There are many things which need to be calculated when list pricing a book to determine ROI (return on investment…a quaint accounting term that means the ratio of money gained or lost on an investment (substitute your book) relative to the amount of money invested (substitute costs of preparing the book for sale).
When getting ready to publish a book, you have to factor in all those costs that occur before print time. This includes what you may have paid for professional editing, interior design/layout, cover design, ISBN number, plus the routine office drill of equipment, computer programs, paper, phone calls, faxes, etc. Okay, it is perfectly feasible to have shelled out $2,000 before the book ever heads off to the printer.
Using an average POD print cost (90 cents flat fee plus .013 cents per page print fee), we’ll price a book of 200 pages. The cost to print each book would be $3.50 per book (.90 + 2.60).
Okay, now how many books do we think can reasonably be sold? Want to go with 1,000? Then we need to add $2.00 ($2000 expenses divided by the number of books hopefully sold) to each book price to recoup our prepaid expenses. So now the true base price is $5.50 per book.
How much do you want as a royalty from the sale of each book? $5.00? But wait you’re want to sell through Amazon so you have to give them 55% of the list price. So you would have to set the price of your book at $23.35. ($23.35-12.82 (55%)-$5.50=$5.01). And if you go through Booksurge, your selling price would be $20.25 ($20.25-$9.72 (48%)-$5.50=$5.03).
What is the average price for a book in the same genre as yours? Be sure to compare apples to apples… Stephen King’s new 592 page hardback may list for $28.00 but if you are not quite as well-known and are offering a 200 page trade edition, you probably need to find something else a little more comparable. And what if you don’t sell 1,000 copies? What you only sell 500 or 250 or 100? Do the math substituting the new numbers…Yikes!
Demanding steep discounts on books that will seldom sell in high numbers is a proven path for making sure they don’t sell at all. That’s why Amazon is frontloading their costs. They’ll make money by charging $29.95 to join the Amazon Advantage program. They will charge set-up fees at Booksurge. And if it should accidently happen that a POD books actually is sold, they’ll take the lion’s share of that as well. (Gosh, you weren’t really in it for the money, were you?)
The book world is a tough place to make it. Cut corners in production and you have a sad, shoddy product even your mother may not want. Put in the necessary money to make it shine and you raise the number of copies you have to sell to break even.
And to be competitive in the market place means you may not be able to afford Amazon.
Tuesday, April 22, 2008
Saturday, April 19, 2008
Survival!?!
In the beginning…it was a relationship of mutualism. Publishers and authors needed outlets, Amazon needed product to fill it shelves and differentiate itself from the other book stores beginning to set up virtual shops. And it worked well. Red “Buy Now” buttons proliferated the internet. And with each red button, a subliminal message was being sent to the buying population. Golly gee, if that button was found on everything from John Grisham’s latest bestseller to that very esoteric tome on Patagonian economics, it was obviously the trusted place to go.
And Amazon made it easy for the loneliest of authors, the smallest of publishers to come aboard. A few clicks that even technophobes could handle and, boom, there you were on an equal par with a Stephen King or Random House. All those little blood red buttons fed Audrey Amazon very well and it grew and it grew until the day came when mutualism morphed into parasitism.
Amazon has no reason to care who they are going to bleed dry; who’s going to disappear from their shelves. They are playing a numbers game. They are betting there will always be someone who can’t wait to get their words into print, hang the cost. You see, they are in business. Unfortunately, the way they are currently doing business is directly affecting other businesses, like yours.
But what is happening to the POD world is something that happens daily in the world of people who make cars, washing machines, dresses, flea collars. Everyday businesses wake up to find a key supplier has just filed bankruptcy and shut their doors; war has broken out in the only country in the world able to supply their raw materials; several of their key people have run off and set up an identical shop…across the street.
That's why the same laws applying to survival of the specie also apply to business…adapt, mutate, or die. And now that the POD world has squawked and squalled, it’s time to hunker down and choose which of the three survival routes we are going to take in our own businesses.
