Why publishers should give away ebooks

I used to buy a lot of MP3s. I don’t anymore. That’s not to say I don’t listen to MP3s. I have about 10,000 of the little guys squeezed like vienna sausages into my iTunes music folder, and I listen to them a lot. But when I buy music today I buy it on vinyl. I’m no audiophile, no retro hepcat, but my ears tell me that music sounds better on vinyl – warmer, more nuanced, less shrill – and I make it a point to listen to my ears. Also, I’ve rediscovered the pleasures of looking at the art work on record jackets. Thumbnail images are pretty weak substitutes. In fact, they suck.

But the decisive factor in the transformation of my purchasing behavior, as a marketer would say, wasn’t aesthetic. It was the decision by record companies to start giving away a free digital copy of an album when you buy the vinyl version. Hidden inside the sleeve of a new record, like a Cracker Jack prize, is a little card with a code on it that lets you download the digital files of the songs, often in a lossless format, from the record company. So I no longer have to choose between the superior sound and packaging of vinyl and the superior mobility of digital. When I’m near my turntable, I spin the platter. When I’m not, I fire up the MP3s.

Buy the atoms, get the bits free. That just feels right – in tune with the universe, somehow.

There’s a lesson here, I think, for book publishers. Readers today are forced to choose between buying a physical book or an ebook, but a lot of them would really like to have both on hand – so they’d be able, for instance, to curl up with the print edition while at home (and keep it on their shelves) but also be able to load the ebook onto their e-reader when they go on a trip. In fact, bundling a free electronic copy with a physical product would have a much bigger impact in the book business than in the music business. After all, in order to play vinyl you have to buy a turntable, and most people aren’t going to do that. So vinyl may be a bright spot for record companies, but it’s not likely to become an enormous bright spot. The only technology you need to read a print book is the eyes you were born with, and print continues, for the moment, to be the leading format for books. If you start giving away downloads with print copies, you shake things up in a pretty big way.

So why give away the bits? Well, traditional book publishers have three big imperatives today: (1) protect print sales for as long as possible (in order to fund a longer-term transition to a workable new business model); (2) help keep physical bookstores in business (for the reasons set out in this article by Julie Bosman); and (3) do anything possible to curb the power of Amazon.com, the publishers’ arch-frenemy. Bundling bits with atoms helps on all three fronts. First, you give people an added incentive to buy a print book. When it comes to paperbacks, in particular, a customer essentially gets the physical and electronic copies for the price they’d pay for an electronic copy alone. That changes the buying equation. Second, you do something that helps physical bookstores in their own end-of-days battle with Amazon. Suddenly, they have a strong new sales pitch. Third, by offering the ebooks in a standard, non-proprietary format (ePub, say), you make the Kindle, which doesn’t handle the ePub format, considerably less attractive, particularly for anyone buying their first e-reader. (Why buy one that’s not going to accept those free ebooks you’re going to get when you decide you want a print edition?) Either Amazon stands firm with its proprietary format, or it retools the Kindle as a general purpose reader that can handle ePub. If it chooses the former course, it loses e-reader market share. If it takes the latter course, it weakens its grip on sales of ebooks and weakens the rationale for subsidizing Kindle purchases. There’s also one other potential benefit for publishers, which could be very important in the long run: By setting up their own site where customers download free ebooks, they open a direct relationship with book readers, something they’ve never really had before.

I’d like to say my plan is a no-brainer, but it’s not. I can see at least three obstacles, and there are probably more. On the commercial side, you’re going to have some cannibalization. There are probably households today who, to get the best of both worlds, buy a book in both print and electronic versions. Give away the ebook, and you sacrifice those ebook sales. I have to believe, though, that that’s not going to amount to that many copies, and if you’re talking about your long-run survival those duplicate sales are trivial. Also on the commercial side is the question of how this would affect Barnes & Noble, the struggling behemoth of physical bookstores which also, with the Nook, is Amazon’s top competitor in the e-reader market. I’m sure there would be both benefits and costs for B&N, but since I don’t know the details of the company’s finances I don’t know what the net effect would be. Still, if you’re losing as much money as B&N is, business-as-usual is not exactly an attractive strategy.

