Seattle Mystery Bookshop

A Simple Plan for Publishing's Future

by PNBA Executive Director Thom Chambliss (reprinted with his kind permission)

With the lawsuit filed against several of the largest publishers in the country challenging the way in which those publishers decided to adopt the "agency plan" for selling their eBooks (go here to Seattle Mystery Bookshop's blog for a nice summary of the settlement and what it means), all kinds of people are speaking out about the demise of publishing as we know it. Maybe they're right. My guess is, though, that at least some publishers will figure it out, will go their own way, and will eventually adopt agency plans--not just for eBooks, but for all of their new releases, new paperback editions, and new eBooks.

Why would publishers set minimum prices for their books? Simply to accommodate those authors who want to protect the value of their work, and in doing so, to protect the broadest and deepest ways of distributing books in a free market. Let me explain.

The movie industry has dealt with the issue of digitized product now for more than twenty years; perhaps the book industry can learn from its model. The movie producers, comparable to our publishers, decided early on NOT to release their movies directly to video at the same time as they released the films to theaters. Why? To maintain the value of their long and expensive work. Any movie released "direct to video," without first being run in theaters, was assumed to be so bad that it would lose money in theaters. Over the years, the film industry has established a logical, progressive marketing pattern for their products: first a film is released only to theaters, only at full price. Then the movie is released to video at full retail, and simultaneously to pay TV at premium prices. Finally, usually after a few years, the film is sold to network TV and the DVD is re-priced for mass-market sales.

What is the lesson for publishers? I believe that many publishers of quality books will soon begin selling their front list on an agency plan, meaning the book's price will be set by the publisher, NOT by the retailer, so that those people who most want the book will pay a premium for it. This would allow ALL retailers to sell the books competitively; no one vendor would be able to discount the book lower than its competitors. Perhaps, for many front-list titles, sales quantities would initially decline, because an author's book would not be available anywhere at massive discounts. However, after a reasonable time set by the publisher, that hardcover edition could be sold at discount by whomever. If the book had been well-received by the book buying public at its premium price, the newly discounted copies might see massively increased sales. Then, with the release of the first trade paperback edition, another wave of marketing would take place, dictated by the success of the total premium and discount-priced sales of the hardcover, and sold initially only at the premium paper price, under agency pricing. Again, within a time adopted by the publisher, those editions would eventually be sold at discount. At that point, the eBook versions would be released, many initially sold at publisher-set agency prices, before eventually being offered at discounts set by the retailers.

What advantages would such a system offer? Basically, the same advantages that it offers to the movie industry: the publisher maintains its income and control over the initial release of the product, provides itself with upcoming opportunities to re-market each new edition of the book, and assures the author that he or she will continue to provide the editorial and promotional opportunities, and income, that direct-to-eBook releases don't offer.

Some people complain that publishers should release their books at the lowest possible price, because the public shouldn't have to pay a "premium." Are these same people complaining that the movie studios should release all of their new movies to DVD, at the lowest price based on the cost of transferring the data to disc? If not, why not? Probably because they know that that model would be disaster for the movie producer, and would mean that no one would be able to produce movies at a profit. That is the dilemma facing publishers today: they cannot make a profit by releasing their new books direct to eBook at the lowest cost of data transfer. Some of us respond to that with "Well, duh."

God forbid that I, or anyone else, should tell publishers what to do. I mean this as a suggestion that publishers look at what is working and why. Yes, if publishers moved to agency plan sales for all of their "new releases," in every format, it would mean that independent retail bookstores could again compete on the sale of books, and a lot more of them might survive in such a rejuvenated industry. And, yes, I work for some of those book retailers, so I have a vested interest. But I also believe that publishers, big and small, provide enormous benefit to their authors and thus to the public. Almost every book they publish is chosen not so much with profit in mind, but to share ideas, often at a loss.

Publishers pay up front to acquire books; invest in editorial processes to improve them and make them even better than their first drafts; invest in sometimes wide and sweeping marketing and promotional programs to help the books reach their widest audience; and print, package and distribute the books, all in the hope that they will make enough money to pay for the investment. And, if they are enormously lucky and successful, additional profits may just help pay for the publishing of other books that might not ever make back the expenses. That is the nature of publishing.

If Amazon, or any one discounter, ever becomes the only source of publishing and distribution of books in this country, free speech will become a lost dream. I encourage my publisher friends to think for themselves, and to save themselves while they still can.

From the Columbia Journalism Review

Ebooks and Antitrust

The Justice Department sues Apple and five book publishers for fighting Amazon, April 11, 2012

By Ryan Chittum

Back in 2010, a giant retailer had 90 percent of a market—a near total monopoly (monopsony, if you want to be precise).

