John Sargent answers questions about Macmillan agency pricing

John Sargent of Macmillan has posted a new blog entry, in which he takes a look at four questions that cover the general gamut of the comments he received to his previous one.

The first question Sargent addresses is how much an e-book should cost. He takes a look at several differing points of view—it should cost the same as a hardcover, it should cost almost nothing, it should be tethered at just below the price of the cheapest paper form—and concludes:

In the end, an e book will be priced to reflect the value consumers put on it. We believe at first release an e book is worth more and people will pay more for it. Over time it will become worth less as demand tapers. However, some digital books will retain their value over time just like print books. Some will increase their value over time (many physical books are now only available as trade paperbacks, after they have been out in the cheaper mass market formats). So our digital pricing will vary to reflect the value of the book at the time. But in general, our plan is to price books below ten dollars after there initial sales demand slows (usually within a year).

Along the way, he trots out the same argument that publishers always make concerning e-book pricing: the printing cost is a tiny fraction of the price of a hardcover, and publishers need to pay fixed costs such as royalties, editing, and overhead out of what they make as well. (Of course, Baen is still able to sell its e-books much more cheaply; Toni Weisskopf explains how in this interview.)

In his second answer, Sargent makes it clear that retailers will not have the flexibility to offer e-books at a discount, as Macmillan will control the price.

It is not clear whether this will affect the types of “sale” Fictionwise and eReader offer, where book-buyers get an amount of store credit pegged to the purchase price of the e-book rather than directly discounting the e-book itself. Hopefully not, or Fictionwise might have a number of unhappy customers of its Buywise discount club.

His third answer was to my question—how can Macmillan be trusted to carry through on its pricing pledge. He notes that Macmillan has never yet made a pricing pledge, and adds:

Historically, e book pricing has been driven by a number of factors, and it may well have appeared to be inconsistent.  We never promised to price books in a certain way and have actually never controlled retail prices before now.  And many of our decisions on list prices were driven more by our Amazon relationship than by our relationship with consumers.

I’m pretty sure that can’t be entirely correct. Macmillan has always set its wholesale price, and nothing was stopping it from reducing the e-book price once the book was in paperback. And Amazon has only been selling e-books for the last two years, so there were eight years before that in which Amazon would not have been a factor.

In fact, I definitely remember hearing in conversations with employees of eReader and Fictionwise in years gone by that e-book pricing issues were something of a headache. They had to get the publishers to reduce their e-book wholesale price before they could reduce the e-book retail price, and publishers always lagged behind in getting that done. But I don’t have links I can include. (I have a feeling that the messages are probably buried in the voluminous archives of Jon Noring’s e-book mailing list, if anyone would care to archive-dive for them.)

Finally, Sargent says that Macmillan will be repricing to $9.99 or less e-books that cost $14 while paperback versions are available. (I could wish the question had been better worded, as it does not mention e-books that are $20 or more while paperback versions are available, but I’m going to hope that was just poor phrasing in the answer.)

On the whole, while some of the answers make me a bit skeptical, I must admit it could be worse. It is good to see Sargent making the effort to communicate clearly to consumers in a straightforward manner. Agency pricing is still going to be annoying in terms of the way it hobbles competition, but I suppose we will have to make the best of it.

Related: Sargent compares libraries to Netflix

11 Comments on John Sargent answers questions about Macmillan agency pricing

  1. Physical books can increase in value over time because of scarcity; why would ebooks increase in value over time?

  2. Chris, the constant holding up Baen as the epitome of the way to run a publishing house is not supportive of the points you want to make — at least not to my way of thinking.

    Weisskopf made it very clear in her interview that Baen is a niche publisher that is able, because it is a niche publisher, have more direct contact with its ultimate customers and thus can avoid the middleman. Baen has a loyal following, something it can have as a niche publisher and something Macmillan as a much larger and more general/diverse publisher cannot have.

    The Baen model will work well for niche publishers. But think about it if every publisher followed the Baen model — you would either have to spend numerous hours checking out each publisher’s website or miss new works published by other mid-tier publishers.

  3. The fundamental issue is that Macmillan and Baen (or most smaller/mid presses) have different business models – Macmillan counts on rare huge bestsellers to essentially subsidize the rest and hence it throws books out like spaghetti to the wall and affords the individual losses to be made up overall by the occasional big winners which essentially have to be there given people’s buying habits…

    Now of course it may happen that one season all big winners come only from say Penguin, but Macmillan can take that and the odds are against

    Ebooks so far threaten that model, while the upside of adding 1000$ here and 10k there seems not to be worth the risk

    At Baen each book is expected to carry its weight and the one time they ventured (probably by accident) in the deep waters Macmillan and their ilk live in, they almost sank – Google 1945 Baen Gingrich and see why that book almost bankrupted Baen –

    What this means for ebooks overall imho is that their model is perfect for the many small presses that are sprouting these days and is actually imitated by a quite a few that offer cheap ebooks and regular price print edition – see Chizine pub or Mercury Retrograde press for two I especially like in the sff/horror field –

