In the past two weeks, the publishing company Penguin decided to ban libraries from lending ebooks and the US Authors Guild decried Amazon’s lending library as a breach of contract.

My dilemma with ebooks continues.

On the one side, the convenience factor seems almost overwhelming. Ever since I discovered that I could borrow ebooks from the local public libraries and read them on my iPhone, I’ve read only a few print books. When we travel, the lightened load is visible. I still read four or five books at any given time, but they weigh nothing. When Amazon managed to get the libraries to lend out ebooks in the format supported by their Kindle device, things became even better. Unlike Overdrive, Amazon gets the reading experience right. I can mark passages, copy them to my trusty Evernote notebook, lookup the dictionary and so on with Kindle; all things that are impossible with Overdrive and Adobe’s EPUB format (though I confess I don’t know if this is a limitation of the format, the application or the DRM enforced by the publishers). All the passages and notes are saved even when the lending period is over. If I ever choose to buy the book or if I borrow the book again, all of my highlights and annotations are immediately available in my purchased copy.

On the other side, the rotten side of ebooks continues to bother me. If my previous complaints were about the format, in this entry I focus on my frustrations with the business side of ebooks.

Just like the music industry, the publishing industry is dragging its feet over the distribution and use of ebooks. First, it was Harper and Collins talking of limiting the number of times an ebook could be checked out before a library had to purchase the book again. Now, multiple publishers are banning the complete use of ebooks by libraries. I came across this latest fiasco over at the Media Decoder blog at New York Times. Here is the reason quoted by Penguin for banning the use of their ebooks by libraries:

Penguin’s aim is to always connect writers and readers, and with that goal in mind, we remain committed to working closely with our business partners and the library community to forge a distribution model that is secure and viable,” Erica Glass, a spokeswoman for Penguin, said in a statement issued Monday. “In the meantime, we want to assure you that physical editions of our new titles will continue to be available in libraries everywhere.

Security concern as the concern for banning lending of ebooks ? WTF ? Whose security ? Certainly not the readers or the libraries. It is the security of their business. And what a load of horse manure to say that Penguin’s aim is to connect writers and readers. They conveniently leave out the phrase “while protecting our business”.

Apparently, Penguin is only the latest in a string of publishing houses that have enforced similar bans. Macmillan, Simon & Schuster and The Hachette Book Group already disallow new books from being used by libraries. The concern is that consumers will choose not to buy books if they can borrow them. But, how is this different from what happens with physical copies today ?

The Costs of Publishing

From a 2007 article in the New York Magazine, I came across this statistic about the Random House publishing company:

Annual Revenue: $2.3 billion ($230 million is profit).

Sources of Revenue: Fiction: 55 percent; how-to, nonfiction, lifestyle: 22 percent; children’s: 20 percent; Christian: 3 percent. Under 10 percent of profits come from top-ten titles such as The Audacity of Hope, by Barack Obama.

Overhead Costs: Two thirds of Random House’s income comes from paperbacks, which retail for about $10. Of that, $5 goes to the retailer; $2 covers Random House buildings and staff; $1.50 goes to author payments; $1 goes to paper, printing, and binding; 50 cents is profit.

Another article, this time in the New Yorker Magazine, puts the costs of publishing as follows:

On a new, twenty-six-dollar hardcover, the publisher typically receives thirteen dollars. Authors are paid royalties at a rate of about fifteen per cent of the cover price; this accounts for $3.90. Perhaps $1.80 goes to the costs of paper, printing, and binding, a dollar to marketing, and $1.70 to distribution. The remaining $4.60 must pay for rent, editors, a sales force, and any write-offs of unearned author advances. Bookstores return about thirty-five per cent of the hardcovers they buy, and publishers write off the cost of producing those books. Profit margins are slim.

But consider the costs of publishing a printed book compared to the cost of publishing an ebook. E-books don’t need physical retail space such as those required by physical books. This means that retailers can afford to take a lower cut than the current 50%. Furthermore, the costs associated with printing and distributing the books is reduced to practically zero. Publishers today have to write-off losses associated with printing books that undersell even the initial printing numbers. With ebooks, all this writeoff goes to zero.

I may not be too far off in my calculations. According to this 2009 article in Bloomberg, publishers make $2.15 per ebook compared to only 26 cents per printed book. Amazon, the largest ebook retailer today, pays $12-$13 to the publisher to sell a book for $9.99. This means that Amazon is making a loss of $2-$3 per book. Amazon is doing this hoping to establish an unassailable beach head in the ebook business.

Wither The Publisher ?

In the article on ebooks in the New Yorker magazine, Carolyn Reidy, of Simon & Schuster publishing house says:

In the digital world, it is possible for authors to publish without publishers. It is therefore incumbent on us to prove our worth to authors every day.