Among numbers we’ve heard bandied around the publishing world is that 70% of all books published annually will sell less than 100 copies. So out of the approximately 200,000 books published, 140,000 will never be owned by anyone other the author’s family and friends. (This is not just POD books, large publishing houses birth their share of stillborns.) So obviously having a red button alone is not the ticket to fame and fortune.
The red button is just a tool and Amazon (B&N, Borders, Powell’s) is just a pipeline. It takes much more to prime the pump and get sales trickling steadily. And that’s the part POD publishers and authors have to take ownership of. We can adapt our numbers to hopefully feed Amazon and have something left over to survive on ourselves; we can mutate our business so it is no longer reliant on any one button; or we can hold a funeral for our hopes and dreams. The choice is ours…not Amazon’s.
And Amazon made it easy for the loneliest of authors, the smallest of publishers to come aboard. A few clicks that even technophobes could handle and, boom, there you were on an equal par with a Stephen King or Random House. All those little blood red buttons fed Audrey Amazon very well and it grew and it grew until the day came when mutualism morphed into parasitism.
Amazon has no reason to care who they are going to bleed dry; who’s going to disappear from their shelves. They are playing a numbers game. They are betting there will always be someone who can’t wait to get their words into print, hang the cost. You see, they are in business. Unfortunately, the way they are currently doing business is directly affecting other businesses, like yours.
But what is happening to the POD world is something that happens daily in the world of people who make cars, washing machines, dresses, flea collars. Everyday businesses wake up to find a key supplier has just filed bankruptcy and shut their doors; war has broken out in the only country in the world able to supply their raw materials; several of their key people have run off and set up an identical shop…across the street.
That's why the same laws applying to survival of the specie also apply to business…adapt, mutate, or die. And now that the POD world has squawked and squalled, it’s time to hunker down and choose which of the three survival routes we are going to take in our own businesses.
Among numbers we’ve heard bandied around the publishing world is that 70% of all books published annually will sell less than 100 copies. So out of the approximately 200,000 books published, 140,000 will never be owned by anyone other the author’s family and friends. (This is not just POD books, large publishing houses birth their share of stillborns.) So obviously having a red button alone is not the ticket to fame and fortune.
The red button is just a tool and Amazon (B&N, Borders, Powell’s) is just a pipeline. It takes much more to prime the pump and get sales trickling steadily. And that’s the part POD publishers and authors have to take ownership of. We can adapt our numbers to hopefully feed Amazon and have something left over to survive on ourselves; we can mutate our business so it is no longer reliant on any one button; or we can hold a funeral for our hopes and dreams. The choice is ours…not Amazon’s.
Tuesday, April 15, 2008
Shortening The Long Tail
Amazon is indicating they will list any book, however, if the book is not printed at Booksurge or the publisher/author is not part of the Advantage program, any orders will be sent to resellers.
We are curious as to how this is going to work based on a situation from our own company. We chose to reissue a fully revised, updated book that had seen first/last print in 2000. We made the unfortunate mistake of keeping the old title. When it was picked up from Ingram by Amazon, all the ancient information attached to it including links to some resellers. The copies offered by the resellers were the 2000 version by the prior publishing house. They in no way resembled the new edition.
That led us to wonder: is Amazon going to make it clear on a book’s page that they are not supplying the book; that it will be coming from a third-party reseller? (Caveat emptor?) What happens when there are no books available from resellers?
Does even putting up a page for a book which they have no intention of selling themselves because of their self-imposed rules create a violation of the Federal Trade Commission Act? The FTC says an ad is deceptive (a page on Amazon is an ad since they are offering a product for sale) if it is likely to mislead consumers acting reasonable under the circumstances and is “material”, that is, important to a consumer’s decision to buy the product. If a customer sees a book on Amazon, don’t they have the expectation of actually being able to buy that book from Amazon?
And where exactly will resellers be getting the books, if the books can’t be purchased from Amazon in the first place? Somehow, it seems a little weird that resellers will only have something to sell because they purchased it from someone else first.
