t tell you how other publishers will handle availability and pricing. I can only speak for Macmillan.
Meanwhile, there are millions of you and one of me. So, please feel free to post questions or comments below.
Thanks!
John
I’ll be in touch…

[Rhiathame]

Our e-book sales over the last year clearly indicate that only about a third of our e-book business is in the digital versions of new release hardcovers. Unit sales of older books far exceed our new release hardcover sales, so the $9.99 and lower prices will continue to represent the largest portion of our business.

Perhaps this is because the preponderance of the books that they have released are not new release hardcover sales, between that and the desire of many of us to replace beloved yet battered version of books have led to this "figure"

Thanks for sharing this Jess.

[Jesslyn]

Okay--the red has cleared from my eyes and I can sanely address this. Overall, the only bright spot to this entire debacle is that Macmillan will no longer hold the publication of ebooks.  At best, pricing for most books will just mean that I wait until they come down.  I had gotten used to cheaper ebook pricing at hardcover release time; I guess I'll just go to a wait for the paperback purchasing model to match a higher ebook price model:

"Price. We will price our e-books at a wide variety of prices. In the ink-on-paper world we publish new books in different formats (hardcover, trade paperback, and mass market paperback) at prices that generally range from $35.00 to $5.99. In the digital world we will price each book individually as we do today. Generally e-book editions of hardcover new releases will be priced between $14.99 and $12.99; a few books will be priced higher and lower. This is a tremendous discount from the price of the printed hardcover books, which generally range from $28.00 to $24.00."
I find this statement a little disengenous, how many folks pay full price for hardcover and the agency model means that retailers can't do the same pricing discounts for ebooks.

E-book editions of New York Times hardcover bestsellers will be priced at $12.99 or lower while they are on the printed list.  E-book editions of paperback new releases will be generally priced between $9.99 and $6.99.
Okay, so now we'll be paying more for ebooks than many mmpb?

[drenee]

How does the change to the agency model now allow the e-book to be released sooner?
deb

[Geoffrey]

At the moment, the Macmillan books on my wish list that are under $9.99 are priced the same as  the mmpb - or $7.99.  While that's not an expensive price, it doesn't fit within my personal pricing guidelines which does not have me buying ebooks that are more than 80% of the cost of the pbook.  And I agree he's being disingenuous regarding hardback pricing.  I have bought hardbacks for years and never paid the full msrp for them; I don't intend to start basing my purchases on an unreal price.

In the end, the market will settle where it will.  I don't think Macmillan et. al. will end up with prices where they are currently setting them.  However, I don't think prices will settle at a $9.99 across the board pricing for new books, either.

[Geoffrey]

How does the change to the agency model now allow the e-book to be released sooner?
deb

It allows them to give us a bone.  I assume they think we'll be so bedazzled by having books available that we'll just pay what they ask.

[drenee]

Thank you, Geoffrey.  I thought it was something like that. 
We are just the dumb public. 
deb

[Jesslyn]

How does the change to the agency model now allow the e-book to be released sooner?
deb

Its not so much that the agency model allows sooner releases but the earlier releases are a product of the publishers being able to set their own pricing rather than the book sellers (Amazon, B&N) being able to set the book price.

[Gertie Kindle 'a/k/a Margaret Lake']

In every other marketplace that I can think of, the product is sold to the retailer and the retailer sets the final sales price.  Food, stationery, cars.  So what does our friend "John" think he's doing? 

[cheerio]

Prices definitely need to drop soon

[anivyl]

In every other marketplace that I can think of, the product is sold to the retailer and the retailer sets the final sales price.  Food, stationery, cars.  So what does our friend "John" think he's doing? 

I think what he is trying to protect is the interest of 1) the publishing house, 2) the authors and etc related people. When you have a pricing model like that, it is to seek control and (as steve jobs would say) ensure quality etc etc. In a way, I guess, it ensures they all get paid at least a minimum profit.

what annoys me is he thinks it's ok to produce mmpb at $5.99 and thereabouts, but ebooks is a minimum of $9.99 or thereabouts... with very vague probabilities of them being under that price.

[Jesslyn]

At the moment, the Macmillan books on my wish list that are under $9.99 are priced the same as  the mmpb - or $7.99.  While that's not an expensive price, it doesn't fit within my personal pricing guidelines which does not have me buying ebooks that are more than 80% of the cost of the pbook.  And I agree he's being disingenuous regarding hardback pricing.  I have bought hardbacks for years and never paid the full msrp for them; I don't intend to start basing my purchases on an unreal price.

In the end, the market will settle where it will.  I don't think Macmillan et. al. will end up with prices where they are currently setting them.  However, I don't think prices will settle at a $9.99 across the board pricing for new books, either.

I have tried to keep my philosophy on ebooks the same as DTBs. There are/were writers that I would pay a lot more for, a little more for or just base mmpb prices only. I will continue with that model, but regardless of which category, I'll be paying more attention to price and publisher now and will be stricter in that policy towards Macmillan books.  Because of that, Macmillan will probably see much less of my $ and Random House more on the same or higher price points.

