Barnes and Noble reports a decline in revenue, Nook looks like a dead horse

Profits are improving, but this is entirely due to cost cuts. Sales of Nook devices and accessories are less than 1/4 than what they were a year ago. From the Press Release:

First quarter consolidated revenues decreased 7.0%, to $1.2 billion, as compared to the prior year. First quarter consolidated earnings before interest, taxes, depreciation and amortization (EBITDA) improved to $30 million, as compared to an EBITDA loss of $9 million a year ago. First quarter results were positively impacted by approximately $13 million of favorable adjustments resulting from cost rationalization efforts discussed in the NOOK section below.  The consolidated first quarter net loss was $28.4 million, or $0.56 per share, compared to a net loss of $87.0 million, or a loss of $1.56 per share, in the prior year [...]. 

The NOOK segment (including digital content, devices and accessories) had revenues of $70 million for the quarter, decreasing 54.3% from a year ago. Device and accessories sales were $18 million for the quarter, a decrease of 78.6% from a year ago, due to lower unit selling volume. Digital content sales were $52 million for the quarter, a decline of 24.2% compared to a year ago, due primarily to lower device unit sales. 

NOOK EBITDA losses decreased $50 million, as compared to a year ago, to $5 million, primarily as a result of the cost rationalization efforts that were initiated last fiscal year. 

Eleanor Catton will pay fellow writers to read, the grant might be called "Lancewood"

From the Guardian:

Eleanor Catton, the youngest ever winner of the Man Booker prize, has announced that she will put the money from her latest awards win towards establishing a grant that will give writers "time to read" [...]. 

The grant has yet to be given a name, "in case a nice philanthropist hears about this and would like to lend their name and support to the project", but Catton said that the word which keeps coming to her as a possibility "is the horoeka, or lancewood, a native tree that begins its life defensively, with sharp rigid leaves and a narrow bearing, and at a certain point transforms into a shape that is confident, open and entirely new – so different, in fact, that the young and old versions of the tree look absolutely unalike. That is what I believe that reading can do." 

Catton told the Guardian she intended that writers winning the grant would be awarded $3,000 each for "time to read". "My idea is that if a writer is awarded a grant, they will be given the money with no strings attached except that after three months they will be expected to write a short piece of non-fiction about their reading (what was interesting to them, what they learned) that will be posted online so that others can benefit from their reading too," she said.

Doug Preston prepares new attack to Amazon

Publishers Weekly has the letter that author Doug Preston, leader of Authors United, sent to colleagues to warm them up for a new public initiative, "perhaps as soon as next week".

Dear Author, 

I want to thank you for signing the letter, and I would also like to welcome those of you who have recently added your name to our effort. 

As you may have noticed, the letter we published in the Times generated a great deal of media attention and changed the conversation. In reaction, Amazon established a "readers united" website that seems to be a corporate creation posting official Amazon corporate statements. In the process Amazon managed to misquote George Orwell (which generated this response from the George Orwell estate.) 

Amazon is continuing to sanction books: 2,500 Hachette authors and over 7,000 titles have now apparently been affected. Hachette authors have seen their sales at Amazon decline at least 50% and in many cases as much as 90%. This has been going on for six months and it has been particularly damaging to struggling debut and midlist authors. Amazon is reportedly in negotiations with Simon & Schuster and we can only hope they will not start targeting S&S books next. 

Amazon has been falsely trying to depict us as "rich" authors who are seeking higher e-book prices, while it is fighting on behalf of the consumer for lower prices. Unfortunately, some media outlets have bought this Amazon disinformation campaign. We have not, of course, made any statements whatsoever on book pricing. Our point is simple: we believe it is unacceptable for Amazon to sanction books as a negotiating tactic. Amazon has other negotiating tools at its disposal than harming the very authors who helped it become one of the largest retailers in the world. Amazon could stop the sanctions tomorrow while continuing to negotiate with Hachette. 

And so we are forced to move on to our next initiative. I will be asking you once again for the use of your good name -- perhaps as soon as next week. Stay tuned. 

Again, I want to thank you most sincerely for your courage in standing up for books and the literary community. I will be in touch. 

Warm regards, 

Doug Preston 

P.S. In the meantime, it might be a good idea to do what we can through social media, blogs, opinion pieces, and other means to counter Amazon's disinformation campaign. The writer Janet Fitch, for example, publicly released her letter to Jeff Bezos, which generated this excellent story in the Los Angeles Times.

Spending money on white space

Craig Mod believes that properly sized book margins contribute to pleasurable reading and signal that the publisher cares about quality.

A book with proper margins says a number of things. It says, we care about the page. It says, we care about the words. We care so much that we’re going to ensure the words and the page fall into harmony. We’re not going to squish the text to save money. Oh, no, we will not not rush and tuck words too far into the gutter. 

A book with proper margins says, We respect you, Dear Reader, and also you, Dear Author, and you, too, Dear Book. [...] 