There’s also the technical challenge involved in actually distributing the free ebooks. Vinyl records are sold sealed in plastic. The only way to get the code for the free e-copy (other than engaging in vandalism in a retail store) is to buy the album, crack the seal, and fish out the code. The books on bookstore shelves aren’t sealed in plastic, so how do you prevent creeps from writing down the code in a store and then going home and filching the e-book from your server? I don’t know the answer to that question – I’m thinking maybe you print a code on the sales receipt – but I have to think there’s a geek somewhere who could come up with a boffo solution. Some publishers are already experimenting with physical/digital bundles, including ones that include an ebook download for free, so there are clearly already some test cases to learn from. The good news is that book buyers, as a group, probably aren’t the most criminally minded segment of the population.

Will giving away ebooks secure the future of the printed book, save the corner bookstore, and let publishers go back to enjoying three-martini lunches? No. But I think it would help, and at the very least it would annoy Amazon. When you’re on the receiving end of Massive Disruption, it’s not a bad idea to foment a little disruption yourself.

POSTSCRIPTIVE QUESTION: In that article I link to above, Bosman writes that “sales of older books — the so-called backlist, which has traditionally accounted for anywhere from 30 to 50 percent of the average big publisher’s sales — would suffer terribly [if physical bookstores disappear].” I had assumed, following Long Tail logic, that online bookstores, which can “stock” far more backlist books than even the largest physical bookstore, would spur more backlist sales than physical stores. I guess I was wrong. Can anybody with inside knowledge of the book trade confirm the truth of what Bosman wrote? And if it is true, what does that say about the power of the Long Tail effect?

24 Comments

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24 Responses to Why publishers should give away ebooks

  1. A Facebook User

    That’s a brilliant strategy. Not only would it weaken Amazon’s and Apple’s closed universes, it would provide significant benefits to readers: they get the best of having physical books (random access, page flipping, scanning, page comparisons, diagrammatic note-taking) and the best qualities of digital books (searchability, portability, read-anywhere / read-in-snatches).

  2. Wngdn

    My best guess about the reason backlist sales would suffer terribly is a lack of promotion. Publishers mainly promote new releases. People are also less likely to stumble on backlist titles online, because Amazon, B&N, and so on tend to rank things by popularity. In other words, although they can “stock” all of those backlist titles, they have limited “display space”.

    (I work in publishing, but on the production side, not marketing, so I can only guess.)

  3. Dan Miller

    I’m not actually knowledgeable about the publishing industry in any way, but I think it might be worth pointing out a distinction between backlist and the long tail effect. As I understand it, the long tail relates to niche interests, but still might gravitate to the newest releases in those niche interests. So it could be possible for this to not be contradictory. As I said, I could be totally off base, but might be worth keeping in mind.

  4. I don’t think the “annoy Amazon” aspect still works. New kindles — all species, as far as I can tell — now support ePub. At least that’s what Amazon.com says; Wikipedia doesn’t agree.

  5. Maybe publishers are addressing the long tail in the wrong way. There must be millions of books which are no longer in print and which sell dismally.

    Why not release these books online for free and monetize them via adsense?

    Also, could authors make more money releasing their books online for free and monetizing them with advertising rather than going through a publisher? Would this make it easier for authors to interact with readers? Collect email lists?

    Think about it.

  6. Greg,

    From Amazon’s support page for Kindle: “EPUB eBooks are not supported on your Kindle.”

    http://www.amazon.com/gp/help/customer/display.html?nodeId=200728710#recognize

    There are conversion programs (for DRM-free ePub), but few people go that deep into the weeds.

    Nick

  7. Haikujaguar

    I am mystified at how the backlist would suffer if physical bookstores went away, since for the past year, I haven’t been able to find the backlist of any author I checked in a physical bookstore. In fact, I was lucky to find any of the authors at all if they hadn’t had a book out in the past few months, because the fiction section I read has been reduced from ten shelves to two.

  8. I don’t think it would annoy Amazon a bit.

    10 years ago I told Jeff Bezos that what I wanted most was to be able to order both digital and physical book at the same time, and have the ebook delivered to my hard disk with one-button. Jeff said that was what he wanted too, but the publishers would not let him. Would not even discuss the possibility.

  9. Nick Carr

    Ten years ago, Bezos may well have viewed ebooks as complements to print books. Now he views them as substitutes. Don’t underestimate the importance of that distinction.

  10. Bill H.

    I have been in publishing for the last 6 years, and before that, 20 years in software and IT.

    I think what non-publishers don’t get about the print-digital shift is that there is actually a problem with the print model economically that publishers hope to cure with the digital model.

    The problem tracks back to basic micro-economics: if you have a durable good that lasts for a long time (a book), and you sell the asset, how do you price it?