    But for the deep waters publishing field of the giants who knows what if anything will work and here Amazon offered something that made consumers “bite” but displeased the publishers, so the battle is still on…

    Personally I would love 1000 Baen’s and 0 Macmillan and their 5 brethren, but…

  4. Rich,
    When you say that Macmillan isn’t a niche publisher – yes, obviously. But within Macmillan, there’s plenty of ‘niche’ _imprints_ (Tor being the obvious parallel, with it’s community building at Tor.com). Any of those could, if they wanted – and Macmillan allowed – follow Baen’s model. That would allow Macmillan to experiment on different delivery mechanisms without ‘betting the farm’ on any of them. Will they do it? Hmmm, let me think…

    And as for:

    But think about it if every publisher followed the Baen model — you would either have to spend numerous hours checking out each publisher’s website or miss new works published by other mid-tier publishers.

    …what a problem to have! What disadvantage does this have? Compared to the current system?

  5. A physical book can come in a variety of guises – hardback, paperback, trade paperback, luxury signed calf-leather-bound limited edition, etc etc. There’s absolutely no reason that the same sort of segmentation can’t be applied to the digital marketplace.

    One-size doesn’t fit all in terms of pricing, and it doesn’t fit in terms of the offering either. There’s ample scope for publishers to differentiate ebooks in terms of the quality of their presentation and use that to maximise profits in the same way that they do for physical product.

    As for Baen:

    Can a used book sale or a library loan introduce my author, my series, my brand to a new reader … —heck, yes. My goal is to make more readers for my brand. ANY sale has the potential to do that.

    Toni Weisskopf said it all – Baen is selling a brand, and they operate in an niche in which that strategy works. Comparisons to general publishers are simply invalid.

  6. Charles,
    when you say that ‘Comparisons to general publishers are invalid’, could you provide any evidence? Even if that’s true, big publishers also work in Baen’s niche… Tor, Ace, Daw, Roc imprints. We know that Baen’s model works in this niche, so why aren’t other publishers experimenting with it, at least on an imprint level? It would be one thing for big publishers to say: ‘we have tried it, it doesn’t work’, it’s another for them to… not bother? Not care?

  7. As for the whole Baen thing, while I love webscription.net and more than 90% of my ebook money goes to them, I suppose most big publishers won’t be interested in this model, even on the imprint level, because such a model makes it virtually impossible to sustain the “bestseller of the year” business strategy they usually work with (and they work with this strategy even on the imprint level, once the very definition of “bestseller” is relative to genre, among other factors).

    Baen expects each of their books to to pull their own weight but they don’t expect those books to finance all the rest (Toni Weisskopf’s own words: “http://newteleread.com/wordpress/2010/03/11/interview-toni-weisskopf-publisher-of-baen-books/”). That’s not how big publishers work. They expect one or two books in their catalogue to bring in huge profit, in order to pay for the ones they know will only break even, if much.

    The whole ebook pricing problem and the fact that ebooks are inevitable, even if they won’t take paper books off the market (and they probably won’t), points to a direction in which ebook rights will be negotiated in separate, sold to companies who know how to make and market ebooks as a product on their own, as opposed to traditional publishers which don’t see them as such.

  8. Thiago,
    I seriously doubt that Tor, for instance, doesn’t expect ‘each of their books to to pull their own weight’. They may well pay more for titles that they think will do better, but I very much doubt that this is such a huge difference in corporate strategy that it would render the results from Baen’s experiment inapplicable. Certainly, there has been no evidence, of any sort that I’m aware, that releasing DRM-free ebooks would result in a loss of sales. I might be wrong; if I am, please correct me!

  9. @ Stuart

    I don’t think they don’t expect each of their own books to pull their own weight, but they still count on a few books which they know will sell a lot (like the recently released “The Gathering Storm”, in the Wheel of Time series) to pay for other books which they don’t expect to bring much cash. Teresa Nielsen Hayden herself wrote something to that effect on a bunch of comentaries and in her own blog, Making Light, right at the beginning of the Macmillan/Amazon thing (http://nielsenhayden.com/makinglight/archives/012148.html#396969).

    As for wether DRM free ebooks would result in loss of sales I suspect it should be quite the contrary. But the point is big publishers won’t let go of having control (or the illusion of control) over their own product so easily. This very weekend Chris Meadows wrote that post about how Sargent is going after libraries, how he wants Macmillan to get paid everytime some library lends a Macmillan ebook.

    It’s not so much that I think Baen’s models just wouldn’t work for big publishing companies, it’s that I think they just wouldn’t try it. The agency model Sargent pushed on Amazon is evidence to that. They’d rather have a model that treats ebooks like paper books than one in which ebooks are their own thing.

  10. FYI, I didn’t write the libraries post.

  11. Yes, I’m sorry, it was Chris Wlaters. I knew it had been a Chris, and your name automatically popped up. I stand corrected.

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