Gosh, and have the brainiacs leading the POD charge done the math? If a book is listed for $14.95 and short-discounted for 25%, then that is $3.74. Now if a reseller puts the same book up for $7.00 and Amazon charges 15% (according to their Marketplace pricing info) plus 99 cents per transaction, they now have made $2.04. Oh, wait, they also charge a closing fee of $1.35 to sellers. Okay, that brings their total to $3.39. Yea, they only lost 35 cents on the deal!
Yes, we understand books can be sold for more to ensure the feeding of Amazon’s insatiable appetite but seriously, how many people are going to pay close to retail for a book they will also have to shell out heftily for shipping when they could click over to competitor A, B, or C and get a new book with the shipping thrown in?
Our thoughts are if you are small enough the gorillas wearing the big A haven’t shown up yet, don’t panic and sign up for anything. Amazon is maneuvering itself into a losing proposition. It made its reputation on being the go-to place for all those books from small and niche publishers that couldn’t be found on the local chain book shelves. (That’s us, right?)
Sit tight. Resellers have to get a book from somewhere in order to sell it on Amazon. Barnes & Noble or Borders won’t mind making money on new books while Amazon loses money on used books. The more of us that don’t sign, the greater the losses will be eventually.
And the odds are the FTC will eventually require even mighty Amazon to obey the rules about truth in advertising; either by clearly marking the pages as not available except through resellers or possibly taking the pages down altogether since they are not actually making the books available to be purchased. Remove a few hundred thousand book pages to comply with the FTC and guess what…you begin to look just like every other chain store.
We are curious as to how this is going to work based on a situation from our own company. We chose to reissue a fully revised, updated book that had seen first/last print in 2000. We made the unfortunate mistake of keeping the old title. When it was picked up from Ingram by Amazon, all the ancient information attached to it including links to some resellers. The copies offered by the resellers were the 2000 version by the prior publishing house. They in no way resembled the new edition.
That led us to wonder: is Amazon going to make it clear on a book’s page that they are not supplying the book; that it will be coming from a third-party reseller? (Caveat emptor?) What happens when there are no books available from resellers?
Does even putting up a page for a book which they have no intention of selling themselves because of their self-imposed rules create a violation of the Federal Trade Commission Act? The FTC says an ad is deceptive (a page on Amazon is an ad since they are offering a product for sale) if it is likely to mislead consumers acting reasonable under the circumstances and is “material”, that is, important to a consumer’s decision to buy the product. If a customer sees a book on Amazon, don’t they have the expectation of actually being able to buy that book from Amazon?
And where exactly will resellers be getting the books, if the books can’t be purchased from Amazon in the first place? Somehow, it seems a little weird that resellers will only have something to sell because they purchased it from someone else first.
Gosh, and have the brainiacs leading the POD charge done the math? If a book is listed for $14.95 and short-discounted for 25%, then that is $3.74. Now if a reseller puts the same book up for $7.00 and Amazon charges 15% (according to their Marketplace pricing info) plus 99 cents per transaction, they now have made $2.04. Oh, wait, they also charge a closing fee of $1.35 to sellers. Okay, that brings their total to $3.39. Yea, they only lost 35 cents on the deal!
Yes, we understand books can be sold for more to ensure the feeding of Amazon’s insatiable appetite but seriously, how many people are going to pay close to retail for a book they will also have to shell out heftily for shipping when they could click over to competitor A, B, or C and get a new book with the shipping thrown in?
Our thoughts are if you are small enough the gorillas wearing the big A haven’t shown up yet, don’t panic and sign up for anything. Amazon is maneuvering itself into a losing proposition. It made its reputation on being the go-to place for all those books from small and niche publishers that couldn’t be found on the local chain book shelves. (That’s us, right?)
Sit tight. Resellers have to get a book from somewhere in order to sell it on Amazon. Barnes & Noble or Borders won’t mind making money on new books while Amazon loses money on used books. The more of us that don’t sign, the greater the losses will be eventually.
And the odds are the FTC will eventually require even mighty Amazon to obey the rules about truth in advertising; either by clearly marking the pages as not available except through resellers or possibly taking the pages down altogether since they are not actually making the books available to be purchased. Remove a few hundred thousand book pages to comply with the FTC and guess what…you begin to look just like every other chain store.