    If there were only one copy of a book, then it would be incredibly scarce, and people would buy and sell that book (effectively creating a rental market). Everyone in the value chain would buy the book for its asset value (let’s say $100,000), which would compensate the author. Then you’d sell it after you had made good use of it (say, for $999,900, which means your rental fee was $100). People do this today with works of art (and great ones actually appreciate in value).

    But the book business has redefined the book not to be incredibly scarce, but — thanks to Gutenberg — incredibly abundant. The book is now, in the day of paperbacks, seen as the words on the page (so there is no value to the physical work). The book is source code.

    So, here’s my observation as a software guy: what programmer would SELL his or her source code for the cost of its first USE? None. And, in fact, we have lots of strategies that prevent users from even accessing the source code. They can only experience the source code IN USE. And they pay for usage.

    The answer to the micro-economics question about how to price a durable good asset like a book is, you don’t sell it. You charge for usage of it.

    Publishers acquire books as durable good assets. The traditional publishing model has not set them up as renters or usage brokers (like SaaS providers). There is probably some sort of implicit subsidy of bookstores, which can re-sell books as used and keep the money (note that they don’t pay the author a royalty for that usage — only the publisher does that, based on first sales).

    As publishers try to learn the lessons of the music and media industries in the shift from print to digital, anyone with some sense and an understanding of economics will seek to implement new strategies where pricing is based on usage, not asset sales.

    Any other strategies you see that do not address the asset vs. usage dichotomy are either flawed or a mirage.

  11. CS Clark

    In regards to sales of backlists, when physical bookstores start stacking shelves based around what customers bought, instead of boring, old-fashioned alphabetical order, or stack series in order of how popular they are instead of the order intended by the author, or stick biographies of authors and vaguely related books in between the ones you are looking for, or indeed cover the shelves with study guides that appear to be dumbed down articles from Wikipedia at a really big font size to make them 32 pages long and yet costing more than the paperback of the novel it will help you study then, then they will be at the same level as online bookstores at creating the serendipitous moment of ‘Hey, I liked that book. Oh cool, he wrote more, I’ll get the next three’.

    Anyway.

    I’ve been working in educational publishing for some time, specifically with electronic material to accompany and complement student and teacher’s books. What I’ve found, or heard, is that quite often publishers can be caught in a trap of their own making, in that once people are used to these materials being provided they won’t be willing to pay that much more for them as an extra (I mean, conceptually they will no longer be an extra), but they then become such an essential component that you won’t really sell without, which in turn simply makes the production process more expensive for not that much more sales/money.

    The costs of ebooking a novel that will sell well probably won’t affect the bottom line that much (although that won’t stop publishers from foolishly cutting corners) but for all those books for which 1,000 will be decent it might represent a significant chunk. And if they have pictures, diagrams, complications, and on top of that people start expecting ridiculous bells and whistles and video interviews and what nots? And if they don’t have all this they sell even fewer copes just by virtue of never having been expected to sell enough to warrant having the extras, and mean-spirited trolls give them one-star reviews because the ebook comes with the same cover instead of a separately comissioned piece.

    I’d suggest one alternative would be to include a deep discount voucher for the ebook with the physical book. That way, it’s still a sale, you don’t convince people that the real price of an ebook is free, and you’ll (inspired by the number of people who buy heavily discounted games on Steam that they already own) you’ll encourage people buying convenience. For extra bonus sneaky points, why not have the voucher redeemable only through the publisher’s own website.

  12. For me what is needed is to get away from the file paradigm, and truly move towards the licence and references paradigm, that is :”if I bought something it just works, and I don’t have to deal with files at all”.

    Moreover I can look at my bookshelf from any of my current or future machines, whether corresponding copies are on the machine or not, and sort out my bookshelf (disco, video, sito shelf) as I want.

    But for this to take place, for sure the organisations taking care of one’s private bookshelf have to do just that, and be independent from the corresponding editors, shops, copies holders.

    This a bit more developed in below text (2007) :

    http://iiscn.files.wordpress.com/2011/03/copies_licences.pdf

    Or post :

    http://iiscn.wordpress.com/2011/05/15/concepts-economie-numerique-draft/

    Not to forget that the exact same role and associated organisations, is what is needed around the “identity on the net” problematic, and associated current “war”(using your facebook, twitter, g+ account to log on most sites/services).

    “identity problematic” where, let’s not forget, there is absolutely no need for a common ID per person to be shared between actors for the “things to work without friction”, and that voicing “the end of privacy and anonimity on the net”, is just a position to be the holder of said private data in the above mentioned “war”.

