Sony has announced a ¥455 billion loss in its fiscal year, which ended last March. But not to worry: that only sounds scary because of the yen is so big compared to the US dollar.  In dollars that’s only $5.7 billion.

Hmm.  $5.7 billion sounds like a lot, actually. Enough to drop the company’s value to about 3% of Apple’s.

Sony is the company that brought you the Walkman and the PlayStation. And the Sony eReader.  What is going to become of our poor dear Sony eReader?

Though it never remotely competed with Amazon’s Kindle and has been surpassed in popularity by the B&N Nook, Apple’s iPad and even Kobo’s eReader, it has held steadfast for the six years since its introduction and remains a viable electronic reading device.

The company has a new chief who is giving 10,000 employees pink slips and implementing other cost-cutting measures which have emboldened him to predict ¥8.5 trillion in sales in the next two years, according to Reuters.  Now that sounds pretty impressive.  Surely there will be a few yen of profit to sustain Sony’s eReader.

We hope so.  We’re fond of it, and we need someone to compete with the big boys.

Richard Curtis

This blog post was originally published by Digital Book World as Sony on the Ropes. Will eReader Survive?

Independent bookstores aren’t the only retailers chafing at the practice of showroom. Just ask Target.

In showrooming, customers enter a retail store and, when they have located the product they’re shopping for, walk out, go home and purchase the item on the Internet at a lower price.  Some shoppers simply scan the barcode of the production in the store and order it online on the spot. This in effect makes the brick and mortar store a mere showroom for customers to examine products they have no intention of buying there. Last Christmas Amazon actually promoted the practice, outraging alarming and outraging many stores and store chains. We know of at least one publisher that fought back by discontinuing distribution of its books on Amazon.

The latest objector is Target, the giant retail store chain. Executives, reacting to what they perceived as showrooming of Amazon’s Kindle e-book reader, informed Amazon they would no longer carry it.

Though Amazon sells most of its Kindles on its own website, many customers like to examine them physically, just as they may now do with Kindle’s rival, Barnes & Noble’s Nook, which may be “road-tested” by customers in B&N’s brick and mortar bookstore.  Recognizing consumers’ natural impulse to touch, Amazon began distributing Kindles in big retail chains.

It’s hard to predict what impact Target’s action will have on Kindle sales.  With nearly 1,770 stores in 49 states and gross revenues of $65 billion, boycott of a product by Target can have some seriously detrimental impact on any supplier. More ominously, if Staples, Best Buy and Wal-Mart, which also sell Kindles, see themselves as showrooming victims and follow Target’s lead, it could put a crimp in Amazon’s sales – and its image.

For the complete story read Target, Unhappy With Being an Amazon Showroom, Will Stop Selling Kindles by Stephanie Clifford and Julie Bosman in the New York Times.

Richard Curtis

This blog post was originally published on Digital Book World as Target Targets Amazon as Showrooming Enabler

Laura Hazard Owen, writing for Gigaom.com, reports a unique strategy for combating the practice known as “showrooming”.

In showrooming, customers enter a bookstore, browse, then select (or scan the barcode of) the book they want to purchase, walk out of the store and order it from an online bookstore. Which makes the independent store a mere display space for customers to order books from its competitors. Last Christmas Amazon actually promoted the practice, outraging indy stores. One got so mad it stopped doing business with the behemoth. (See Can You Survive without Amazon?)

Barnes & Noble, the highest-profile target of showrooming, is now in a position to fight fire with fire. Microsoft’s investment in B&N’s Nook business gives the bookstore chain the potential for a showroom that loops back to its own inventory via the Nook.

“B&N CEO William Lynch says that the company plans to embed NFC (near field communication) chips into Nooks,” reports Owen. “Users could take their Nook into a Barnes & Noble store and wave it near a print book to get info on it or buy it.”

It’s an interesting concept, but there’s a big flaw in the reasoning.  Showrooming enables customers to scan a high-priced book in a brick and mortar store, then buy it at a discount on an Internet store.  In other words, if you scan a $20.00 book in a Barnes & Noble bookstore, then go to B&N’s online store, you’ll be able to buy it for, say, $16.00.  Then why, you will ask, can’t I pay $16.00 inside the bookstore?