Monday, April 14, 2008
The (Whose) Advantage
So, maybe you’re a free-spirit who doesn’t exactly want to be shackled into lock step with Amazon by its chief henchman, Igor Booksurge. But if the thought of being exiled to the land of no red buttons is causing heart palpitations, there is an alternative route. It’s called the Advantage program.
To join the Advantage program, for an annual fee of $29.95 and a 55% discount off your list price, you are permitted to send five copies of your book to the Amazon warehouse and keep your red button. Oh, wait a minute…you didn’t price your book with the 55% discount factored in? Hmmmm…let’s run some numbers. Your book is $15.00 minus the discount of 55% ($8.25). So now your gross profit is $6.75. Production costs are $3.83 (which incidentally, you will be prepaying plus the shipping to the warehouse). So your actual net profit is $2.92 per book. But darn, you paid that pesky $29.95 already. That’s an overhead cost which needs to be recouped. So dividing the $29.95 among the five books sent to the warehouse is $5.99. So now you actually have a net loss of $3.07 per book for those five books.
And we would think there is a question of whether, since you are granting (however involuntarily) a 55% discount to Amazon, if you will be required to grant it to all other book stores, virtual or otherwise, in order not to violate the Anti-Price Discrimination Act. (Sorry, we don’t know the answer to that question, but it could be worthwhile to find out before trouble starts knocking at the door.)
A curious thought just came into our heads. They are demanding 55% from Advantage members and 48% from PODs using Booksurge. Is that 7% difference significant? Does it correlate to profit margins being built into the cost of each book printed through Booksurge? Is it what they figure you should be paying for the space your five books are taking up in their warehouse? Or is it just punitive?
Before leaping to sign on the digital line, work through the numbers carefully. How many books will need to be sold through Amazon’s Advantage program before it becomes profitable? Will you have to raise the price of your book to compensate for the higher discount? And if you do, will you be pricing yourself out of the market?
Writing isn’t just an art; it’s a business for everyone from authors to publishers to book sellers. Amazon has the right to make money, just not ALL the money.
To join the Advantage program, for an annual fee of $29.95 and a 55% discount off your list price, you are permitted to send five copies of your book to the Amazon warehouse and keep your red button. Oh, wait a minute…you didn’t price your book with the 55% discount factored in? Hmmmm…let’s run some numbers. Your book is $15.00 minus the discount of 55% ($8.25). So now your gross profit is $6.75. Production costs are $3.83 (which incidentally, you will be prepaying plus the shipping to the warehouse). So your actual net profit is $2.92 per book. But darn, you paid that pesky $29.95 already. That’s an overhead cost which needs to be recouped. So dividing the $29.95 among the five books sent to the warehouse is $5.99. So now you actually have a net loss of $3.07 per book for those five books.
And we would think there is a question of whether, since you are granting (however involuntarily) a 55% discount to Amazon, if you will be required to grant it to all other book stores, virtual or otherwise, in order not to violate the Anti-Price Discrimination Act. (Sorry, we don’t know the answer to that question, but it could be worthwhile to find out before trouble starts knocking at the door.)
A curious thought just came into our heads. They are demanding 55% from Advantage members and 48% from PODs using Booksurge. Is that 7% difference significant? Does it correlate to profit margins being built into the cost of each book printed through Booksurge? Is it what they figure you should be paying for the space your five books are taking up in their warehouse? Or is it just punitive?
Before leaping to sign on the digital line, work through the numbers carefully. How many books will need to be sold through Amazon’s Advantage program before it becomes profitable? Will you have to raise the price of your book to compensate for the higher discount? And if you do, will you be pricing yourself out of the market?
Writing isn’t just an art; it’s a business for everyone from authors to publishers to book sellers. Amazon has the right to make money, just not ALL the money.
Thursday, April 10, 2008
There's An Amazon In Your Pocket-Big Time!
Okay, sharpen those pencils, pull out the pocket calculator and let’s tot up what the wages will be working as a serf in the kingdom of Amazon. Since it is currently easier to get a hold of nuclear secrets than it is Amazon’s POD contract, we came up with some hypotheses extrapolated from bits and pieces we have found scattered around the web.
