Profiteering Publishers

The Finkler Question (a 2010 Man Booker Prize Winner)

Paperback Edition

Australian Independent Bookstore: Booktopia $32.95 AUD

Australian Chain Bookstore: Borders Au $32.95 AUD $9.69AUD $5.99 USD

E-book Edition

Australian Independent: $26.45 AUD

Australian Chain : Borders AU: $12.60 AUD

Amazon Kindle Edition $5.39 USD

Where would you buy from?

*NB the Aussie dollar is currently the same value as the US dollar

With the opening of the iBookstore in Australia the issues of geographical restrictions and overpricing in the Australian market is again the topic of heated conversation. Australian book publishers are desperately clinging to an outdated business model when it comes to ebook publication, and even print publication. They successfully managed to block imports being sold in Australia around 2 years ago, under the 30 day law, a book must be made available in Australia within 30 days of its publication anywhere in the world or the bookseller is free to import any edition it likes.  Proponents of the law make much of it  supporting Australian authors and protecting independent booksellers. What they don’t admit is that it allows publishers to control pricing in what is effectively a non-competitive market which gives them the all the power.

Australian author royalties are rather complicated, calculated by multiplying the price of a book by the royalty percentage which could be 10% of the sale price for a print book during the initial run. It seems then that it makes sense then that the more a book costs the better the return to the author. However by pricing books so high, the publishers limit the sales it could make at a lower price point, a bonus for publishers who can then, in most contracts, reduce the authors royalties to say 5% for not meeting sale targets. Even if the lower price point of discount results in increased sales the author loses out. It wouldn’t be fair to compare if more units are sold at the lower price point because discounting only occurs after they have exhausted the full paying market, so you can’t reliably judge if the lower price point would or would not result in more sales.  In a wholesale pricing model, the publisher can sell copies at a discount based on order amounts, which means as the author royalty stays the same amount, the writers royalties also drop.  These current models are firmly in the publishers favor, particularly with the ludicrously low royalty rate authors receive, with its complicated sliding scale.

When it comes to worldwide rights, I am given to believe that the author receives a lower rate again, say 3% for argument’s sake on sales. So books published here under an Australian company by overseas authors give publishers an even bigger slice of the profits, because the book by an overseas author will still be sold at the price that a book by an Australian author is sold at. Publishers have long justified their costs on international titles by blaming freight costs primarily, conveniently distracting the public from the fact that a large percentage of books by overseas authors are actually printed here. And if it is such an issue, why doesn’t pricing fluctuate along with the worth of the Aussie dollar?

Independent booksellers are hamstrung by publishers too. Publishers control the content, the price and distribution in the Australian book market. The Australian publishers have always operated in a way that is very similar to the much maligned ‘Agency model’ recently introduced by the big names in the US. In the Agency model, publishers set the book’s selling price, and the retailer takes a certain cut of that price. This gives independent booksellers a very narrow margin to work within. In a model like Amazons, the retailer pays a set unit price for per book to the publisher and then has control over the pricing. Amazon’s model is actually more beneficial to the publisher but it requires the publisher to give up control over retail pricing. If they do that, then the consumers decide what is a fair price for the book rather than the publisher. I don’t believe the publishers shouldn’t earn profit, I do object that its main motivation is increasing profit for its owners and shareholders (just like banks) at the expense of providing fair value product. My non reader friends who buy maybe 3 or 4 books a year were horrified to learn how overpriced books in Australia are compared to the US (up to triple the price), they simply weren’t aware of it or that there are alternatives. It’s these attitudes that the publishers rely on to ensure they keep their prices artificially high. Though it’s hardly a significant sample, of my closest friends all of them have bought more books in the last six months than any other time because of the lower price point they now know is available to them.

And now, ebooks enter the mix. Australian publishers ignored the potential for as long as possible. The physical creation of an ebook is a fraction of the cost of printing a book, there are reduced storage and distribution costs, no freight costs all the reasons publishers have traditionally cited as to why their pricing is so high. Yes agenting fees don’t change, neither do promotional costs (for those lucky few that get promoted). Yet Australian publishers feel justified in charging the same price for an ebook as a printed trade paperback, thereby forcing retailers to do the same. The stranglehold by the Australian publishers in the growing global market is already suffocating retailers who have no way to compete, so to recoup their losses the publishers are now trying to claw back their losses with ebook profit. At the same time, keeping ebook prices artificially high ensures that people will still buy print copies since for many the printed book holds benefits such as resale value that override the convenience of the eformat. Sadly, many Australians lack the technological savvy (and decent internet access) to look outside of Australian markets to purchase books at a significantly lower price point right now but that is rapidly changing, and its impact will be huge if nothing changes. Forward thinking authors may have negotiated ebook rights at a higher rate knowing , others may have simply signed over all their rights out of a lack of understanding, whichever way it goes, the large Australian publishers of  ebooks are going to be making out like a bandit on ebook sales as the market grows in Australia. Retailers will suffer because of the publishers inability to rethink the market, for that I am sorry. Sadly supporting local bookstores reinforces the publishers market dictatorship.