[The Hooded Claw]

I think what he is trying to protect is the interest of 1) the publishing house, 2) the authors and etc related people. When you have a pricing model like that, it is to seek control and (as steve jobs would say) ensure quality etc etc. In a way, I guess, it ensures they all get paid at least a minimum profit.

My understanding is that he's also trying to protect the interests of "brick and mortar" book retailers.  Stores such as B&N or Borders are already extremely squeezed by the pricing offered by Walmart and Amazon on bestselling titles (which are a huge part of sales), and they viewed the $9.99 pricing of ebooks as a further nail in their coffin.  Though the increase in ebook pricing may help delay the inevitable, I suspect most mass market bookstore chains will go the way of small independent bookstores unless they can reinvent themselves in some way (conceivably as coffee houses and intellectual centers as they seem to be trying to do).

[VictoriaP]

I have to be fair and say I've rarely looked at the price of a paperback at purchase (except the larger trade sized ones).  But in looking at the ones on my shelves, I can't find a single mass market sized one that sold for $9.99.

Where MacMillan will find themselves floundering likely isn't with the hardcover sales and their price equivalents for e-books, it's the lower end of the pricing scheme.  I will not pay more than paperback price for an ebook version of a book currently available as a paperback.  I also will not pay $6.99 for a 300 page "cozy" mystery (Hello, St. Martin's Press, a MacMillan sub) as that's just really pushing the boundaries of value for the money.

I also really don't like his tone regarding the author royalty "consequences"--BAD choice of words there, skippy.  If you're going to raise prices on ebooks, then you better d*mn well put back the royalties to match the print versions.  The Big Six have been ripping off their authors on this subject for at least a year that I'm aware of.  It just irks me to no end that the writer is making half as much per book merely because I chose to buy it in ebook form for d*mn near the same price I would have paid for the pbook version.

[Gertie Kindle 'a/k/a Margaret Lake']

I think what he is trying to protect is the interest of 1) the publishing house, 2) the authors and etc related people. When you have a pricing model like that, it is to seek control and (as steve jobs would say) ensure quality etc etc. In a way, I guess, it ensures they all get paid at least a minimum profit.

Since he's already cut the royalties to authors, I don't think that's the case.  In addition, if Amazon sells an e-book at $9.99, but MacMillan has priced it higher, Amazon has been paying MacMillan the higher price and taking the loss. 

As far as ensuring quality, I've read (or tried to read) plenty of books from the big publishers that were a load of horse-hockey.  I found bad formatting in print books long before e-books came along. 

[Addie]

I just don't understand why the publishers had to seize control. If Amazon took the price hit, then wouldn't the publishers still have been pleased with themselves? The only difference they've made is that instead of the difference coming from Amazon, they're expecting it to come from readers.

And has there ever been at least a decent explanation for why e-books are priced higher or the same as mmpp?

[lisa.m]

I just don't understand why the publishers had to seize control. If Amazon took the price hit, then wouldn't the publishers still have been pleased with themselves? The only difference they've made is that instead of the difference coming from Amazon, they're expecting it to come from readers.

And has there ever been at least a decent explanation for why e-books are priced higher or the same as mmpp?

Because all of the other retailers were complaining about having to compete against amazon's pricing. Most likely since B&N jumped into the game and Steve Jobs is now looking to get his, there was enough backlash against Amazon for the publisher(s) to be able to stand up to Amazon. I'm incredibly annoyed that the competition has actually caused an increase in price instead of the usual decrease due to competition. This almost smacks of collusion to me.

I can't see myself paying some of these higher prices at all.

[Shastastan]

I seem to recall buying new hardcover releases at B-N for less than the publishers' list prices.  For example discounts of say frfom $34.99 to $25.99.  If I read his press release correctly, that will no longer be the case and the full $34.99 will be price the consumers will pay.  I guess these prices will apply to Costco and Walmart, too?

[nabrum]

My understanding is that he's also trying to protect the interests of "brick and mortar" book retailers.  ..

Not true. Non eBooks sales prices will still be controlled by the seller. Nothing is changing a'la Brick & Mortar stores and book prices

[loonlover]

I seem to recall buying new hardcover releases at B-N for less than the publishers' list prices.  For example discounts of say frfom $34.99 to $25.99.  If I read his press release correctly, that will no longer be the case and the full $34.99 will be price the consumers will pay.  I guess these prices will apply to Costco and Walmart, too?

I very frequently purchased new releases of hardcovers at B&N for much less than the publisher's list price.  I really can't remember the last time I paid the full price for a new release.  In the 6 months or so before getting my Kindle (July 2009) I also purchased below publisher's suggested price at Target and Kroger.  While new releases make up very few of my purchases, I still can't see paying almost as much for an e-book as I would pay for the hardback at one of the businesses mentioned above if they continue to discount.  If no one discounts hardbacks, then I will for sure just wait until the paperback is released or not purchase at all.