This company tried to dictate pricing in the industry via its dominant position (aided significantly, to be sure, by its early innovation in the market) and by the fact that it can use its profits elsewhere to subsidize heavy discounts, selling them at a loss so other retailers can’t match its prices. That threatened to further cement this company’s grip on the market, as did the fact that it sold a device that locked consumers into its proprietary software. This company used its monopoly power to demand lower prices from manufacturers, removing their products from its store (and thus cutting off almost all sales) when they didn’t comply.

Manufacturers in this market—the folks who actually make the stuff people buy—were gravely concerned about the power this retailer had assumed over their business.

Another giant company came along and told manufacturers it had a better model. It would let them set their own prices for their own goods in exchange for a fixed cut and for barring other retailers from selling for less. The manufacturers agreed and individually set their own prices for their products.

While this would have been vertical price fixing and considered illegal five years ago under the Sherman Antitrust Act, a 2007 Supreme Court ruling has changed that, saying that retailers can set minimum prices for their products to “give consumers more options so that they can choose among low-price, low-service brands; high-price, high-service brands; and brands that fall in between.”

Two years later, the model has made an impact. The monopoly retailer’s position in the market has been reduced to 60 percent. Prices have risen about 25 percent, which allows for the emergence of two new major retailers who wouldn’t have been in the market since they would have been competing to lose money on every book sale. Sales have continued to boom.

The Justice Department sues for antitrust violations. But whom does it sue? The companies fighting the monopoly, naturally.

The dominant retailer I’m talking about above, of course, is Amazon. The competitor is Apple (and, later, Barnes & Noble), and the manufacturers are the major book publishers.

But the Obama administration is missing the forest for the trees in suing them for colluding to raise prices in the ebook market.

While this may look like price-fixing, and the DOJ has some damning-looking meetings and timelines (that Penguin’s CEO says contain “material misstatements and omissions”), it’s ultimately about companies being forced to do what the government wouldn’t do: Take on a monopolistic competitor that abused its market power to dictate how they do business.

How do we know this? Because the publishers sued here made less money under Apple’s agency sales model than they did under Amazon’s loss leader policy. As Macmillan CEO John Sargent, who is fighting the DOJ suit, says: "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." What kind of sense does it make for companies to fix prices to make less money? The publishers were gravely worried about the monopoly power Amazon was accumulating over their market and they acted to break it. If anybody was anticompetitive here it’s Apple, which leveraged its heft and the publishers’ weak position vis a vis Amazon to ensure itself a 30 percent profit margin on ebook sales.

This kind of market distortion is unsurprising when companies like Amazon, which doesn’t play nice, are allowed to accumulate dominant positions and to use their power to dictate terms.

GigaOm’s Mathew Ingram writes that “A case against Amazon wouldn’t make any sense unless it could be shown that Amazon’s behavior was causing higher prices.” It’s true antitrust laws are there primarily to protect consumers, but they do that in part by protecting competitors and suppliers from chokeholds in markets. Doing so ultimately protects consumers in the long run—on prices and on selection.

Taking a loss on something to establish or maintain a dominant market position is predatory pricing. In the short run, that may benefit consumers, but it won’t in the long run. (UPDATE: I’ve made several copy edits to fix tenses in the opening few paragraphs.)

Reprinted with the kind permission of the CLR, whose motto is "Strong Press, Strong Democracy"

DoJ settlement, Amazon: What it Means

What does the settlement of three major publishers with the Department of Justice lawsuit mean? Really - it is too soon to know. We think we know what it will mean in the near-term, but if we could predict the future we'd be gazillionaires from all the Lottery numbers we'd have chosen and wouldn't be trying to scrape out livings selling books.

In the short term, we will undoubtedly see the price of e-books tumble. Will it be a slight decrease or a free fall? In the short term, probably somewhere in between. Amazon released a statement yesterday that they were looking forward to lowering prices. Will that mean back down to $9.99 from $14.99? We shall see. Will it mean even lower? We shall see. You can track that yourself. Pick a new book on Amazon and check the price for a Kindle edition. Then look up the same book on another site and see if there is a difference. Now repeat every couple of days. (We don't set the prices of the e-books sold through our site. Google does that. Will they drop prices to match Amazon? We'll see.)

In a comment reported widely yesterday, "Reaction from Amazon was also swift. Drew Herdener, a spokesperson for the e-tailer, called the DoJ’s decisions “a big win for Kindle owners,” adding, “We look forward to being allowed to lower prices on more Kindle books.”

A report on Mediabistro notes that in the first quarter of 2012, Amazon's sales of e-books rose 29% while Apple's rose just 1%. Overnight, Apple's stock had dropped 13% when we checked Friday, while B&N's dropped 6.4% Thurdsay (down 17% for the month that is not half over). We admit to not being able to tell much from these tea leaves - Amazon's stock is also down slightly.