For a showroom to work properly you need two components: a physical space with physical books to browse; and a virtual space to actually buy them. Think of a library where physical books are on display for browsing only. Customers choose the titles they want, swipe a credit card, and wait a short time while the book is printed on an Espresso-type printer.

We’ve been buttonholing readers with this mad scheme for years, and you can see some of our postings about kiosks here.

Richard Curtis

This blog post was originally published on Digital Book World as Showdown for Showrooms

If you seek cogency on digital publishing subjects you’ll always find it in Laura Hazard Owen’s postings.  A good example is a recent one on the implications for consumers of the settlement agreements with the Department of Justice in its conspiracy lawsuit against five major publishers and Apple.

What does the settlement mean for customers? Here’s a summary:

1. Let the Discounting Begin. “Readers are likely to see lower prices on e-books published by HarperCollins, Hachette and Simon & Schuster — at least at Amazon, which expressed its glee over the settlement. But you won’t see those lower e-book prices until at least June…I wouldn’t be surprised to see some shockingly cheap bestsellers from those publishers — think massive summer promotions where big titles by authors like James Patterson, Jodi Picoult and Nicholas Sparks are $1.99.”

2. Amazon rivals will discount too. “Other e-book retailers, like Barnes & Noble and Kobo, are likely to want to enter into new contracts quickly as well so that they are on a more even playing field with Amazon.”

Owen points out that Amazon competitors “may not be able to afford to discount a wide range of e-books as deeply as Amazon can.” But that has not prevented Barnes & Noble, Kobo, and even the struggling Sony from maintaining a healthy market share of the e-book retail business.

3. Bundling of e-books, and e-book/p-book combo packages. “Justice notes that agency pricing ‘prevented e-book retailers from experimenting with innovative pricing strategies…such as offering e-books under an ‘all-you-can-read’ subscription model where consumers would pay a flat monthly fee,’ bundles or buy-one-get-one-free promotions. The settlement opens the door for those types of promotions on Hachette, HarperCollins and Simon & Schuster titles.”

4. Less predatory loss-leader pricing. “When it comes time for Simon & Schuster, HarperCollins and Hachette to negotiate their new contracts, the settlement allows them to ‘negotiate a commitment from an e-book retailer that a retailer’s aggregate expenditure on discounts and promotions of the Settling Defendant’s e-books will not exceed the retailer’s aggregate commission under an agency agreement in which the publisher sets the e-book price and the retailer is compensated through a commission.’”

5. Will Apple now sell e-books at a discount? “If it simply removes Simon & Schuster, Hachette and HarperCollins titles from its shelves without negotiating new contracts — yes, this would mean Walter Isaacson’s Steve Jobs biography, published by Simon & Schuster, would no longer be available through iTunes — it will be losing a large part of its catalog. If Apple agrees to negotiate new contracts that don’t require agency pricing, it could also make agreements with the many publishers who have not been able to sell their books in the iBookstore before. That would mean a much wider book selection for iBookstore shoppers.’

Read details in What the DOJ e-book lawsuit means for readers now

Richard Curtis

This blog post was originally published on Digital Book World as E-Book Prices Must Come Down

In another coup for its book publishing enterprises, Amazon’s Thomas & Mercer imprint has acquired fourteen novels in Ian Fleming’s James Bond thriller series, plus two nonfiction books by Fleming.

If Amazon’s policy holds true the books will be carried exclusively on the Kindle e-reader.  As Publishers Lunch‘s Michael Cader points out, however, the news “brings attention again for Barnes & Noble, and whether they will carry the print editions. Since Amazon says the ebooks will be Kindle exclusives at the outset, and BN has already declined to carry titles from Amazon Publishing in their physical stores, the policy is unlikely to change.”

B&N has stated its position about Amazon Publishing’s books in no uncertain terms.

Richard Curtis

This blog post was originally published on Digital Book World as Amazon’s Fleming Acquisition May Not Bond with B&N

Something Fishy Served Up at Picholine?

Is this a joke?

