As you may've heard, Ama - er, um - SPECTRE recently put forth an offer to independent booksellers to become part of their 'team'. The gist of it is that we can sell their gizmos and their e-files and get a slice of their action for a period of two years. Here's their press release on the deal.
From The Verge you get the math on this 'offer':
"Let’s clear up some numbers in this article.
Amazon is offering a 6% discount on wholesale purchases of Kindle devices and up to a 30% discount on accessories. That means a KF HDX would cost a bookstore $216. Amazon will then give them a 10% commission on ebooks sold (and only ebooks sold, not apps, movies, music, audiobooks, or ebook rentals). Given that the upper limit selling price for a trade ebook is around $15, they’re looking at a maximum of $1.50, but with average prices in the 6 or 7 dollar range they’re looking at chump change in commissions.
Also, because of Amazon’s proprietary DRM, the bookstores can’t sell their own ebooks directly to try and get more of the pie.
The second option is to forgo the commissions in exchange for a 3% increase on the margin for the devices. Yeah… $7.50 isn’t going to convince anyone.
The thing is that people running independent bookstores aren’t stupid. For them to survive in the current state of the physical book selling market means that they’re actually probably very business savvy. So they are going to be able to see right through the smokescreen here. Business Insider summed it up perfectly: “Amazon has a plan to get indie bookstores to kill themselves”.
In every respect this is a terrible ripoff, especially when Kobo is offering a much better program through the ABA." [We here at SMB are part of the Kobo program.]
The New York Time's David Streitfeld asked JB for his thoughts on this and he's what he sent back:
I can't help but see this as a misleading attempt to counter the in-roads that Kobo has made with readers and fans of independent booksellers. Recently, we've read of Amazon shutting down part of its publishing due to a lack of success and profits (and stories about how Amazon itself is still not profitable). Something about this move has a feeling of retreat.
This release really doesn't provide much info. What's the discount that they're offering to booksellers on their gizmos? If independents can't make much money on the sale of the devices, they're at a disadvantage - selling the competitor's hardware, enriching the competitor, and not making much in return. There's also the issue of how an independent's customers get to the place to order they e-books. Are our customers just clicking on link on our website that then takes them to Amazon's? All that means is that they're selling independents the opportunity to become a new set of portals to funnel customers to Amazon. We help Amazon grow its business and, in return, we get a thin slice of the sale? That's not cooperation; that's being willingly complicit in your own execution.
Here's the final Streitfeld's article in the New York Times.
Since then, there have been any number of reactions, some bemused, some scornful, some perplexed, and some outraged.Here are just a few noted by Melville House Books on their website:
“We are not enticed in the least by the latest ‘offer’ from Amazon. It’s a dagger disguised as an olive branch – the latest effort by Amazon to gain traction with indie customers and loyalists.”
— Lissa Muscatine, Politics and Prose, DC
“Hmmm, let’s see. We sell Kindles for essentially no profit, the new Kindle customer is in our store where they can browse and discover books, the new Kindle customer can then check the price on Amazon and order the ebook. We make a little on their ebook purchases, but then lose them as a customer completely after two years. Doesn’t sound like such a great partnership to me.”
— Carole Horne, Harvard Book Store, MA
“If past experience is any indication, Amazon is not doing this to be sweet to indies.”
— Dorothy Massey, Collected Works Bookstore, NM
and our personal favorite -
“They can go fuck themselves.” — Sarah McNally, McNally Jackson Books, NY
Shelfaware ran a story with similar quotes:
David Bolduc, owner of the Boulder Book Store, Boulder, Colo., called participation in the program "sleeping with the enemy. If anyone thinks Amazon is going to do you a favor, you better have someone walking behind you so you don't feel the stab. Their whole entire business model is predatory.... I don't see any possible way to live in the same ecosystem as Amazon. They don't want anybody else. They want to be the go-to source for everything in the world."
For me, it's a Main Street issue," said Anne Holman, co-owner of the King's English Bookshop, Salt Lake City, Utah. "If I sell their Kindles after everything they've already done to indie bookstores, where would I be? It's about more than just bookstores: it's about the bike shop across the street, it's about the restaurants.... And it's not just the booksellers they've put out of business, it's the electronics store down the street, it's the other small businesses. I like our small businesses ecosystem and want it to flourish."
