Posts Tagged ‘illustrated ebooks’

Printed books are zero-rated for VAT in the UK. Ebooks are taxed at 20%.

Publishers have taken a softly-softly approach to VAT on ebooks, fearful that if they kick up too much of a fuss the Government will awaken to the fact that printed books are presently zero-rated and slap 20% on them overnight.

Such a move would decimate the British publishing industry — and by extension picture libraries, photographers and all the industry’s ancillary suppliers would take a huge hit. It’s therefore unlikely to happen, but who can predict what a politician may take into his head to do.

City law firm Berwin Leighton Paisner has announced on its website:

VAT treatment of ebooks – The firm is taking a groundbreaking case challenging HMRC’s view that ebooks are standard-rated for VAT purposes, in contrast with physical books which are zero-rated.”

Hard-nosed commercial firms like BLP do not take cases on pro bono, or challenge national or international law simply for the greater good. Therefore they’re doing this for one of their clients, and that client will have deep, deep pockets.

Who can it be? Who will benefit?

Well, the consumer will benefit if prices fall by 20% (they won’t). Publishers will benefit from a boost in sales.

But by far the biggest beneficiaries will be the retailers. Apple sells ebooks. Tesco sells ebooks. They will both see a hike in profits. BLP numbers Apple and Tesco among its gilt-edged list of clients.

Our digital publishing company Heritage Ebooks sells 50 illustrated ebooks from its site for every one ebook sold by the rest of the UK’s ebook sales outlets — Waterstones, Foyles, Tescos and so on — put together.

And for every one of our ebooks that we sell from our site, Amazon will sell twelve from theirs.

It is disproportionately huge. OK, so we’re tiddlers, microbes even, but I expect the proportions are similar whatever you publish.

Amazon has been subject to much opprobrium and contumely for selling ebooks to UK customers and charging the full 20% VAT while taking advantage of the 3% VAT they pay as a company based in Luxembourg. Like Starbucks, Macdonalds and KFC, large American companies have an aversion to paying their fair share of tax in Europe, and as their lawyers and accountants are sharper than ours, they can get away with it.

And now some organisation, through BLP, is challenging HMRC’s ruling on the grounds that charging different rates of VAT on print books and ebooks breaches EU law on fiscal neutrality.

Come on, this has to be Amazon. Who else could afford such a suit? And who else would profit more?

Amazon charge us, the publisher, for the bandwidth used when a customer buys and downloads a Heritage Ebook from them. Because our ebooks are highly illustrated, they have large filesizes and therefore incur high bandwidth usage fees. And because one or two books are downloaded via 3G rather than broadband, Amazon charges us across the board at mobile phone companies’ bandwidth fees.

The result is that for two of our titles, we are losing 10p on every sale made through Amazon because of their charges. Amazon are thereby forcing us to raise our prices.

And I thought their intention was to drive prices down.

 

 

 

Gwyn Headley

by Gwyn Headley

Managing Director

First, some housekeeping. We’ve had teething problems with an email server since last Friday. It’s fixed now, but if you’ve recently contacted fotoLibra and haven’t yet had a reply, please send your message again. Thanks, and apologies.

I was prompted to write this after reading a posting about the subject on Mike Shatzkin’s invariably thought-provoking blog. Shatzkin leans more towards pessimism than I do. But he thinks carefully, deeply and analytically before he puts fingers to keyboard and what has has to say is always worth listening to.

He pleaded “Somebody please tell me the path to survival for the illustrated book business.” He meant illustrated ebooks, of course.

OK, this is the view I’m getting from where I’m standing. I admit you can’t see very far when you’re staring at the coal face, but if our sole purpose was to make money out of illustrated ebooks in the next 12 months, a) we’d have chosen a different subject, such as porn, and b) we probably wouldn’t have started to dig the mine.

There’s no denying that the sales of Heritage Ebooks’ first 40 illustrated titles have been less than spectacular. I would go so far as to describe them as disappointing. But all publishers are optimists by nature, and what gives me hope is that having created the books, they now are sitting in virtual warehouses at no cost to us, as ready and available for sale to your device today as they will be in five years time.