A Melville House posting by Kelly Burdick has allegedly unearthed email exchanges among executives of some Big Six Publishers plus Steve Jobs of Apple setting up a dinner to discuss “the $9.99 problem”. The email thread comes from “From deep inside the files of the Justice Department”, says Melville, and if verified will explain why the Department of Justice pressed its collusion case – and why at least three of the accused settled.

Clearly, the interchanges didn’t pass DoJ’s smell test. Does it pass yours? Here is the email that allegedly started it (reproduced, deletions and all, from the Melville House posting):

From: Makinson, John (jMakinson@us.penguingroup.com)
To: jSargent@macmillan.com, xxxx@hachettebookgroup.com, xxxx@harpercollins.com, xxxx@simonandschuster.com, dShanks@us.penguingroup.com, xxx@xxxxxxxx.com
cc: steve@apple.com
Date: Monday, September 22, 2008, 10:46am
Subject: the $9.99 problem

Let’s get together again and keep discussing the “the $9.99 problem.” Where and when works?

For the complete thread read The Collusion Files: how it really happened by Kelly Burdick. Is this true or have we been punked?

Richard Curtis

This blog post was originally published on Digital Book World as On the Dinner Menu: Fishy Discussions about “$9.99 Problem”

After complying with the draconian reporting requirements imposed by the Department of Justice, the three publishers that have settled to avoid prosecution may wish they’d fought the charges. The conditions are just a little less stringent than house arrest. We will not be surprised to hear that executives at Simon & Schuster, Harper or Hachette have been fitted with ankle monitors.

Richard Curtis

Here is a summary of the compliance requisites for the parties that settled (from Publishers Weekly):

Compliance:
This is the most onerous part of the settlement, and helps explain why Macmillan and and Penguin have decided to fight. Under the Settlement, each publisher will have to engage in a number of compliance measures including:

The appointment of an “Anti-Trust Compliance Officer,” reporting directly to the company’s general counsel.

In addition, the publishers must provide at least “four hours of training” for relevant staff delivered by an attorney and conduct “an annual compliance audit.”

The Settling Publishers must also furnish to the DoJ “on a quarterly basis” electronic copies of any non-privileged communications containing allegations of noncompliance and must “maintain and furnish to the Department of Justice on a quarterly basis, a log of all oral and written communications, excluding privileged or public communications,” between the publishers “officers, directors, or employees” involved in the development of the Settling Defendant’s plans or strategies relating to e-books.

Under the Settlement, the DoJ can also inspect the publishers’ offices, and “require Settling Defendants to provide to the United States hard copy or electronic copies of all books, ledgers, accounts, records, data, and documents in the possession, custody, or control of Settling Defendants, relating to any matters contained in this Final Judgment.”

DoJ officials can also interview “either informally or on the record” the Settling Defendants’ “officers, employees, or agents.” But, if you’re tabbed, you do get to bring your an attorney.

And, upon request, the Settling publishers must submit “written reports or respond to written interrogatories, under oath if requested,” relating to any of the matters contained in the settlement.

This blog post was originally published on Digital Book World as Compliance Requirements for Publishers That Settled: Everything But Ankle Monitors

Unlike its Big Six colleague Macmillan, HarperCollins elected to settle with the Department of Justice over the controversial Agency business model, rather than go through a trial. (For a full backgrounder read Apple Promoting a New (and Radical!) Business Model for Selling E-Books? and Publishing’s Weekend War: 48 Hours That Changed an Industry)