Nor should you think these reactions are limited to US booksellers. From The Bookseller:
Sheila O'Reilly, owner of Dulwich Books in London, told the Bookseller: "I think I would search my heart and find that morally I just couldn't stock the Kindle. I know Amazon employ lots of people in this country but they also have head offices in Luxembourg and Ireland for tax avoidance reasons and I couldn't ignore that. If it was more of a level playing field between Amazon and independents, then maybe I would think about it, but it isn't."
David Dawkins, manager at Pages of Hackney bookshop in East London, said Amazon "has made a point of aggressively diverting people's habit of using the high street. The company has made it clear that is what they want to do and I would be very surprised if this signals a change in policy towards independent retailers and the high street. I also wouldn't want our customers to think that we were doing trade with 'the bad guys.' I think we may lose quite a lot of respect if our customers thought we were sleeping with the enemy."
Other news on the subject of SPECTRE:
~ There's been a great deal of press about Brad Stone's biography of Jeff Bezos and his creation. Then there was MacKenzie Bezos' heated criticism of the book. If you don't know what to think or who to believe, here's a story about an early employee the company and his view on Stone's book who posted a four-star review of the book on SPECTRE's own site. Shel Kaplan - the former employee - thinks Stone got it right.
~ Last month, towards the end of October, Ama - er, um - SPECTRE announced that it was raising it's minimum amount an order needed to achieve to get free shipping from $25 to $35. Whether this was to recoup some revenue due to the policy, or to drive people toward their Prime service whereby the customer pays upfront for a membership and then is enrolled to get services whether they use them or not, is anyone's guess. (Free shipping on all orders is one of the services.) Either way, they're moving to do less for free and to use their pervasive computer systems to make suggestions to people so that they'll buy just a little more to get up to the now higher free shipping total.
~ SPECTRE announced a joint plan with the United States Postal Service to provide Sunday delivery.The Postal Service plans to use flexible scheduling to do this and says it will hire no new employees, though we've seen nothing about what this will cost in payroll. Is SPECTRE going to eat these charges or are they to be passed along to their ordinary consumers (Prime members will pay no shipping charges for Sunday delivery)?
~Then there is the inexplicable phenomenom of SPECTRE being a massive, worldwide outfit that still makes little to no profit for its stockholders, an anomoly on Wall Street.
Derek Thompson wrote in The Atlantic in October "Defenders say Amazon is trading the present for the future, spending all its revenue on a global scatter plot of warehouses that will make the company indomitable. Eventually, the theory goes, investors expect Amazon to complete its construction project and, having swayed enough customers and destroyed enough rivals, to “flip the switch,” raising prices and profits greatly. In the meantime, they’re happy to keep buying stock, offering an unqualified thumbs-up for heavy spending.
But this theory assumes a practically infinite life span for Amazon. The modern history of retail innovation suggests that even the behemoths can be overtaken suddenly. Sears was still America’s largest retailer in 1982, but just nine years later, its annual revenues were barely half those of Walmart. “The economic countryside is littered with the carcasses of companies that thought they had a [durable] competitive advantage,” says Alex Field, an economic historian at Santa Clara University. “Just look at BlackBerry or AOL.”
Amazon is not as insulated from its rivals as some think it is. Walmart, eBay, and a bounty of upstarts are all in the race to dominate online retail. Amazon’s furious spending on new buildings and equipment isn’t an elective measure; it’s a survival plan. The truth is that the company benefits from a beautiful but delicate tautology: Amazon has won investors’ trust with a reputation for spending everybody to death, and it can spend everybody to death because it has won investors’ trust. For now."
Greg Satwell, writing in Forbes Why Amazon Is A Lousy Business
Benedict Evans wrote this past August, "Equally, the problem with saying 'we can't tell from outside how Amazon is really doing, but it will become profitable, just wait and see' is that you could be waiting for ever without ever knowing if you're wrong."
Eugene Wei is one who thinks SPECTRE's business model is genius, that in this model short-term profits are not the point and are unimportant. Which business model is it that he approves of? The original one where there were to be no warehouses at all, that everything would be done in the great flowing river of the internet, where it would have no physical presense, no stock, no stockers - just office workers sitting at computers and sending customers' orders to manufacturers. Is that the genius business model, the one that was ditched long ago?