In a blog by a librarian titled “Confessions of a Science Librarian”, the author says something similar in this entry:

The print business model grows out of scarcity. Physical objects cost money to produce and are by definition limited in numbers. The last time I checked, there was no scarcity of text to read online.

The only scarcity that is potentially exploitable in the online world is of good text and publishers need to find a way to insert themselves into the equation by convincing people that filtering the wheat from the chaff and organizing and curating the good stuff is worth paying for.

Amazon is doing what it can to push traditional publishers off the cliff. An article published in NYT a couple of weeks back starts like this:

Amazon.com has taught readers that they do not need bookstores. Now it is encouraging writers to cast aside their publishers.

Citing the different segments Amazon is hoping to consolidate, one agent says:

“Everyone’s afraid of Amazon,” said Richard Curtis, a longtime agent who is also an e-book publisher. “If you’re a bookstore, Amazon has been in competition with you for some time. If you’re a publisher, one day you wake up and Amazon is competing with you too. And if you’re an agent, Amazon may be stealing your lunch because it is offering authors the opportunity to publish directly and cut you out.

One of Amazon’s top executives is quoted as saying that the only two entities needed in the world of digital publishing are the writer and the reader and that everybody else is just in the way. Amazon is offering 70% royalty (at least according to the 2009 New Yorker article) for those who offer Amazon direct digital copyright and agreed to a price between $2.99 and $7.99. 70% is a significant increase compared to the existing 10-15 % offered by traditional publishing houses.

Amazon’s self publishing model has certainly attracted a lot of writers who find it difficult to get as much as a foot in a publisher’s door, as the story of one author shows:

Laurel Saville was locked out by the old system, when New York publishers were the gatekeepers. “I got lots and lots of praise but no takers,” said Ms. Saville, 48, a business writer who lives in Little Falls, N.Y.

Ms. Saville no longer even contemplates a career with a traditional publisher. “They had their shot,” she said. She is now writing a novel. “My hope is Amazon will think it’s wonderful and we’ll go happily off into the publishing sunset,” she said.

No wonder the traditional publishing houses are running scared. But instead of competing with Amazon, they’re indulging in negative tactics such as delaying the release of ebooks compared to the print edition (similar to how it releases the hard cover version long before it releases the paperback edition) and making enemies of libraries with their obnoxious policies.

The whole publishing world will be completely transformed in a few years, I think, but maybe not necessarily in beneficial ways.

Authors Guild Complains About Amazon

But the publishing industry isn’t the only one striking out against Amazon and ebooks. Amazon opened a lending program a few weeks back whereby subscribers to the Amazon Prime program would be able to borrow one ebook a month for free, much like a library. Two weeks back, the US Authors Guild complained loudly that Amazon’s library was a breach of contract. Literary agents too complained that they failed to see how this program would benefit their clients, the authors. I don’t know the extent to which the Authors Guild represents the views of the authors as opposed to being some form of a business association, more focused on the economics of writing rather than writing itself.

A Writer’s Point of View

I wonder what authors want. I suspect there’ll be two camps. One camp will be those who want to make a living off of writing and the other will consist of those who write merely for the joy of writing, not necessarily to make money. The blogging world and wikipedia are prime examples of how such writers are not an anomaly. Just like software programmers are willing to spend substantial hours to put out software for free, I’m sure there are many writers who’ll be glad to have their work out in the world. And just like there are paid programmers and programmers who work for free (or at least moonlight in this), I suspect there maybe both kinds of writers.

An Ebook Manifesto

In the blog “Confessions Of A Science Librarian”, the author has an entry titled “The eBook Users Bill of Rights” where he captures what he thinks are the minimum requirements of a good ebook policy:

Every eBook user should have the following rights:

• the right to use eBooks under guidelines that favor access over proprietary limitations
• the right to access eBooks on any technological platform, including the hardware and software the user chooses
• the right to annotate, quote passages, print, and share eBook content within the spirit of fair use and copyright
• the right of the first-sale doctrine extended to digital content, allowing the eBook owner the right to retain, archive, share, and re-sell purchased eBooks

Once we start with this, as a user, I’ll be far more comfortable with using ebooks.

And when it comes to publishing houses and what is required to get access to them, I think of Emily Dickinson, the poet. She wrote all her poems in anonymity, writing them for her own pleasure. When she attempted to publish her work, she was rebuffed, publishers considered her work not worthy of print. Her poems were discovered after her death by her sister. To me, publishing houses are like Encyclopedia Brittanica, an aging dinosaur whose time has come.

Update: Penguin seems to have reversed its policy and reverted back to allowing its ebooks to be loaned out by libraries.