Hypothesis No. 1: The contract is not likely tilted to the benefit of POD publishers and authors. Why? Because nobody who signs it is allowed to say anything about it. It has that, “an offer you can’t refuse” Godfather feel; the one you sign so they don’t break your kid’s fingers.
A Little More Than a Hypothesis No. 2: One bit of leakage is that you must set the list price of your book at or below what you or any other vendor can sell it for. Translation: you can NEVER sell it or allow it to be sold for less than what Amazon is selling it for. Amazon reserves the absolute right to increase its discount (lower your book price) when and how it chooses, even if it puts you in the place where you might actually OWE them for each book sold. Basically, you will be granting them exclusive right to set the price of your book. (And no, dear, they don’t care about your overhead or author commitments.)
A Little More than a Hypothesis No. 3: Amazon is demanding a minimum of a 48% discount on each book. That will also require that 48% discount be given to every other bookstore you sign up with, virtual or otherwise. (It’s the law.) No more opportunity to use short discounts to make the price of your book competitive in the virtual marketplace.
Hypothesis No. 4: Once publishers and authors are locked into their contracts, Amazon has the power to potentially rig the entire game in their favor because you have NO CHOICE. They can charge whatever they want for set-up fees, per page print fees, even an annual storage fee for keeping your book in their computer. And then there is the opportunity of creating other streams of income by requiring books be edited and designed through their services which means they could force all promotional materials such as postcards, bookmarks, etc. be purchased through their sources. (If they do the cover design, where are you going to get the files to send to another printer?)
Hypothesis No. 5: Nobody’s mentioning returns, that ubiquitous albatross hanging on the publishing world’s neck. What will be the policy on that and how will it affect you? Well, looking at the Member Agreement on Amazon’s CreateSpace site, returns (excepting flawed products) are deducted from the publisher/author sales credit account with no extra fee charge. HOWEVER, returns made for misrepresentation of the content of a title result in a $10 charge in addition to the deduction of the sales credit. Also Amazon, in its sole discretion, determines what happens to returned copies. They can accept a return, deduct the sales credit from your account and then use the book to fill another order without paying you the sales credit. Gosh, they get paid twice for the same unit and you get zilch! Kinda make you wonder what's in the real-deal contract, doesn't it?
Stay tuned for Part II-The (Whose) Advantage program!
Hypothesis No. 1: The contract is not likely tilted to the benefit of POD publishers and authors. Why? Because nobody who signs it is allowed to say anything about it. It has that, “an offer you can’t refuse” Godfather feel; the one you sign so they don’t break your kid’s fingers.
A Little More Than a Hypothesis No. 2: One bit of leakage is that you must set the list price of your book at or below what you or any other vendor can sell it for. Translation: you can NEVER sell it or allow it to be sold for less than what Amazon is selling it for. Amazon reserves the absolute right to increase its discount (lower your book price) when and how it chooses, even if it puts you in the place where you might actually OWE them for each book sold. Basically, you will be granting them exclusive right to set the price of your book. (And no, dear, they don’t care about your overhead or author commitments.)
A Little More than a Hypothesis No. 3: Amazon is demanding a minimum of a 48% discount on each book. That will also require that 48% discount be given to every other bookstore you sign up with, virtual or otherwise. (It’s the law.) No more opportunity to use short discounts to make the price of your book competitive in the virtual marketplace.
Hypothesis No. 4: Once publishers and authors are locked into their contracts, Amazon has the power to potentially rig the entire game in their favor because you have NO CHOICE. They can charge whatever they want for set-up fees, per page print fees, even an annual storage fee for keeping your book in their computer. And then there is the opportunity of creating other streams of income by requiring books be edited and designed through their services which means they could force all promotional materials such as postcards, bookmarks, etc. be purchased through their sources. (If they do the cover design, where are you going to get the files to send to another printer?)