Oh - in case you were wondering if we were going to become part of SPECTRE's continuing efforts at Global Domination...
Do you really need us to answer that?
Recently, there have been a couple of news pieces that demonstrate others are sick of Ama - er, um SPECTRE's business practices and are willing to sing out.
First there was an interview with the noted literary agent Andrew Wylie which appeared in The New Republic, a man reknown for his outspokeness as well as his insistance on representing authors and books of "enduring quality". Having been in the publishing business for a great, long time, and having done a little bit of business with SPECTRE, he has strong opinions.
"Question: Do you feel as hostile toward Amazon as you used to?
Answer: I think that Napoleon was a terrific guy before he started crossing national borders. Over the course of time, his temperament changed, and his behavior was insensitive to the nations he occupied.
Through greed—which it sees differently, as technological development and efficiency for the customer and low price, all that—[Amazon] has walked itself into the position of thinking that it can thrive without the assistance of anyone else. That is megalomania."
The second piece is from the Seattle Times, "Book: Bezos' tactics not for faint of heart" with Jay Greene writing about a new biography of Jeff Bezos by Bloomberg BusinessWeek senior editor Brad Stone. While Green notes that the book delves into some psychological profiling of SPECTRE's creator to explain how the company operates (knowing how erroneous profiles of serial killers have been over the years, we put little stock in them), we point to the end of the article, where the scorched-earth business practices are detailed:
"Stone writes about a 2009 meeting between an Amazon executive and the founders of Quidsi, a startup making a name for itself with mothers with its Diapers.com site. Amazon was planning to move into the category. At first, Quidsi’s founders told Amazon that the company wanted to remain independent. But as Amazon moved into the business, their thinking changed.
Amazon cut prices up to 30 percent, and quickly matched any price movement at Diapers.com. Revenue growth at the startup began to stall and venture capitalists became reluctant to pump new money into the company that was clearly in Amazon’s sights.
Quidsi began talks to be acquired by Amazon archrival Wal-Mart Stores. When the Arkansas retail giant made a lowball bid, Quidsi turned to Amazon. At the exact same time that the Quidsi founders met with Bezos in Seattle, Amazon issued a news release announcing Amazon Mom, a deal that gave them a year of Amazon Prime, with its free two-day shipping, and 30 percent off diapers if they signed up for regular monthly deliveries.
'Quidsi could now taste its own blood,' Stone wrote.
Two months later, Amazon acquired the company for a slight premium over Wal-Mart’s original bid, but below its final offer.
'Bezos’ Khrushchev-like willingness to use the thermonuclear option had had its intended effect,' Stone wrote. 'The Quidsi executives stuck with Amazon, largely out of fear.'"
As Mr. Wylie notes in his interview: "If you eat all the grass on the hill, eventually you don’t have any topsoil, Mr. Bezos."
They call it a 'scorched earth policy' for a reason. Nothing useful is left, nothing is left alive, and nothing can regenerate.
That's SPECTRE's business model.
There's a new ad on TV from Ama - er, um SPECTRE - touting their newly updated reading gizmo. You see a carefully chosen variety of 'civilians' sitting in a 'pseudo-living space', with fake walls and big chairs and they're reading on this flat piece of techonology and are simply ecstatic about the experience.
No, they're not reading books. They're reading files on a computer...
The camera pulls back at the end to show this little staged area is right in front of one of New York City's icons, the Flatiron Building. You'll recognize it - it is triangular but seems to be pretty flat, leaving you wondering what the offices and hallways inside it are like. It sits on a wedge of land point north, where Broadway and 5th Avenue intersect. This is mid-way between Wall Street and Central Park, pretty much dead center of the publishing center of the United States.
Now - think back to the big lawsuit where the US government sued Apple and a raft of major publishers for collusion in setting e-book prices in an attempt to stop Ama - er, SPECTRE - from completely monopolizing the e-book market. And here's an ad about the wonders and joys of e-reading staged in the heart of American publishing.
One last bit of this that eliminates any question of coincidence: the Flatiron Building is the home of St. Martin's Press, one of those publishers charged of collusion and the one more vociferously resisting to settlement, and most adamant about the dangers of what Ama - er, um SPECTRE was doing to publishing.