Harper’s press release below.
Richard Curtis
*******
Contact:
Erin Crum
Vice President, Corporate Communications
HarperCollins Publishers
(212) 207-7223
Erin.Crum@harpercollins.com
FOR IMMEDIATE RELEASE
HarperCollins Publishers Settles e-Book Pricing Dispute with the Department of Justice
New York, NY (April 11, 2012) — HarperCollins Publishers today announced that it has reached an agreement with the United States Department of Justice to end its investigation into HarperCollins’ contracts for the distribution of e-books. HarperCollins did not violate any anti-trust laws and will comply with its obligations under the agreement. HarperCollins’ business terms and policies have been, and continue to be, designed to give readers the greatest choice of formats, features, value, platforms and partners – for both print and digital.
After HarperCollins adopted the agency model in 2010, the e-book market exploded, giving consumers more choices of devices, formats and prices that would never have existed but for the agency model. Some examples include:
 The iBookstore, which offers iTunes customers a storefront to buy HarperCollins’ books
 The launch of Barnes & Noble’s NOOK Book Store, which grew faster than any other platform for HarperCollins’ titles over the last two years
 Prices for dedicated e-readers declined from almost $400 to under $100, and competition exploded in the device market, making the e-book reading experience less expensive
 Dynamic pricing of HarperCollins’ e-books, including some titles priced under $2, was introduced to maximize the sales and reach of our authors and their books
 The introduction of color tablets with native e-book stores led by Apple and Barnes & Noble, which are now the fastest selling devices for e-book consumers
 The introduction and rapid development of enhanced e-books with audio, video and interactivity, which are a fast-growing digital format for HarperCollins
HarperCollins faced legal challenges on five separate fronts, including the DOJ investigation which was resolved today. The e-book market has grown over the last two years from a small e-ink market, dominated by one platform, to a $1B market with several competing platforms. HarperCollins made a business decision to settle the DOJ investigation in order to end a potentially protracted legal battle.
About HarperCollins Publishers
HarperCollins, one of the largest English-language publishers in the world, is a subsidiary of News Corporation (NYSE: NWS, NWS.A; ASX: NWS, NWSLV). Headquartered in New York, HarperCollins has publishing groups around the world including the HarperCollins General Books Group, HarperCollins Children’s Books Group, Zondervan, HarperCollins UK, HarperCollins Canada, HarperCollins Australia/New Zealand and HarperCollins India. HarperCollins is a broad-based publisher with strengths in literary and commercial fiction, business books, children’s books, cookbooks, mystery, romance, reference, religious and spiritual books. With nearly 200 years of history HarperCollins has published some of the world’s foremost authors and has won numerous awards including the Nobel Prize, the Pulitzer Prize and National Book Award, the Newbery Medal and the Caldecott. Consistently at the forefront of innovation and technological advancement, HarperCollins is the first publisher to digitize its content and create a global digital warehouse to protect the rights of its authors, meet consumer demand and generate additional business opportunities. You can visit HarperCollins Publishers on the Internet at http://www.harpercollins.com.
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John Sargent, CEO of Macmillan, has circulated an open email to the author, illustrator and agent community informing them of a civil lawsuit brought by the Department of Justice. Sargent stands by his firm’s position on the so-called Agency sales model that is the government’s grounds for the suit, vows to fight it unlike some other publishers that have settled with the DOJ, and expressed confidence in vindication. The full text is below. (For a full backgrounder read Apple Promoting a New (and Radical!) Business Model for Selling E-Books? and Publishing’s Weekend War: 48 Hours That Changed an Industry):
Richard Curtis
****************

Dear authors, illustrators and agents:

Today the Department of Justice filed a lawsuit against Macmillan’s US trade publishing operation, charging us with collusion in the implementation of the agency model for e-book pricing. The charge is civil, not criminal. Let me start by saying that Macmillan did not act illegally. Macmillan did not collude.

We have been in discussions with the Department of Justice for months. It is always better if possible to settle these matters before a case is brought. The costs of continuing–in time, distraction, and expense– are truly daunting.

But the terms the DOJ demanded were too onerous. After careful consideration, we came to the conclusion that the terms could have allowed Amazon to recover the monopoly position it had been building before our switch to the agency model. We also felt the settlement the DOJ wanted to impose would have a very negative and long term impact on those who sell books for a living, from the largest chain stores to the smallest independents.

When Macmillan changed to the agency model we did so knowing we would make less money on our e book business. We made the change to support an open and competitive market for the future, and it worked. We still believe in that future and we still believe the agency model is the only way to get there.

It is also hard to settle a lawsuit when you know you have done no wrong. The government’s charge is that Macmillan’s CEO colluded with other CEO’s in changing to the agency model. I am Macmillan’s CEO and I made the decision to move Macmillan to the agency model. After days of thought and worry, I made the decision on January 22nd, 2010 a little after 4:00 AM, on an exercise bike in my basement. It remains the loneliest decision I have ever made, and I see no reason to go back on it now.

