In 1939, Germany invaded Poland using a new kind of warfare - the Blitzkrieg. This translates to lightning war. It utilized the airforce and the tank corps and it moved fast and hard and it overwhelmed the Polish nation before they knew that was happening.
Friday, Amazon declared war on the entire publishing Universe. We've been blitzkrieged.
SPECTRE, as we prefer to think of them, has begun discounting many hardcovers between 50% and 65%. To put this in persepective, when we order a hardcover from a publisher, we're generally given 46% (to be clear, there are specials that might, rarely give us 50% and one distributor's top discount is 45% - the wholesalers are lower that this). That means we pay the publisher 54¢ out of each $1. As we've explained in past postings, out of the 46¢ that we make on the sale of that book, we pay the rent, payroll, supplies, media (websites, blogs and other fees) and for the occassional bag of Fritos. That 46¢ is otherwise known as 'profit'. The lower the discount, the more difficult it becomes to pay the bills. There is no way anyone outside of a megacorporation can afford to offer those steep discounts and stay in business.
"'It's an open declaration of war against the industry,' said Jack McKeown, president of Books & Books Westhampton Beach, Westhampton Beach, N.Y. Like several people familiar with Amazon's move, he speculated that Amazon has been "emboldened" by the Justice Department's victory against five major publishers in the e-book agency model case as well as Wall Street's acceptance of continued losses by Amazon for now in the expectation of retail domination--and major profits--eventually. This last point was seen most recently on Thursday, when Amazon's quarterly results included a net loss and were below Wall Street expectations but did not provoke the usual rush to sell, as is the case with most companies whose results are disappointing."
How cozy is the relationship between SPECTRE and the Obama administration? This coming Tuesday, the President is scheduled to give another of his major speeches concerning the economy, the middle class and the need for good paying jobs at the Amazon fullfillment center in Chattanooga. If you've been reading along over the last couple of years on SPECTRE's business practices, you know there have been a continual flow of articles about how badly SPECTRE has treated it workers. So first the Justice Department works to hand the publishing world over to SPECTRE and then the President visits to champion them as a business model...
John Mutter, author of the story in ShelfAware notes that "The discounts are far below the usual 40%-50% range sometimes offered by Amazon, warehouse clubs and other discounters and are more typical for remainders than frontlist hardcovers. In some cases, the hardcovers are priced below the Kindle editions." We've noted in past posts that SPECTRE's own publications are priced higher than their own electronic versions, that they're seeminly content to sacrifice their own works to sales of their e-books, now we can see that they're content to sacrifice ANYONE's works to their own designs.
One has to wonder if this is aimed at any particular location. Payback to the publishers for trying to keep Amazon from taking over all of the electronic books world by agreeing to the 'agency pricing' system, the system the Justice Department targeted? After Borders declared bankruptcy in Feb. of 2011, the publishing industry has been worried about the health of Barnes & Noble. B&N has been struggling with the failure of their Nook, the great real estate costs of their massive stores and the general problems that have plagued all booksellers the last few year. Might this be a coup de grace aimed at their last major corporate competition? After all, trying to match SPECTRE's new discounts in their precarious state would be financial suicide for B&N - or anyone else. If B&N were to finally implode, SPECTRE would have no rival of comparable size and heft.
Whatever their aims, it is something than no independent can compete with. Little places like us have no deep pockets. Wall Street may be satisfied to sit back and watch Amazon bleed money. Wall Street is so awash with money that they're indifferent to what goes on along Main Street. And let's be clear - if Amazon is giving these levels of discounts, they're losing money on each sale. What is the merit of a business policy that says let's make sales by losing money? How long can they do that?
And who will be left standing - or crawling - when they're done?
The term 'scorched earth' comes from a military practice. It is as old as time and humans have been inflicting it upon one another as long as they've been fighting. In the Civil War, Sherman's March to the sea was an example - destroy everything that can be of use to the enemy. Literally, burn it all down the the ground. The retreating Germans did this as they left the Russian Front, the Russians used it against Napolean, it was applied in the Boer War. It is so brutal and so unforgiving that it was officially outlawed by the 1977 Geneva Convention. "It is a military strategy where all of the assets that are used or can be used by the enemy are targeted, such as food sources, transportation, communications, industrial resources, and even the people in the area. The practice can be carried out by an army in enemy territory, or in its own home territory."
At the begining of July, the NYTimes noted that Amazon was lowering the discounts it was paying to self-published authors and small publishers - meaning they were paying them less, and keeping more, of the sale. In the past, they've removed buy buttons from various publishers whose actions they disliked. They've eliminated entire types of books if thought controversial. They've deleted books from customer's e-readers that were paid for. And the poor treatment of their own international work force has been written about repeatedly. You can find our posts, with embedded links to the pertanent news articles, on our blog under the heading "Bookselling these Days"
And remember, Amazon is working with the CIA to supply cloud-sourcing security.
Welcome to SPECTRE's world. We're all just spectators.