Price concerns keep Random House content from Apple iPad
The largest book publisher in the world may not offer its content for the iBookstore on Apple's iPad when the device launches April 3, as Random House is reportedly concerned over the effects of e-book prices.
According to the Financial Times, Random House executives want to explore the matter further with their authors and agents before agreeing to Apple's terms, which dictate Apple would receive a 30 percent cut of all sales on the iBookstore. Markus Dohle, chief executive of the publisher, said his company could still reach a deal before the iPad goes on sale April 3, but he is proceeding with caution.
The concern is over Apple's adoption of the "agency model," which allows the company serving the content to take a cut of sales. Apple has employed the same 70-30 split to great success with its App Store for software on the iPhone and iPod touch.
Under the traditional business model, resellers have bought books from publishers at discount prices, and then marked them up to make a profit through sales. But Apple's approach would have the publishers set the prices paid by consumers -- something Random House executives are concerned could lead to considerably lower prices, and thus lower profits.
The holdout from Random House exists after five of its biggest competitors -- HarperCollins, Hachette, Penguin, Macmillan and Simon & Shuster -- were all announced as iBookstore partners at Apple's official unveiling of the iPad. Books will be sold through the iBooks application, which will be available for download at launch through the App Store.
But reluctance from Random House is not the first example of publishers showing skepticism over Apple's new business model for the print world. Last month, the Times also reported that talks "stumbled" with some newspapers who are uncomfortable with Apple's revenue sharing plan and unwillingness to share consumer information -- data that is a valuable asset for traditional print publishers.
According to the Financial Times, Random House executives want to explore the matter further with their authors and agents before agreeing to Apple's terms, which dictate Apple would receive a 30 percent cut of all sales on the iBookstore. Markus Dohle, chief executive of the publisher, said his company could still reach a deal before the iPad goes on sale April 3, but he is proceeding with caution.
The concern is over Apple's adoption of the "agency model," which allows the company serving the content to take a cut of sales. Apple has employed the same 70-30 split to great success with its App Store for software on the iPhone and iPod touch.
Under the traditional business model, resellers have bought books from publishers at discount prices, and then marked them up to make a profit through sales. But Apple's approach would have the publishers set the prices paid by consumers -- something Random House executives are concerned could lead to considerably lower prices, and thus lower profits.
The holdout from Random House exists after five of its biggest competitors -- HarperCollins, Hachette, Penguin, Macmillan and Simon & Shuster -- were all announced as iBookstore partners at Apple's official unveiling of the iPad. Books will be sold through the iBooks application, which will be available for download at launch through the App Store.
But reluctance from Random House is not the first example of publishers showing skepticism over Apple's new business model for the print world. Last month, the Times also reported that talks "stumbled" with some newspapers who are uncomfortable with Apple's revenue sharing plan and unwillingness to share consumer information -- data that is a valuable asset for traditional print publishers.
Comments
I think there's a typo in the article, shouldn't it read that they get to keep 70% of the sales and not 30%?
No kidding - I think if I were Random House I would worry if I was the only one getting 30%!
[Fixed already - WOW!]
Authors can now self publish and actually sell a book for money on the iBookstore. What use is a publisher?
The iPad and other devices like it spell the end of the line for the big publishing houses and they know it.
Authors can now self publish and actually sell a book for money on the iBookstore. What use is a publisher?
I'm sure it will work out that way for some, but publishers provide other valuable services besides just taking a cut (ie editing, understanding readers and the market, good publishers work like an agent.)
But as you say, publishing is in for some big changes.
Does an book author get a smaller PERCENT royalty when books are priced at different price points? I'm not talking about the dollar amount here, clearly the $ royalty per paperback is not as high as a premium priced hardcover but the actual percent... is it smaller with a lower price version of a book?
In other words, does a book author simply see a set amount per book no matter how much the publisher prices it at? Say for example $1.00 per book no matter if it was a hard or soft cover and no matter if it was priced at/sold for $15 or $5 or does what the author gets reflects the actual price the item was sold for? ... Or, using 10% as just an easy example... does the author get $1.50 per book when they are priced at (sell for) $15 and .05 when the book is priced at $5.00.
OR
Is it something in between where hardcover priced books kick back $1.00 each in author royalty and paperback editions kick back .50 each.
If it is something like the system above then yes, I can see when Apple wanting a flat 30% no matter what the selling price is might be seen as an issue.
Maybe it's longterm concerns about the iBookstore taking too much business, like the iTMS, thereby hurting every area of business involved with printed distribution. Or perhaps the threat Amazon has made to publishers who go for the agency model Apple is offering.
I could see this working for my dad who reads a lot of material and buy books. If only their wi-fi router stopped dropping signal all the time. Maybe it's time to get me a new AEBS and give my old one to my parents.
Another old school media company reluctant to embrace new technology and so will at some point become irrelevant.
Authors won't need the services of the publishers (printing costs, advertising, editing...) in a few years and the companies that cannot adjust will perish.
KRR
You cannot teach old dogs new tricks...
Another old school media company reluctant to embrace new technology and so will at some point become irrelevant.