Other publishers have chosen to settle. That is their decision to make. We have decided to fight this in court. Because others have settled, there may well be a preponderance of references to Macmillan, and to me personally, in the Justice Department’s papers – often without regard to context. So be it.

I hope you will agree with our stance, and with Scott Turow, the president of the Author’s Guild, who stated, “The irony of this bites hard: our government may be on the verge of killing real competition in order to save the appearance of competition. This would be tragic for all of us who value books and the culture they support”.

Since we are now in litigation, I may not be able to comment much going forward. We remain dedicated to finding the best long term outcome for the book business, for Macmillan and for the work you have entrusted to our care.

Thanks.

John

The below announcement from the Authors Guild reports that Barnes & Noble has acceded to pleas from the Guild not to make authors collateral damage in the war with Amazon over the latter’s business practices including exclusive content agreements.

Here’s the Guild’s announcement in full:

Richard Curtis

***************************

Here’s some welcome news: Barnes & Noble has agreed to our request to bring Marshall Cavendish children’s books back to their stores’ shelves. By our count, more than 250 authors and 150 illustrators have been affected.

How these books got pulled in the first place is a lesson in how exclusive content agreements have begun balkanizing the book marketplace.

In December, Amazon Publishing purchased Marshall Cavendish’s children’s book list, more than 450 children’s and young adult titles. The next month, Barnes & Noble announced that it would not be stocking any Amazon published titles in its stores. B&N released a statement from Jaime Carey, its chief merchandising officer, saying that it would not stock books published by Amazon, “based on Amazon’s continued push for exclusivity with publishers, agents and the authors they represent.”

With this announcement, B&N pulled Marshall Cavendish children’s books from its shelves. For Debby Dahl Edwardson, the timing could not have been worse or more devastating. Her most recent book, “My Name is Not Easy,” had been selected as a 2011 National Book Award Finalist. This sort of recognition can transform an author’s career, and authors typically visit countless bookstores to make the most of such opportunities. Ms. Edwardson, however, found her opportunity drastically curtailed. Barnes & Noble removed her book from its shelves (including from the shelves of its store in Fairbanks, Alaska, the one nearest the author’s North Slope home) about two months after the National Book Awards ceremony.

As we’ve made clear over the last several years, we’re very concerned with Amazon’s rapidly growing dominance of bookselling. Exclusive content is a big part of that story. With $9 billion in cash, Amazon can afford to cut more deals as it did with DC Comics to acquire exclusive e-book rights to titles, as it tries to gain the upper hand in the e-reader and tablet market.

So we’re sympathetic to the position of brick-and-mortar booksellers, even the largest of them: this isn’t a fair fight, by any stretch. Still, it’s essential that authors and readers not become collateral damage. The authors and illustrators who signed contracts with Marshall Cavendish had no way of anticipating that the publisher would assign their contracts to Amazon. For these authors to lose their vital showroom presence in Barnes & Noble stores was clearly unfair and harmful. Children’s books, especially picture books, need to be seen to be appreciated by readers.

We fear that more and bigger battles in bookselling and book publishing loom in the months ahead. For the sake of authors and readers, we hope those fighting it out will avoid using access to vital literary marketplaces as a weapon.

Unfortunately, this seems unlikely. Amazon is seizing an ever-growing share of the bookselling market, but it’s after far bigger game. Deploying some of its cash to buy publishers with deep backlists is an inexpensive way for Amazon to ensure that its Kindle Fire is an essential device to many readers, who then can be sold movies, TV shows, and music through the platform. Amazon’s history suggests it won’t be shy in these efforts.
Meanwhile, Barnes & Noble isn’t backing down. Its executives made clear to us that it is making this exception because it announced the policy after Amazon announced its purchase of the Marshall Cavendish titles. For any new Amazon acquisitions, Barnes & Noble’s policy is to ban the books from their shelves.

For now, however, some good news for Marshall Cavendish authors and illustrators.
We’ll keep you posted on any developments.