No, no coindence.
Just a bully sticking a finger into the eye of a foe.
Recently, NW Book Lovers republished something that Village Books in Bellingham sent to their customers about the importance of supporting local businesses - booksellers or not. It's thoughtful and important and we think worth rebroadcasting.
In the wake of price wars among online megastores plus the President’s jobs speech at an Amazon warehouse and the American Booksellers Association’s letter about it, we thought we’d share the thoughtful email that the owners of Village Books in Bellingham sent to customers.
We’re so grateful to all of you for the outpouring of support since the reports of Amazon’s predatory pricing onslaught. We’ve received dozens of encouraging notes, quite a number of you have sworn off buying from predators, some have written directly to Amazon, and several of you have mentioned the issue as the reason you were consciously making purchases here. Thank you.
The issue grew a bit more widely known last week when President Obama chose an Amazon warehouse in Tennessee as the venue for a speech on job creation. Critics have rightly pointed out that local retailers, including independent booksellers like Village Books, have been far more successful in creating sustainable jobs than the massive online discounter. Some of you even told us that you have written the White House, protesting the President’s choice of speaking venue.
A number of you have asked, “What can I do?” There are a couple of things. First, you can spread the word widely about the importance of shopping locally. Here are ten good reasons to pass on to your friends:
1. Buy Local — Support yourself: Several studies have shown that when you buy from an independent, locally owned business, rather than a nationally owned businesses, significantly more of your money is used to make purchases from other local businesses, service providers and farms — continuing to strengthen the economic base of the community.
2. Support community groups: Non-profit organizations receive an average 250% more support from smaller business owners than they do from large businesses.
3. Keep our community unique: Where we shop, where we eat and have fun — all of it makes our community home. Our one-of-a-kind businesses are an integral part of the distinctive character of this place. Our tourism businesses also benefit. “When people go on vacation they generally seek out destinations that offer them the sense of being someplace, not just anyplace.” ~ Richard Moe, President, National Historic Preservation Trust
4. Reduce environmental impact: Locally owned businesses can make more local purchases requiring less transportation and generally set up shop in town or city centers as opposed to developing on the fringe. This generally means contributing less to sprawl, congestion, habitat loss and pollution.
5. Create more good jobs: Small local businesses are the largest employer nationally and in our community provide the most jobs to residents.
6. Get better service: Local businesses often hire people with a better understanding of the products they are selling and take more time to get to know customers.
7. Invest in community: Local businesses are owned by people who live in this community, are less likely to leave, and are more invested in the community’s future.
8. Put your taxes to good use: Local businesses in town centers require comparatively little infrastructure investment and make more efficient use of public services as compared to nationally owned stores entering the community.
9. Buy what you want, not what someone wants you to buy: A marketplace of tens of thousands of small businesses is the best way to ensure innovation and low prices over the long-term. A multitude of small businesses, each selecting products based not on a national sales plan but on their own interests and the needs of their local customers, guarantees a much broader range of product choices.
10. Encourage local prosperity: A growing body of economic research shows that in an increasingly homogenized world, entrepreneurs and skilled workers are more likely to invest and settle in communities that preserve their one-of-a-kind businesses and distinctive character.
And, you can also take the One Book Pledge by clicking here.
To be clear, we have no problem with Amazon, or anyone else, selling printed books, eBooks, or even refrigerators. What we object to is the predatory pricing that is fully intended to put other retailers out of business and establish one company as a monopoly. Monopolies have never proven to be in the best interest of the public.
Thanks again for your support, Chuck & Dee and the entire team at Village Books and Paper Dreams
And we agree with them to the core of our beings.