    This aspect a bit more developed below :

    http://iiscn.wordpress.com/2011/06/29/idenum-une-mauvaise-idee/

    And for the above, much more than any technological novelty, what is needed is the role definition, and associated roles separations.

  13. A Facebook User

    I thought this was a great idea. It’s probably worth remembering that the current state of LPs… it’s still really a specialty with the big sellers hitting 40 thousand or so. But hey, that wouldn’t count as bad sales for some novelists. I love a download code when I buy a record. Enjoy the superior audio, conscious ritual and artwork of playing records while also having access to the convenience of the MP3s. The real question is is the publishing industry adaptable to new requirements and willing to remind us that book can (or should) be special objects. Publishing can’t hang on to mass production of things like hardcovers. A lot of hardcovers Only have the advantage the release window. Who wants a bunch of Sue Graftons in HC if the ebook comes out the same day and cheaper? When an LP comes with a download code, it’s an endorsement of the physical form. This might cost a little more but it’s a better experience and it’s something to hold and love and maybe it even has an extra flexi disc. Publishers have to up the object value… yesterday. I have an annotated edition of Walden from Houghton Mifflin that’s cloth bound, embossed, illustrated, worth paying for. And I’ll keep it forever. More like that!

  14. Chris Roberts

    Yes, why not put in an electronic version of your work “The Shallows?” Oh, that’s right, hack writing wouldn’t sell much of anything. (P.S. Bet you don’t print this comment).

    Chris Roberts

  15. A Facebook User

    Eric Flint at Baen books, a leading e-book provider, posted several discussions about the economic impact of electronic books on publisher’s sales. One question concerning the impact of free books on sales of backlist was:

    “Do you think other authors in the library would be willing to come forward with similar statistics? I realize this might be unlikely (since many consider money quite private), but people could try to explain away your success with the library as the fluke of a single author whose popularity is on the rise. They’d have a much harder time explaining away multiple authors from the library all showing the same increase in sales (if, indeed, everyone else’s sales have also increased).

    Flint answered:

    There are at least two who will — David Drake and Mercedes Lackey. I just got a letter from Misty telling me that her royalty income for a number of her older titles climbed dramatically after she put a few of her books in the Library. As soon as she gets a chance, she’ll send me the raw data and I’ll put it up in analytical form in the Library as I did with my own titles. (This will probably take a few weeks, though. Both Misty and I are busy.)

    Perhaps the most interesting thing about Misty’s experience is that the titles involved are not in the Library — in fact, they’re issued by a different publisher than Baen altogether. So what seems to be happening here is pure “cross-over.” People read some of her Baen titles in the Library — people whom, Misty suspects, probably never read anything of hers before — and then started buying a number of her books. And now the results are starting to show up in a different publisher’s royalty statements.”

    http://www.baen.com/library/prime_palaver7.asp

  16. A Facebook User

    It’s a niche market, but a lot of publishers in the tabletop role-playing game hobby have been doing this for a number of years:

    http://www.bits-and-mortar.com/

    It’s definitely a huge incentive, as PDF pricing for games is all over the map right now.

  17. A Facebook User

    The biggest issue w/ the plan to use epub’s are that the publishers are deathly afraid of non-DRM’d books.

    As someone noted, Baen has been doing this for 13 years, but almost every one else is only willing to post DRM’d books.

    If they’re using DRM, than EPUB isn’t all that open, in the end.

    I actually asked Toni Weisskopf of Baen about bundling last weekend, and they’re trying to look into it, but it’s hard.

    It also turns into a question of royalties, etc.

    One other thing: We have likely reached a tipping point in paper books vs ebooks purchased..

    http://phx.corporate-ir.net/phoenix.zhtml?c=176060&p=irol-newsArticle&ID=1521090

    SEATTLE, Jan 27, 2011:

    Jeff Bezos, said: “… Kindle books have now overtaken paperback books as the most popular format on Amazon.com. Last July we announced that Kindle books had passed hardcovers and predicted that Kindle would surpass paperbacks in the second quarter of this year, so this milestone has come even sooner than we expected – and it’s on top of continued growth in paperback sales.”

