E-Books, Business Models and Sloppy Reporting in NY Times

A New York Times reporter asks an interesting question — How Much Should an E-Book Cost? — in a Week in Review article, but her reporting is so shallow that the answer is murky at best.

She starts this piece with an anecdote about a best-seller by political thriller writer David Baldacci. The book’s Amazon Kindle price was originally set at over $15, but that price set off a rebellion among the author’s fans, one of whom wrote on the comments at Amazon that the price was just too high to bother with his work.

The fan’s comment, Rich writes:

was a chilling sentiment for authors and publishers, who have grown used to an average cover price of $26 for a new hardcover. Now, in the evolving Kindle world, $9.99 is becoming the familiar price. But is that justified just because paper has been removed from the equation?

For many readers, this may sound like sufficient reason. Buying music, after all, is so much cheaper now that there aren’t discs and plastic cases. Shouldn’t the same logic apply to books? And if not, won’t the temptation to steal electronic copies online simply increase?

Publishers and authors say it is much more complicated than the cost of paper and shipping. The lower e-book price “is not sustainable,” said Mr. Baldacci, whose novels regularly rise to the top of hardcover best seller lists. If readers insist on cut-rate electronic books, he said, “unfortunately there won’t be anyone selling it anymore because you just can’t make any money.”

First things first: The price of Baldacci’s book was re-set at $9.99 (a price I will henceforth refer to as $10), and it’s selling like digital hotcakes; I guess you can make money this way, after all. Nowhere in the article is this mentioned. I truly hope that’s a reflection of sloppy editing, not incompetent reporting.

Now, sellers have every right to charge more for popular books, especially when they’re new. This is basic supply and demand. But the revolt by Amazon customers has had everything to do with the publishing industry’s belief that it can charge higher prices for inferior products.

The kinds of books I buy for my Kindle, as I noted in a recent piece for the All Things Digital site, fall generally under the casual entertainment category. I buy a Kindle book the way I buy a movie ticket — for books, like most movies, that I’ll read or watch once and forget about. A physical book is more like a DVD–something I want to own and enjoy again and again.

So my Kindle purchases are like the books I used to buy in airport newsstands, such as mysteries, thrillers and semi-trashy novels that I’d sometimes leave in hotels or airplane seat-back pockets once I’d finished them. And once I got accustomed to reading e-books, I started doing something that had been out of character in the analog era: buying new books that, in print, were available in hardcover only. Why? The $10 price felt right. In fact, my new-book purchases soared.

Then the Kindle prices started soaring for new best-sellers. I stopped buying. (I save these titles to a list I keep on the Amazon website, called “Too expensive on Kindle,” and periodically check to see if the price has dropped. So far, not yet on any of these.)

Hiking prices this way creates a bad deal for the customer. Amazon’s price for a new hardcover is typically just a couple of dollars higher. This means I could buy the hardcover, read it and donate it to my local library, and–after the tax deduction–come out ahead. I’d do even better taking the book to my local used-book store and getting cash.

The ability to give away or sell a used book is called the “First Sale Doctrine” in copyright law. But by sending me a digital file and tethering that file to a specific device, Amazon and the publishers have removed my right to transfer it, and thereby destroyed a portion of the book’s value. By all rights they should offer me a better price, considerably better, than the hardcover (or, for that matter, softcover) edition.

Nowhere in Rich’s article does she even hint at this. Moreover, she appears to entirely take the word of publishers on several key facts, notably when they claim that Amazon’s $10 price is a loss-leader and not a price to which they’ve agreed. An Amazon customer service person told me that the higher new prices for Kindle books were a reflection of the publishers’ decision that they, not Amazon, wanted to charge higher prices.

I’m not saying all this to defend Amazon (in which I own a small amount of stock). In fact, I find the Kindle an extremely troubling device, in part because of the way it removes my rights to do what I want with what I’ve purchased. Amazon’s digital rights management system is, like that of the DRM employed by the entertainment industry for movies and music (thankfully disappearing with the latter), a system for restricting customer rights, and it’s bad news in every way.

Moreover, I agree with Cory Doctorow that the publishing industry is foolish to allow Amazon to set the terms of its future existence, as Amazon is certainly trying to do. The publishers could market their own electronic versions and cut out the middleman entirely (like my publisher, O’Reilly Media — though O’Reilly sells via Amazon, too, in non-DRM versions in all cases). Amazon’s value-add, however — or their own myopia — is sufficiently robust that they toe the line, at least in part.

The whining by author Baldacci, unchallenged by reporter Rich, is just pathetic. No one is forcing him to release his books in digital form. He and his publisher are entirely free to say no, or to offer their own digital edition. The real worry, as Rich does report:

The doomsday scenario for publishing is that the e-book versions cannibalize higher-price print sales. Publishing houses, already suffering from the recession, could be forced to cut author advances or lay off more editors.

Ah, now we understand what’s really going on in this situation. It’s about the enormous advances that Baldacci might have to trim. It’s the possibility that people will buy at the paperback price (actually higher) for a new book, not that they’ll stop reading what authors write.

The business is definitely changing. It’s too bad that publishers and rich authors are resisting change with all their might.

It’s equally problematic that journalists on these issues can’t be bothered to dig just a little deeper when they raise important questions.