I read with interest your comments in the Financial Times of August 31, 2009, regarding the fact that “unilateral pricing by Google, Amazon and other e-book retailers such as Barnes & Noble could destroy publishers’ profits and kill the lucrative trade in hardbacks.” I write to warn you that, if your primary concern is retaining the profit in hardbacks, you will repeat the errors of numerous of C-level peers in media companies, from newspapers and magazines to the music and television industries. Instead, you should be prepared to wipe out your hardcover profits over the next five years to retain your relationship with readers. The real reason Amazon is selling e-books at a loss today is to take the demand-creation relationship away from you.
The hardcover is a package for printed content. Despite it’s wonderful history, the codex form factor in its various sizes of hardbound pages, is just a package, albeit one tightly bound up in the distribution processes traditional to publishing. The hardback book has led the publishing parade for centuries, but has given way in the era of industrial publishing to paperbacks, so that now far more than half the books published are never released in hardback. Hardbacks are seldom profitable, despite what the FT article says, relying on unexpected hits to produce the lion’s share of profit at a publishing house. Predictably successful hardback first editions, such as the upcoming Dan Brown novel, The Lost Symbol, are less profitable than the surprise hit because of the deep discounts demanded by retailers online and off.
Hardbacks are the best way to test the market for viable trade paper titles that will thrive in your midlist, because they are more likely to end up in discount bins than as returns. Rather, I should write “Hardbacks were the best way…” as the e-book is poised to take the place of hardbacks as first-edition-to-market because they can be sampled by chapter and, even, given away to spark readership wildfires. Newspaper companies failed to see that preserving the newspaper killed the news that made the daily edition valuable. The form factor in newspapers and books are deeply integrated into the distribution systems on which these industries rely. Moving books or morning editions from place to place has been the key to profitability for publishing since before any of us were born. It’s over, as newspaper companies prove daily.
Distribution is no longer the hard problem in publishing or any form of information delivery. It’s a competence that Hachette should shed in favor of outsourced relationships with, among others, Amazon and Google. Amazon can move books much more cheaply than any publisher. They could probably print them more cheaply, too. Both Amazon and Google can move virtually unlimited volumes of bits anywhere on the planet at a fraction of the price Hachette can deliver books to retail.
Amazon is not poised to tell Hachette and other publishers that it will pay a smaller share of $9.99, they are thinking about whether