  18. Adam Shields

    Thomas Nelson did a trial of this a while ago and evidently it didn’t go well because they no longer advertise it. I bought a couple books this way. I alway took the code and read the ebook because that is what I prefer and then have away the book. I don’t read paper book much, but I would pay an extra dollar or two for the hardcover if I could give it away and still read the ebook

  19. me.yahoo.com/a/k6d_k_l8n8kk_X_5SC8h4H7pXMMYv_Bjng-

    i’ve had kindle for a while and it hasn’t impressed me. the books are too expensive, and they aren’t formatted with care. a lot of the books have words missing every few pages, typos, or they can’t properly depict math/chemistry symbols or even accent symbols from other european languages. i would buy a lot more books if they were formatted in a kindle size PDF format. a problem is that kindle doesn’t navigate pdfs very well. i would instantly buy an ereader that could do pdfs well. a properly done pdf can seem like an actual product, because you’re looking at what the editor was looking at. but for epub and mobi it has the feeling that the book was written in something like microsoft word, then copied and pasted into epub or mobi, and then not checked for problems.

  20. A Facebook User

    Hi! As far as plastic wrap goes… there is no reason a book can’t be plastic wrapped the same way as a vinyl record.

    Also, I agree, providing the e-content with the printed product is a great feature that should bolster B&N business. It could also boost Nook sales if they offered printed/e-Pub packages such as purchase a Nook and get three printed/e-Pub titles free. This is a good example of IT and business strategy alignment. Ahhh… but wait! Maybe I was sucked in by the sexiness and nostalgic attraction of vinyl records!

    Yes, I’ve overlooked technology and progress and I find a critical disagreement with the argument in favor of growing the printed book/vinyl record business. As a hobbyist/bedroom and occasional party DJ, I used to throw copious amounts of money at vinyl records and now that I’m married of course that has ceased. But I’m still interested in the same music and have found an alternative: Serato Scratch Master Live. With this technology I can have all the vinyl I want by digitally transferring songs to one, two, or more platters instead of buying endless copies of vinyl. And if Instagram can replicate the warmth and nostalgia of a Polaroid photo then why can’t technology do the same for music or text media?

    If the argument for the warmth, feel, nostalgia or what have you of a hard copy media then I would propose that technology just hasn’t been able to meet your 1-10 scale of satisfaction. Maybe you currently rank things like the Nook, Kindle, mp3 players or Serato sound technologies around a 6 or 7 on a scale of 10 as far as esthetic value based on the user experience. But what if the Nook and Kindle improved on this user experience by adding a 4D experience where you could SEE and FEEL virtual pages as you turned them? I might be willing to pay an extra c-note or two for that type of experience.

    Believe me, I will never throw away my vinyl records but I am looking forward to a $600-$1000 investment in digital technology that will allow me to continue to grow my digital music collection while improving storage and retrieval capability. Maybe I’ll even put together a nice set or two for some parties. I agree with your apparent push to keep book stores in business and I believe it’s possible. I just don’t agree that growth of antiquated technology such as the printed book or vinyl record is really needed. As previously mentioned all that vinyl is expensive but it also takes up a lot of space in my garage and weighs a ton which has been a real pain with six household moves in the past 15 years. Additionally, all these printed book or vinyl copies of music eat up natural resources. Suggesting a resurgence of hard copy audio or visual media is not just old fashioned… it counteracts the benefit of existing technology. I just keep thinking of the vast majority of these material assets that end up in landfills. With the technology we have I would argue there’s a societal and moral obligation to act responsibly as our numbers continue to grow on this planet. –Logan

  21. A Facebook User

    Just had to play devil’s advocate to my own argument. Economics is a key concern and surely more books in print means more print jobs, agricultural jobs and other jobs I’m sure. However, job creation is also a reality with digital content. Then again, as world population grows maybe the added jobs from a strong traditional print and digital print industry are needed. However, I still maintain my opinion that the greater good achieved with advancing technology gains is more meaningful than maintaining antiquated and resource demanding technology. Also, a greater demand on resources to make printed books also means higher prices for other goods that would otherwise use the paper book resources. –Logan

  22. A Facebook User

    Just had to play devil’s advocate to my own argument. Economics is a key concern and surely more books in print means more print jobs, agricultural jobs and other jobs I’m sure. However, job creation is also a reality with digital content. Then again, as world population grows maybe the added jobs from a strong traditional print and digital print industry are needed. However, I still maintain my opinion that the greater good achieved with advancing technology gains is more meaningful than maintaining antiquated and resource demanding technology. Also, a greater demand on resources to make printed books also means higher prices for other goods that would otherwise use the paper book resources. –Logan

  23. A Facebook User

    Of course, having authors sign your book would be one thing even 4D books couldn’t fully replicate. Or… maybe that perception could change in time as well. –Logan

    Sorry for the double post above… wish I could delete one.