Hypothesis No. 5: Nobody’s mentioning returns, that ubiquitous albatross hanging on the publishing world’s neck. What will be the policy on that and how will it affect you? Well, looking at the Member Agreement on Amazon’s CreateSpace site, returns (excepting flawed products) are deducted from the publisher/author sales credit account with no extra fee charge. HOWEVER, returns made for misrepresentation of the content of a title result in a $10 charge in addition to the deduction of the sales credit. Also Amazon, in its sole discretion, determines what happens to returned copies. They can accept a return, deduct the sales credit from your account and then use the book to fill another order without paying you the sales credit. Gosh, they get paid twice for the same unit and you get zilch! Kinda make you wonder what's in the real-deal contract, doesn't it?
Stay tuned for Part II-The (Whose) Advantage program!
Tuesday, April 8, 2008
Cave-In!
Amazon has laid siege to the Print on Demand industry. For all the gory details, there is no better place to go than http://www.writersweekly.com/ and click on the Amazon Booksurge Information Clearinghouse box.
In the corporate world it is a move called vertical integration or, as it usually turns out for everyone from producers of products to consumers, “up yours”.
In a nutshell Amazon is demanding every single book in the country that is printed through POD technology be printed by Booksurge, a company which, good golly, what a coincidence, they own. Refusal will guarantee (warning: evil consequences ahead) they will not stock or sell a book. The “Buy Now” button goes bye-bye. (Yes, there is an alternative but that deserves its own space. Stay tuned.)
And since the bomb landed, blog after blog has ranted and raved about the unfairness of the situation but admitted by the end they have caved because they “have no choice.” That’s because Amazon has done an absolutely brilliant job of brain-washing the POD community into believing the only books sold anywhere, anytime are through them. In actuality, Amazon accounts for 15% of books sold. Hmmm…that means out of every 100 books, Amazon sells 15 and 85 are sold by others.
Frankly, the buttons appearing to be shut off are attached to books with low sales. Is Amazon really going to shut down the button on someone who’s selling several hundred books daily? (And if they do, is that the kind of evil overlord you want in charge of your future?)
So maybe those buttons aren’t really magic. Maybe they are just security blankets; keys to the publishing washroom; proof one is a writer. The button is absolutely meaningless until an effort has been put in to promote a book enough that someone actually clicks through and buys it. (And wanna bet, should a book they don’t produce suddenly become an Oprah pick, they might be willing to bend the button rule just a tad?)
It takes the same effort to sell a book through Amazon as it would through B&N or Borders or even out of the trunk of a car (don’t smirk, James Redfield sold 90,000 copies of the Celestine Prophecy that way), so why do so many think they must sign their future over to Amazon just to possess a red button.
In the corporate world it is a move called vertical integration or, as it usually turns out for everyone from producers of products to consumers, “up yours”.
In a nutshell Amazon is demanding every single book in the country that is printed through POD technology be printed by Booksurge, a company which, good golly, what a coincidence, they own. Refusal will guarantee (warning: evil consequences ahead) they will not stock or sell a book. The “Buy Now” button goes bye-bye. (Yes, there is an alternative but that deserves its own space. Stay tuned.)
And since the bomb landed, blog after blog has ranted and raved about the unfairness of the situation but admitted by the end they have caved because they “have no choice.” That’s because Amazon has done an absolutely brilliant job of brain-washing the POD community into believing the only books sold anywhere, anytime are through them. In actuality, Amazon accounts for 15% of books sold. Hmmm…that means out of every 100 books, Amazon sells 15 and 85 are sold by others.
Frankly, the buttons appearing to be shut off are attached to books with low sales. Is Amazon really going to shut down the button on someone who’s selling several hundred books daily? (And if they do, is that the kind of evil overlord you want in charge of your future?)
So maybe those buttons aren’t really magic. Maybe they are just security blankets; keys to the publishing washroom; proof one is a writer. The button is absolutely meaningless until an effort has been put in to promote a book enough that someone actually clicks through and buys it. (And wanna bet, should a book they don’t produce suddenly become an Oprah pick, they might be willing to bend the button rule just a tad?)
It takes the same effort to sell a book through Amazon as it would through B&N or Borders or even out of the trunk of a car (don’t smirk, James Redfield sold 90,000 copies of the Celestine Prophecy that way), so why do so many think they must sign their future over to Amazon just to possess a red button.
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