It is very true that the market hasn’t yet evolved for the illustrated ebook. We are seeing sales in ones and twos. But when people have grasped the concept, they have committed themselves wholeheartedly. So far seven of our customers have ticked the two most important boxes — they are interested in the subject we’re publishing, and they are comfortable with digital reading, and as a result they have bought thirty or more ebooks from our Follies of England series. Two have purchased all forty titles.

Heritage Ebooks is constrained by geography and field of interest. If you’re not interested in follies and you don’t often get to England, then we are not your kind of epublisher — at the moment. We have more titles on other topics planned; an illustrated tour of every Spanish province, a parenting guide; but for the moment we are cornered in a niche market.

Amazon’s hegemony isn’t particularly helpful. To build market domination, they gathered low-hanging fruit in bushels — bestselling fiction. The Kindle is designed for reading plain text, not illustrated books. 16 shades of grey may have inspired a bestseller, but it’s not a turn-on for illustrated ebook publishers. The colour Kindle Fire hasn’t yet got a release date in the UK.

Nevertheless Amazon sell eleven times as many of our ebooks as all our other sales outlets, including our own heritage.co.uk website, put together. Our return from them is feeble. Our ebooks are heavily illustrated, so they have large file sizes. Amazon charges us, as publishers, for their bandwidth used when a purchaser downloads a copy of one of our ebooks. If it’s a £4.99 ebook, that can be as much as 80p per title. Remember that comes after VAT and KDP’s 30% fee has been taken off.

Our choice to publish ebooks using Epub was driven by a number of factors. Foremost was Heritage Ebooks’ position as a sister company of the picture library fotoLibra.com. Pricing images for digital use was posing problems for us as the foundations for calculating the great majority of prices — print run and image size — had been removed at a stroke. We wanted to provide a system which would work for us, for our photographers and for digital publishers. We created advanceImages, a microroyalty system with no upfront fees, so epublishers could use as many images as they liked without any cashflow worries before publication. After six months sales, the publisher submits the retailers’ sales reports and is billed a royalty on the images used. Clearly no one was going to play guinea pig, so we set up our own publishing division to demonstrate the service’s functionality. To that extent Heritage Ebooks has been a tremendous success — the system works, and works well. The first advanceImages royalty statements will be posted with the launch of fotoLibra Version 5.0, hopefully next week.

Another incentive was to display our Active Location Finder, a mapping system which displayed both the reader’s location and the precise position of the building described, a tremendous asset to any ebook guide publisher.  This is simply impossible to do in a conventional printed book, and it was another spur to creating our first illustrated architectural guide books.

A third was graphical: graphics, typography, design, subjects that were embedded in me from my earliest days in publishing, suddenly became irrelevant. I find it incomprehensible that Fifty Shades of Grey can be presented in the same Caecilia font as Bring Down The Bodies, Harry Potter or this week’s Jack Reacher story. To me each font has its own unique voice, accent and point of view. Using the same font for everything you read is like listening to Churchill’s speeches being spoken by a computer.

Heritage Ebooks were created with the iPad as its preferred reading device. There was sufficient screen real estate to display images well, better in fact than in most physical books. We wanted reflowable and resizable text which would stay with the images it referred to. And although we couldn’t force readers to use our font choice of Cochin, at least we could recommend it. Then came iPad 2, and Cochin disappeared from the selection of fonts available. It has returned for iPad 3.

The future? More people will read illustrated ebooks on more devices. No, printed books will not disappear. It’s uncertain whether illustrated ebooks will take market share from illustrated books, or create a new segment. When automatic transmission was first introduced for cars in 1940 it was widely seen as the death knell for the stick shift. Yet over 70 years later in Europe, the world’s most sophisticated car market, over 80% of new car buyers choose manual transmissions. Even in America, home of the Wafter, sales of manual shifts are on the increase. Easier isn’t always better or more popular. We will have printed books alongside ebooks, which will have to have additional features (I refuse to use the word enh*nc*d) to recommend them to a separate but similar market.

Yes, the first forty Heritage Ebooks have cost us more than they have made so far. But they are out there in the marketplace, they look great, they work perfectly, and we have learned useful lessons, and we have proved the efficacy and worth of fotoLibra’s advanceImages system to the benefit of photographers and publishers alike. We’ll be publishing more. There are no remainders in this business.