~ the Crew
1 – Craig Johnson, A Serpent’s Tooth, Viking
2 – Mike Lawson, House Odds, Grove Atlantic
3 – James Lee Burke, Light of the World, Simon & Schuster
4 – Mary Daheim, Gone With The Win, Morrow
5 – Carl Hiaasen, Bad Monkey, Knopf
6 – Timothy Hallinan, The Fame Thief, Soho
7 – C.J. Box, The Highway, Minotaur
8 – tie
Lisa Lutz, The Last Word, Simon & Schuster
Robert Galbraith, The Cuckoo’s Calling, Mullholland
10 – Daniel Silva, The English Girl, Harper
As you may've heard, President Obama today visited an Amazon 'fulfillment center' in order to make a 'major policy' speech on the economy and the need for jobs. As you might imagine if you've been paying attention to what we and others have been saying about SPECTRE for the last couple of years, you'll not be surprised that this choice of locale has been controversial. To show that it isn't just us who have problems with SPECTRE, here are a number of messages sent to the White House as posted in today's ShelfAware:
From the board of The American Booksellers Association:
Dear President Obama:
On behalf of the American Booksellers Association, we are writing today to call your attention to how Amazon's business practices are actually harming small businesses and the American economy. While Amazon may make news by touting the creation of some 7,000 new warehouse jobs (many of which are seasonal), what is woefully underreported is the number of jobs its practices have cost the economy.
For you to highlight Amazon as a job creator strikes us as greatly misguided.
As you've noted so often, small businesses are the engines of the economy. When a small business fails and closes its doors, this has a ripple effect at both a local and a national level. Jobs are lost, workers lose healthcare and seek unemployment insurance, and purchasing decreases. And while Amazon may now be boasting about the creation of jobs, any gains are elusive, and not a long-term solution.
The simple fact is that Amazon's practices are detrimental to the nation's economy.
The news this weekend that Amazon is slashing prices far below cost on numerous book titles is further evidence that it will stop at nothing to garner market share at the expense of small businesses that cannot afford to sell inventory below their cost of acquisition. In the end, monopolies are bad for consumers--and there are no examples in American history that prove otherwise.
For more than a decade now, Amazon has flouted sales tax laws in an effort to maintain a competitive advantage over Main Street businesses. To date, 16 states have passed sales tax laws to level the playing field for bricks-and-mortar businesses, and in all but three of those states Amazon (as well as Overstock.com) has fired its online affiliates in order to evade collecting and remitting sales tax to the state (two of the 16 states only just passed their sales tax laws). This has resulted in many online affiliates going out of business. Moreover, by eschewing its obligation to remit sales tax, Amazon has negatively impacted state budgets and services, as well as those of local communities.
In addition, Amazon's continued practice of using books, both in print and e-book formats, as "loss leaders" in an effort to increase their already immense market share of the retail book trade and to up-sell large-ticket items has impacted Main Street retailers and the communities in which these stores are located in ways that can be calculated (job losses, store closures, a decrease in sales tax revenue, etc.) and in ways that simply cannot (urban blight, budget cuts affecting first responders and other community services, etc.).
All told, according to the Institute for Local Self-Reliance, every $10 million in spending that shifts from Main Street retailers to Amazon results in a net loss of 33 retail jobs. That would mean for 2012 alone--using Amazon's own numbers about its increase in sales--Amazon cost the U.S. economy almost 42,000 jobs just last year!
At a time when Main Street retailers, including indie bookstores, show promise of recovering from the recession, we are disheartened to see Amazon touted as a "jobs creator" and its warehouse facility used as a backdrop for an important jobs speech, when, frankly, the exact opposite is true.
Conversely, the value of a local business to its community cannot be overstated--whether through job creation or in the myriad ways it gives back to the community.
We would love to continue this timely and important conversation with you. We'll bring together a group of real job creators to meet at your favorite local, independent bookstore! And we'll buy the coffee!
The board of the New England Independent Booksellers Association wrote:
Dear President Obama,
The news that you are planning to speak tomorrow at the Amazon warehouse in Chattanooga, Tenn., as part of your campaign to highlight the need to bolster middle class families and create jobs has hit members of the New England independent bookselling community like a ton of bricks.
What is the thinking behind this decision? Amazon is the very embodiment of so much that is wrong with our economy. The often-substandard working conditions at their warehouses around the world have been well documented. Their business model is based on fighting those states that have required them to collect and remit sales tax while driving Main Street brick and mortar stores out of business through predatory pricing. As we write, they are slashing prices of bestselling books in yet another price war where independent and brick and mortar businesses will be collateral damage. We cannot believe this is your vision of job creation and the future of American middle class.
This, from a president who has expressed pleasure in shopping at Kramer Books in D.C., and Bunch of Grapes on Martha's Vineyard? We would hope that your administration would be standing with Main Street, and investigating the monopolistic practices of Amazon, rather than either explicitly or tacitly endorsing those practices.