I am no expert, I have done a lot of reading on the issues from a number of different sources and I am a consumer, not involved in any way in the book industry. There are additional factors that weigh into this argument. I acknowledge that it’s a little more complicated than what I have talked about here, but it seems to me that authors are not supported by the publishers, particularly when they receive such astonishingly low royalties,  retailers are held hostage to artificially inflated prices and the biggest loser in the Australian public. The loss will be even higher when the publishers, and so the entire industry, collapse on the back of corporate greed.

It’s taken me about three days to write this post to weed out the more passionate remarks I want to make, I’m not sure if I have been entirely successful but this issue has been nagging me for some time. The launch of the Australian iBookstore and two recent blog posts prompted my decision to finally weigh into the debate, this one at Dear Author, along with her LostBookSales campaign and a link posted by ReadInASitting regarding piracy. I’d be interested in hearing what you have to say, even if you disagree (rationally) so leave a comment with your thoughts.

9 Comments (+add yours?)

  1. Kerry D.
    Nov 10, 2010 @ 14:37:04

    Great post. An a New Zealander, we’re in a similar position and with an even smaller market than Australia.

    Out of curiosity, what currency are all those prices in?



  2. Kaetrin
    Nov 10, 2010 @ 14:54:32

    Hi Shelleyrae – as a fellow Australian, I share your frustration. I read, almost exclusively, romance books and there are slim pickings in the big bookshops. There are some really great Australian Romance bookshops but each mass market paperback costs about $16-17AUD plus postage to my location as there are no such bookshops in my state. The Book Depostory has the same book for about $8AUD and I don’t have to pay for postage. The only downside is I have to wait for 2 weeks or so. Ebooks are instant – if you can get them. And don’t even get me started on audiobooks.

    I don’t pirate but I have managed to get hold of most of the ebooks I want (and if I can’t then I head to the Book Depository or wait until someone wants to buy me a present!) – hypothetically *cough* one can list a US address and if one is clever about the payment method (or, I understand) uses some kind of ISP proxy (which I know very little about), voila! Such actions, I understand, would be in breach of the geographical restrictions, but I have no moral qualms about anyone doing so as the author still gets paid, it’s not stealing and it’s not piracy. However, at least one anonymous author (over on the Dear Author thread you refer to above) thought this sort of thing was morally wrong and would rather forego the sale.

    I also read a lot of books from independent epubs which are all worldwide so geo restrictions are encouraging me to buy those books first. Harlequin is one publisher who appears better at world English rights than others – their eHarlequin store is pretty good.



  3. Trackback: Book news, reviews, and musings 11 Nov 2010 | Read in a Single Sitting - Book reviews and new books
  4. Blue Tyson
    Nov 12, 2010 @ 16:20:08

    You pretty much have it right, there.

    Even worse is that it is in the majority foreign companies and foreign authors that we pay massively increased prices on books for, so the money leaves the country.

    Australians will be pretty close to the world’s highest downloaders per capital of English language tv, movies etc. Given the huge freezeout in the last year and a half from books, I am pretty sure we will rank right up there with those, too.

    Also, the other media will benefit I would imagine – too hard to buy a book? Get music or tv or movies instead.



  5. Trackback: Book Blogger Hop & Follow Friday 11th November « book'd out
  6. Leslie
    Nov 13, 2010 @ 17:47:39

    I did notice that books and magazines, too, were much more expensive in Australia than in the USA when I visited a few years ago. Now I understand why. That’s just crazy and I don’t blame you for ordering online.



  7. tahliaN
    Dec 27, 2010 @ 11:37:34

    As a fellow Aussie reader, I know the frustrations you talk about and as a new author, your summary of the situation is very helpful. The only reason I have an agent looking for a traditional publisher here is because I want the major store distribution for my first book to get my work in the public eye. If someone does pick it up, I’m going to be very cautious with selling ebook rights. I’d actually like to keep them myself and publish on Smashwords. It’s probably niave to think that I might be able to wangle it, but since most of my blog readers are from OS, I don’t want my ebooks to be priced above the competition in the US.

    If I publish on Smashwords I can get 75% of my ebook sales. All sales will depend on publicity I do myself, of course, and with ebooks ony 9% of the overall market at present, I can’t afford to lock out those who browse in their local store. But for the future – let’s just say I don’t intend to lock the 4 sequels into a contract that uses that model for ebook sales.



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