Authors won't need the services of the publishers (printing costs, advertising, editing...) in a few years and the companies that cannot adjust will perish.
KRR
You should know better than that. They are another old school media company. Which means that once sales start dropping they will blame pirates and pay off the government to pass laws mandating their business model to be the only legal business model and then extort and abuse the public for a decade or more.
What is truly sad is that they didn't seem to learn a dang thing from the music industry when they went through this. They still want to incorporate ineffectual and unnecessary DRM.
Isn't it amazing that even after the music industry dropped DRM that they didn't go out of business within a week because of all the piracy that would kill them without DRM? I guess the pirates weren't affected by DRM and so getting rid of it didn't do anything to increase or decrease piracy. Go figure.
Of course the movie, game, and publishing industry still insist that they must have DRM because without it the pirates will kill their business within a week without it.
Whatever.
One question is what companies are going to spring up to help people get on Apple and what sort of split of the 70 percent will they want. Will Apple allow individuals to submit books directly? Will they set up something like the developers get where you can pay $100/yr to sell on the store?
My daughter is looking at publishing a comic book that really needs color. The cost of printing such a book is so high (in color) that it makes it very unlikely it would sell well. $10 a book she might be able to get OK sales, at $30 or $40, which is the current print prices it would be very tough. If she can sell on Apple for $5 and keep $3.50, it would be worth her time to produce the book and have a couple of hard copies made to send in for Copyright registration.
Each company must decide whether to live in the future or in the past. The old saying, "Lead, Follow, or Get Out of the Way," comes to mind.
The Internet isn't going to go away no matter how much these old fashioned companies wish that it would. By holding back they give license to their competitors to learn and dominate an important new venue.
Apple is arguably the world's foremost technology leader and innovator at the present time. Getting aboard their vehicle is an opportunity not a problem.
The App Store's chief sales are games.
Polls taken show most people don't spend a lot of money at the App Store, with more that 50% not paying anything at all.
http://www.macpolls.com/?poll_id=577
Also look at these polls again what people plan to do with the iPad
http://www.comscore.com/Press_Events..._on_Apple_iPad
So with all this information it goes to show that the iPad/iPod Touch market is the young crowd, with little disposable income and unlikely to purchase higher priced items like ebooks.
So I see Apple allowing people to read iBookStore content on their Mac's and PC's and if they want to transfer that to their kids or personal iPad's they can, in addition to buying on the device itself.
The iPad is more and more a device for parents and teachers to place content on for children without the complexities or drawbacks of a real computer.
There is a huge demand for educational types to help design software for the iPad.
Of course the movie, game, and publishing industry still insist that they must have DRM because without it the pirates will kill their business within a week without it.
I would be fine with publishers keeping DRM to protect their content so long as all of the publishers agreed to a universal standard. That way you could use any protected software with any hardware. You'd have customer choice in both content distributor and hardware device, while the publishers would be protected from piracy. The problem as I see it is that most hardware companies and publishers want a proprietary DRM, where the software only works in their ecosystem. The obvious problem is that you have to buy a separate proprietary hardware device for each content publisher.
I know that Apple works in the latter manner, forcing users to use their hardware and software for all DRM content. However, Apple is also the one company with enough clout to force all these publishes to agree on a universal proprietary standard (albeit Apple's DRM standard). Since I don't see DRM content leaving anytime soon, I personally would rather be locked into Apple's system but know that I can purchase most of the content I want through them, than to have to purchase separate hardware for each publishing company's proprietary DRM schemes.
iTunes is a success when one compares profit from iTunes music 'Purchases' with zero profit from 'pirated' music which I think is still in the >90% range.
The music companies only compare profit from iTunes music 'Purchases' with CD sales, which is dying form of selling music, to say the least.
I remember way back when, when the Theatre industry was trying to kill the VCR and Movies being rented/sold on VCR tapes. The reasoning was it would stop people from going to the movies.
In fact, as it turned out, the opposite was true. People did rent movies...but it had a positive effect because it also encouraged people to see more movies on the 'Big Screen' as well. More people were going to the movies after the introduction of the VCR and than before the VCR.
Edit: Please don't ask me for the article...this was about 20-25 years ago!
I would be fine with publishers keeping DRM to protect their content so long as all of the publishers agreed to a universal standard....
DRM is coming for sure, but like before it only keeps the honest one's honest.
Those willing to take the time to snapshot each page and run it by OCR software will get the text, but not all the interactive stuff obviously. So the cracked stuff would be downgraded quality.
Unlikely other companies will adopt Apple's DRM standard. DRM and formats like AAC are used as leverage to gain market share.
But when the supposed hang up is the agency model... This is a company with severe cranial rectal inversion.
Lets break it out. The retailer buys X books from you at Y wholesale price. When the retailer sell less than some function of X books, they strip the covers and return it to the publisher for a credit of some function of Y wholesale price.
Basically, the publisher is concerned that it will realize less revenue because in the agency model, there is none of the above spoilage. They realize that they profit... handsomely.. from the inefficiency inherent in the dead tree book world and are loath to change that model.
I find their reticence repugnant on several levels.