In the words of John Mutter, editor-in-chief of Shelf Awareness, "This is roughly equivalent of going to a Wal-Mart and calling for more of the kinds of jobs it offers."
We urge you to rethink using Amazon as a beacon of hope for the American economy and middle-class. Nothing could be further from the truth.
Hut Landon, executive director of the Northern California Independent Booksellers Association, wrote:
Dear President Obama:
I'm writing you on behalf of the members of the Northern California Independent Booksellers Association to express our dismay at your decision to deliver an address on jobs at an Amazon warehouse.
Amazon is a company that for more than decade fought tooth-and-nail to protect a business model based on sales tax avoidance, in the process fueling other online companies to copy to its actions and costing states cumulatively billions of dollars.
Worse yet, in our state, Amazon's CEO purposely misled the media and public officials by stating that his company shouldn't have to pay sales tax in California because Amazon didn't have a presence here and therefore wasn't using services that sales tax covers. The fact is, of course, sales tax is collected by retailers on behalf of purchasers who are liable for it--Amazon wasn't being asked to pay sales tax, only to do what other retailers are required to do legally in the states.
Amazon now has largely abandoned its sales tax avoidance strategy because it believes it needs to compete on delivery time. So warehouses have been opening across the country, including in Tennessee. Amazon has created jobs, to be sure, but they are often part-time (making those nasty health benefits a non-factor) and barely minimum wage. The company has made news with their warehouses, but it hasn't always been about job creation. In Pennsylvania, employees were forced to work in extreme summer heat with any air conditioning, and you have no doubt been following Amazon's labor troubles in Germany.
On top of all this, your Justice Department handed Amazon a monopoly on e-books with its recent ruling, assuring that independent bookstores will be unable to compete with e-books being sold as a loss leader to attract new Amazon customers. Ironically, while consumers will see lower prices, they will also see many fewer e-books published in the future. When Amazon decides not to lose money on the products, it will force e-book publishers to offer better terms. Given the already low margins, the response will be to simply not publish nearly as many titles. You'll be able to buy the newest book by Dan Brown, just not anything by the next Dan Brown.
Your appearance at the Amazon warehouse in Chattanooga sends a clear signal to small independent businesses that our value as job creators and community linchpins is not as important as an arrogant chain behemoth's contributions to states' monetary shortfalls and creation of thousands more minimum wage, benefit-poor jobs.
We will continue to do what we do best as locally owned businesses--offer knowledge and service to our customers, create and support community growth and activity, make every effort to provide employees with fair wages and conducive working conditions. And some of us will continue to grow and employ new workers, as small business has always done, even with the Amazons of the world being excused for past transgressions and rewarded for predatory business practices.
We are disappointed that you feel Amazon deserves your attention and endorsement (even if implied). We hope you will carefully consider the message you are sending with such an appearance and perhaps re-think that message in the future.
Sharon Hoshida, co-owner of Granada Books, Santa Barbara, Calif., wrote:
Dear President Obama,
As a voter who cast her vote for you twice, and attended your first inauguration in 2009, I am writing to express my concern about your example of Amazon as a job creator. You should know that their undercutting price tactics and ability to conduct business without the tax responsibilities of all other small businesses has done irreparable damage to independent retailers across the land.
For you to stand in front of their warehouse that is responsible for the loss of jobs and income is truly unconscionable. I am a small business owner, and just opened an independent community bookstore in downtown Santa Barbara, Calif. We are job creators, giving nine people employment. Our money stays in the community, we pay local, state and federal taxes, we serve our community. Amazon does NOT.
Never one to keep his opinions to ourselves, JB sent the following message to The White House yesterday as well:
At a time when small independent booksellers are hurting due to scorched earth policies by Amazon, that you'd appear at one of their facilities to talk about the economy is infuriating. They're the enemy of small businesses like mine and so many others. What you need to do is champion a way to get more discretionary income into the greatest number of hands. Too much money is locked up in the top percentage of the population and they can't buy enough to keep our consumer-driven economy going. We don't need investment. We need customers! We need people who have extra money to spend! You want me to create jobs? I can't do it without more customers spending their money here and they can't do that if they don't have it. You want to support small business? Visit one and give an address from one. Showing any sort of support for Amazon is a huge mistake. But the Republicans will approve…
Finally, Seattle Times economic columnist (and mystery writer) Jon Talton wrote in today's paper about the "Amazon Effect". Well worth your time to read his take on it.