Text printed on the best paper with no margins or unbalanced margins is vile. Or, if we’re being empathetic, sad. (For no book begins life aspiring to bad margins.) I know that sounds harsh. But a book with poorly set margins is as useful as a hammer with a one inch handle. Sure, you can pound nails, but it ain’t fun. A book with crass margins will never make a reader comfortable. Such a book feels cramped, claustrophobic. It doesn’t draw you in, certainly doesn’t make you want to spend time with the text.
Hmmm, it doesn’t stick to the fingers enough. 

On the other hand, cheap, rough paper with a beautifully set textblock hanging just so on the page makes those in the know, smile (and those who don’t, feel welcome). It says: We may not have had the money to print on better paper, but man, we give a shit. Giving a shit does not require capital, simply attention and humility and diligence. Giving a shit is the best feeling you can imbue craft with. Giving a shit in book design manifests in many ways, but it manifests perhaps most in the margins.

HarperCollins raises royalties for authors when it sells their e-books through website

According to The Bookseller, HarperCollins will pay higher royalties to authors for e-books it sells directly through its website, compared to those payed for e-books sold through Amazon and other retailers. This makes sense only as way of incentivizing authors to direct readers to HarperCollins' website, e.g. when promoting their e-books on blogs.

HarperCollins unveiled its new site last week, which features a direct-to-consumer function, allowing visitors to the site to download e-books to read through a free HarperCollins app. The publisher also plans to make print books available for sale later in the year. At the moment, people looking for print books are given links to other retailers, including Amazon, Waterstones and W H Smith. 

The publisher has confirmed that authors will earn more through direct e-books sales through the site. A spokesperson said: "I can confirm that authors' net royalty is higher on e-books sold through our website because we don't have to share a commission with a third party." 

However, HarperCollins would not say what the exact rate was.

Sound of an author seeing his book in print for the first time

David McCandless received the first physical copy of his Knowledge is Beautiful.

Corrupt writers who tolerate typos

A typo in a book is like a paint scratch on a new car, in my humble opinion. But LA Times' Hector Tobar knows writers who aren't exactly nazi about proofreading.

The other day, I exchanged emails with a self-published writer. Discussing Amazon’s dispute with Hachette, he argued that books are overpriced and what traditional publishers have to offer isn’t worth the high price they charge for books. 

What about the cost of editors? I asked. Proofreaders? Book designers? All overrated, he said. “For better or worse, in the online era editing in general and proofreading in particular are becoming less and less important,” he wrote. Readers just don’t care anymore about typos, he said.

Evidence that e-books aren't price elastic

When Amazon called authors to arms against Hachette at the beginning of August, its main argument was that reducing e-book prices would increase total revenue:

Moreover, e-books are highly price elastic. This means that when the price goes down, customers buy much more. We've quantified the price elasticity of e-books from repeated measurements across many titles. For every copy an e-book would sell at $14.99, it would sell 1.74 copies if priced at $9.99. So, for example, if customers would buy 100,000 copies of a particular e-book at $14.99, then customers would buy 174,000 copies of that same e-book at $9.99. Total revenue at $14.99 would be $1,499,000. Total revenue at $9.99 is $1,738,000. 

I wasn't convinced that e-books are price elastic. People working for traditional publishers, short-sighted as they are, have been in the book industry for decades. If demand for e-books was elastic, they would knew this and they wouldn't resist Amazon's request of lowering prices.

I looked for recent empirical evidence on price elasticity and found this nice paper written by Imke Reimers and Joel Waldfogel. They calculated price elasticity for e-books and traditional books sold by Amazon between 2012 and 2013. They found that price elasticity is, in absolute value:

• between .39 and .53 for non-self-published e-books
• between .08 and .22 for self-published e-books
• between .88 and 1.23 for physical books

What does this mean in terms of revenue? Let us take the example made by Amazon. The price drops from $14.99 to $9.99, which is a 33.3% decrease. If this is the price of an e-book that isn't self-published, and assuming that price elasticity is at the top of the range (.53), the number of books sold increases by .333 * .53 = 17.7%.

If customers would buy 100,000 copies of the e-book at $14.99, then they would buy 117,700 copies at $9.99. Not 174,000, as Amazon Books Team wrote in the letter. Total revenue would drop from $1,499,000 ($14.99 * 100,000) to $ 1,175,823 ($9.99 * 117,700). So, it is much better for publishers and for authors (who earn a percentage of the total revenue) that the price stays at $14.99.

Reimers and Waldfogel mention an interview in which Jeff Bezos adamantly says that price elasticity studies suggest that Amazon's prices are too low. Just what Reimers and Waldfogel found out and the opposite of what his team stated. You can see the video of interview here; the relevant passage is (emphasis added):

Jeff Bezos: In the long run, if you take care of customers, that is taking care of shareholders. We do price elasticity studies. And every time the math tells us to raise prices. 

Charlie Rose: But why don’t you do it? 

Jeff Bezos: Because doing so would erode trust. And that erosion of trust would cost us much more in the long term.

A different and common explanation of Amazon's low-price policy is that it uses books and other product categories as loss leaders. Another is that Amazon's prices are predatory, that is they are intended to put rivals out of business or to allow Amazon to dominate the book market in a delicate stage of transition from old to new technologies. This is a legitimate strategy, although I see some possible anti-trust issues in it. However, when Amazon tries to convince authors that e-books are price elastic it simply isn't honest.