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Going Rogue, Now Unavailable on KindleThe publishing conspiracy that's blocking an electronic version of Palin's memoir.

By Daniel GrossPosted Thursday, Oct. 1, 2009, at 9:37 AM ET

If electronic books are the future—literary volumes optimized for the Kindle, the Sony Reader, the iPhone—how come two of this fall's hottest books won't be available in digital form anytime soon? Sen. Ted Kennedy's memoir, True Compass, had a dead-tree print run of 1.5 million but a pixel-version print run of zero. (It's currently No. 1 on the New York Times best-seller list.) Now comes word that Sarah Palin's memoir, Going Rogue, which will debut in November with a print run of 1.5 million copies, will not be available as an e-book until Dec. 26.

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What gives? After all, other blockbusters, such as Dan Brown's The Lost Symbol or Mitch Albom's Have a Little Faith (or, as I refer to it, Sundays with Schmaltzie) don't discriminate among readers. Jonathan Karp, editor of the Kennedy memoir, cited the difficulty of translating photos into the new format as a reason not to do an e-version. But such concerns didn't stand in the way of publishing an audio version of True Compass. Why shut out a group of buyers from purchasing the product? And why isn't Amazon.com, which possesses immense leverage over publishers as a big purveyor of plain old books and the dominant seller of e-books, making more of a stink?

The answer lies in the types of books these are and in the not-always-rational price difference between e-books and hardcovers.

The Kennedy and Palin autobiographies are big, event books that appeal to passionate supporters. The Daily Kos crowd won't go rogue in big numbers, and the National Review gang has no interest in finding its true compass. As a result, the books offer an increasingly rare opportunity for publishers to help out struggling bricks-and-mortar booksellers. In the most recent quarter, same-store sales at Borders fell 18 percent. Same-store sales at Barnes & Noble were off 6 percent in the second quarter. (Here are the two-year stock charts of Borders and Barnes & Noble.) Books like these are a godsend for retailers—especially when hardcover books are the only available format. For highly motivated buyers who don't frequent bookstores, an electronic version is the best option, since it offers instant gratification. The next-best thing is to show up at a store and purchase it. Buying the actual book online from Amazon means you still have to wait a couple of days. So, the theory goes, a Sarah Barracuda fan who needs Going Rogue badly will drive over to the B. Dalton (owned by Barnes & Noble) in the Karcher Mall in Nampa, Idaho, and, while there, also pick up a copy of Glenn Beck's latest. Meanwhile, a Camelot nostalgist in need of a fix will take the T to the Borders on Boylston Street in Boston and buy True Compass—and perhaps a coffee and sandwich.

Then there's the matter of price, which is a bone of contention between publishers and the Kindle portion of Amazon's business. The Kennedy ($35 retail) and Palin ($29 retail) memoirs are expensive books. Most hardcovers these days have sticker prices in the mid-$20s. But Amazon prices most Kindle offerings at $9.99. As my colleague and former editor Marion Maneker notes, book editors believe that over time, the existence of low-priced new books on Kindle will make it difficult for them to charge premium prices for books in stores. And so, out of anger or as part of an attempt to preserve the higher price points of hot books, publishers withhold e-versions for certain books they know will sell huge numbers in print. (Adam Clymer's biography of Kennedy isn't available on the Kindle, either.)

Why isn't Amazon.com livid about this? After all, this technology firm is providing the beleaguered publishing industry a more efficient way to reach readers, and it's being stiffed on some big sellers. It may be that Amazon is losing money on many sales it makes of Kindle-ready books. With the Kindle, Amazon has inverted the old business model of giving away the shaver and selling the blades. Amazon is using the blades (cheap books, in this case) as a loss leader to induce people to pay up for the shaver (the $299 Kindle). As I understand it, Amazon pays the same wholesale price for Kindle books as it does for real books—generally 50 percent of the list price. For a typical hardback that retails for $26—say, E.L. Doctorow's Homer & Langley—Amazon pays $13 and then sells it for $9.99 on the Kindle, taking a $3 loss on each sale. (The longer-term strategy, publishers fear, is that once the Kindle gains significant market share, Amazon will negotiate lower wholesale prices for digital versions.) In the short term, though, this means that Amazon is likely to lose more money on more expensive books sold on the Kindle. It would have to pay $17.50 per "copy" of the digital version of True Compass, and $14.50 per copy for Going Rogue, but would sell them for significantly less. It may seem perverse, but once Amazon has sold a Kindle to a customer, it doesn't have all that much incentive to sell expensive books to the Kindle owner—unless it's willing to boost the prices of electronic books significantly.

And so this arrangement seems to work for all parties—except for Kindle owners. Publishers land a blow in the fight to maintain the integrity of their pricing scheme. Booksellers find that eager buyers have a reason to visit their stores. And Amazon is racking up big profits selling the books the old-fashioned way. As I write, the hardcover editions of True Compass and Going Rogue are No. 5 and No. 3 on Amazon's best-seller list.

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Daniel Gross is the Moneybox columnist for Slate and the business columnist for Newsweek. You can e-mail him at and follow him on Twitter. His latest book, Dumb Money: How Our Greatest Financial Minds Bankrupted the Nation, has just been published in paperback.

Illustration by Mark Alan Stamaty.

COMMENTS

I don't own a Kindle and don't foresee owning one in the near future. However, the notion that an e-book should be priced anywhere close to a dead-tree version is ridiculous. The publisher's production and distribution costs for an e-book are virtually zero. Yes, the publisher needs to recoup marketing costs and pay the editor's salary, and of course the author needs to be paid, but most authors only make about 15% of the hardcover list price, and most titles get almost no marketing support from their publishers. If a publisher can turn a profit on a $25 hardcover that it wholesales for $12.50, and $3.75 of that goes to the author, how much of the remaining $8.75 goes for printing, binding, warehousing, and shipping? My guess is, at least half. That means currently, publishers feel they can earn back their marketing and editing costs and make a profit if they take $4.50 from each sale. $4.50 (publisher) + $3.75 (author) = $8.25. Amazon sells at $10, that's $1.75 profit for Amazon for something that costs them very little to store and distribute, not counting the profit they make off of each Kindle sold.

Publishers need to either spurn e-books entirely or price them rationally, and if the latter, people will either pay a premium for dead trees, or buy Kindles.

-- Rocket88
(To reply, click here)

One of the misconceptions that the publishing industry has is that every purchase of an ebook represents a "lost" sale of the hardback. In other words, they don't view the $10 sale of an ebook as money made, but as $25 lost because they "failed" to sell a hardcover book for $35. This is based on at least two misconceptions:

1) That the average reader doesn't care what format their books come in.

False. I know several people who absolutely hate the idea of reading off a screen. They have no interest buying a Kindle and will never buy an ebook. Conversely, there are those who have fully embraced the ebook and have sworn off dead tree books. For both of these people, comparative pricing doesn't matter. They will only buy the book in the preferred format.

2) That "but for" the existence of the ebook, the customer would have bought the hard cover.

False. People who might not be willing to pay $35 for the hardcover might be willing to pay $10 for the ebook. If the ebook is not an option, the price-conscious consumer might wait for the paperback or borrow it from the library. These consumers are not "lost" hardcover sales because they never would have bought the hardcover.

The publishing industry needs to stop looking at ebooks are lost hardcover sales and instead embrace as a potential new market that they weren't reaching before.

-- Greatbear452
(To reply, click here)

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