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.
Back on March 2, 2012, we wrote the following in our post Watching the Thug Play the Game
"Amazon proponents say that Amazon is bringing the world a river (yes, that's why it is named Amazon) of affordable material and that has to be good for everyone. Well, yes, they do make things affordable. Now. But, after they've run other publishers and other booksellers out of business and have a virtual - if not actual - monopoly on publishing and bookselling, do you really expect them to continue to discount so deeply? If there is no competition, do you really believe that they won't raise the prices on everything, eliminating discounts, slashing the percentages given to authors? If they're the only game in town, what is to stop them? At some point, if Wall Street is to continue supporting them, they'll have to start showing profits to shareholders. To do that, they'll have to take it out of the hide of those who buy from them and sell to them."
Today the Seattle Times ran a story from David Streitfeld of the NY Times detailing just these things, "Small Publishers Anxious as Amazon Shrinks Discounts". According to the article, by lowering the discounts offered to customers, book prices are higher and that's affecting their sales. Small publishers AND authors are taking notice. Other writers and publishers have the same complaint. They say Amazon, which became the biggest force in bookselling by discounting so heavily it often lost money, has been cutting back on its deals for scholarly and small-press books. That creates the uneasy prospect of a two-tier system where some books are priced beyond the reach of an audience."
There appears to be no warning, no alerts and no decernable pattern. Any Amazon customer who uses the retailer’s “Saved for Later” basket has noticed its prices have all the permanence of plane fares. No explanation is ever given for why a price has changed. Bruce Joshua Miller, president of Miller Trade Book Marketing, a Chicago firm representing university and independent presses, said he recently surveyed 18 publishers. “Fourteen responded and said Amazon had over the last few years either lowered discounts on scholarly books or, in the case of older or slow-selling titles, completely eliminated them,” he said. [Our underline]
So much for the free-flowing river.
Higher prices have implications beyond annoyed authors. For all the hoopla around e-books, old-fashioned printed volumes are still a bigger business. Amazon sells about one in four printed books, according to industry estimates, a level of market domination that the book trade has never before seen.
It is an achievement built on superior customer service, a vast range of titles and, most of all, rock-bottom prices that no physical store could hope to match.
Even as Amazon became one of the largest retailers in the country, it never seemed interested in charging enough to make a profit. Customers celebrated and the competition languished.
Now, with Borders dead, Barnes & Noble struggling to survive and independent booksellers greatly diminished, for many consumers there is simply no other way to get many books than through Amazon.
And for some books, Amazon is, in effect, beginning to raise prices.
Stephen Blake Mettee, chairman of the board of the Independent Book Publishers Association, said Amazon was simply following in the tradition of any large company that gains control of a market. “You lower your prices until the competition is out of the picture, and then you raise your prices and get your money back,” he said.
Authors like Hollock and their publishers say they feel helpless about Amazon’s control over their fate. Hollock says he has called Amazon several times to ask why the price of his book was going up, and never received an answer that made sense.
In its 16 years as a public company, Amazon has received unique permission from Wall Street to concentrate on expanding its infrastructure, increasing revenue at the expense of profit.
Stockholders have pushed Amazon shares up to a record level, even though the company makes only pocket change. Profits were always promised tomorrow.
Small publishers wonder if tomorrow is finally here, and they are the ones who will pay for it.
One small nonfiction publisher, which requested confidentiality because Amazon is a crucial account, said the retailer sold its books at a discount ranging from 25 to 35 percent for years.
Then, despite steady sales, the discounts began to shrink. Their most popular book this week was 16 percent off.
For this publisher, that means less revenue and less profit as some buyers reject the more expensive books.
It is a disappointing turn of events, particularly when he recalls the excitement Amazon initially generated among independent presses.
“Amazon enabled our buyers to find us, before any wholesaler would talk to us,” he said. “Their slogan was about ‘leveling the playing field for small publishers’ and they did.”
Mr. Streitfeld's article begins by relating the affect of these actions on the sale of a true crime book by Jim Hollack. He returns to Mr. Hallock to end the article:
For Hollock, the “Born to Lose” author, the issue is readers, not dollars. His award-winning book, published by Kent State University Press, had a steep list price of $35 to begin with.
In the author’s view, Amazon is simply compounding the trouble by raising its price from $23 to more than $30.
“I see all these other books out there that are cheaper,” Hollock said. “I thought, ‘Man alive, I don’t know how I’m going to compete.’”
Well, Mr. Hollock, welcome to the party.
Amazon - or SPECTRE as we've tagged them - doesn't care about you or us or anything other than marketshare and sales. They've been willing to sacrifice profits to gain control. Their actions and practices over the years prove just that.
Today came the news that Williams' Book Store, selling books in the LA area for the last 104 years, is closing. Not enough sales to pay their bills.
While we can say we told you so, we take no satisfaction in it. The wreckage has been at too high a toll.
And on it goes...
Two bits of news caught our eyes recently:
Self-Published Ebook Sales Reach 20% of Genre Market In 2010, the US published 328,259 printed books, the UK 149,400. It is hard to find data on book publications in 2011 but, according to Bowker (they're the outfit that assigns the individual identifying number - the ISBN - to each book), since 2006, self-published books have risen 287%. Some 87,000 or so e-books were self-published in 2011 (some items may've been counted twice but many self-published e-books also lack ISBNs, so the number is 'fluid'). This figure is for the US only, but we can assume that the rest of the English-speaking world is holding up their end of the racket.
The Bowker article notes that in 2011, Amazon alone released 58,412 self-published works, "39% of all self-published print books." Further, "Smashwords was the largest ebook producer, accounting for 40,608 titles, or 47 percent of all self-published ebooks." Add those two figures and you get 99,021 self-published books by these two major players alone. Do the math to figure out what part they didn't produce (the 61% that Amazon didn't release equals 91,362, and the 53% that Smashwords did not produce comes to 45,792) and you get 149,774 self-published print books and 86,400 self-published e-books, or, if this math is correct, in 2011 there were 236,174 self-published titles. Give or take.
Then there was this essay by Barry Eisler, also on The Guardian's webiste: The Digital Truths Traditional Publishers Don't Want to Hear where he once again touts the advantages of e-books and self-publishing over what he calls 'legacy' publishing - meaning the system of publishing that gave him his start.
From what we hear, Eisler has done very well since he walked away from a fat contract with a legacy publisher to go on his own and with Amazon. We know of many authors for whom this route has not only become a stream of money but the only way they can continue to publish. They include nationally and internationally known writers, award winners - names you'd know, many local. The traditional NYC publishers have turned away from what is known as the 'mid-list' author (as opposed to the novice novelist or the mega-seller), no longer giving them contracts that allowed them to live on their writing and letting their older books go out of print. These backlist titles, if they have the publishing rights to them, can become a source of steady money as the books are complete and simply need to be converted to digital files. No one begrudges them this. They ought to be able to make money on their work.
We're just crabby that the major publishers are so myopic as to let these writers go so that we can no longer have their books to sell.
But here's the thing about someone like Barry Eisler: he launched himself into this digital world when he was already an established author. He didn't get to where he is by using that system from the start. Yes, he's done well selling his books on-line as digital files. Good for him. But would he be where he is had he not benefitted from the efforts of the 'legacy publishing' system he so easily dismisses?
Go back to the figure of quarter of a million self-published titles in 2011. We have to figure that the number of self-published books continues to grow each year. So maybe there were not as many in 2010, and maybe a lot more in 2012. And we're half-way through 2013, so...
What we would like to see is Barry Eisler conduct what we refer to as a 'science experiment': Publish a new work under a pseudonym and keep it a secret for a year. Tell no one that you've done it, do nothing to draw attention to it as a Barry Eisler novel, in no way promote it as Barry Eisler work, or allow it to be connected to you - hell, even lie and deny it is yours if someone asks...Do everything you can to keep it just another self-published work by an author no one has heard of. In other words, launch this as any other unknown author just starting out would have to do.
At the end of that year tell us, how did it sell?
Will readers find it among the other few hundred thousand other newly-released self-published works? Can he be successful from scratch, without the help of his reputation and name and without the publicity machinery of a 'legacy publisher'?
That would be an interesting experiment.