What will it mean to publishers? In the short term, it depends on the publisher. Those who settled will be forced to pay millions back to customers in some fashion. So they'll take a financial hit in the short term, at a time when they're already reeling from the falling sales of printed books. On NPR Thursday, one analyst - James McQuivey of Forrester Research - predicted that some won't make it.

The Author's Guild website carried the full statement from someone who didn't buckle. Macmillan's CEO John Sargent is one of the guys who did not settle with the DoJ. "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." Bear in mind that Macmillan is the company that Amazon attacked a few years ago by removing all of their publications from sale.

Penguin Group chairman (the other publisher who refused to settle) John Mackinson wrote this: “The second, and equally powerful, reason for our decision to place this matter in the hands of a court is that we believed then, as we do now, that the agency model is the one that offers consumers the prospect of an open and competitive market for e-books. We understood that the shift to agency would be very costly to Penguin and its shareholders in the short-term, but we reasoned that the prevention of a monopoly in the supply of e-books had to be in the best interests, not just of Penguin, but of consumers, authors and booksellers as well."

At the same time, there is a class action suit against the publishers and an on-going European investigation concerning the agency model as well. So the financial liabilities faced by the named publishers and Apple are impossible to know at this time. It would be fair to say they will be 'large'.

What will it mean to booksellers? In the short term... depends on how far the prices for e-books fall. If they fall fast and steeply, it will inevitably mean lost sales of printed books.

While everyone seems to think that this DoJ case is about competition surrounding the sale of e-books, and how collusion was engaged to raise the price of e-books, what isn't addressed is that higher prices for e-books are needed to save printed books. A $25 or $27.99 hardcover can compete with a $14.99 e-book better than it can with a $9.99 price. Drastically lowered e-book prices gut the sales of hardcovers, even trade paperbacks. If e-books continue to outsell hardcovers and massacre the sales of softcovers, printed books are seriously threatened. No one talks about that.

What you, as reader and consumer and resident of Earth can do for yourself is to watch for stories that report on the sales of printed books. Most likely, you'll find them around the ends of financial quarters, as well as annual reports of the past year's sales that come out at the beginning of a new year. A search on the internet should turn them up - business pages of the major news outlets, or Publisher's Weekly. Quarters go Jan - Mar, April - June, etc. Look for reports in early July that cover the present quarter. That will tell us if something is happening immediately. And that may foretell where publishing is going.

Here are articles on the matter:

Wall Street Journal: US Alleges E-Book Scheme

Publisher's Weekly: The Broad Strokes of the Hachette, HarperCollins and S&S Price-Fixing Settlement

New York Times: Cut in E-Book Pricing by Amazon Is Set to Shake Rivals and Justice Deptartment Sues Apple and Publishers Over E-Book Pricing; 3 Publishers Settle

Bloomberg: U.S. Sues Apple For eBook Pricing as Three Firms Settle

BBC: Q&A: Apple and e-book prices

Author's Guild's president Scott Turow on what it all means. 

I was asked by a reporter from the New York Times if Wednesday, with the settlement, would be viewed in the future as the 'death knell' of what has been so dismissively characterized as 'legacy publishing'. I begged off, saying it was too soon to tell.

I hope that I am right, that there is still hope for my industry. However, I'm having a very difficult time playing the role of an optimist.

~JB

[One last thing: we've been writing about these matters and why they matter for nearly a year now. If you look to the right at the list of Categories and click on 'Bookselling these Days', you can read backward through the earlier posts.]

 

 

Seattle Times on Amazon

If you're in this area, you may already know that the Seattle Times has run an in-depth series of stories on Amazon. Each day has addressed different issues: corporate citizenship, work conditions, wrangles over local taxes, and relationships with publishers.

Today, Wed, April 4th, from 1-2 pm Seattle time, there will be a live on-line talk on the Seattle Times website between series reporter Amy Martinez, book editor Mary Ann Gwinn and author Richard Russo.

If you follow the link before it starts, you can send in your own question for them to answer. We have!

DoJ and the Publishers: A New Umpire in the Game

So the US Department of Justice will sue five major US book publishers and Apple over colluding to fix the prices of e-books. What’s the big deal and why should you care? We’ll try to spell it out. But here’s where the story will end: they were trying to save the traditional publishing industry. Alarmist? You decide.

The point of setting a fixed price at which everyone would sell a given e-book was to allow the publishers to earn money for what they were producing. Before the ‘agency model’ was put into effect, Amazon was selling e-books at firesale prices. Their interest was in locking up as many customers as possible for their Kindle system and to corner as much of the e-book market as they could. They have been willing to sell all of their goods at a loss in order to garner market share.

Because their prices were so low, Amazon was dragging down the prices for all e-books as publishers were forced to lower their own prices to compete. In effect, Amazon was willing to lose money because they could survive it (keep in mind that Amazon is making money selling all sorts of things, not just books, and they're making a ton of it) while book publishers don’t have that kind of financial cushion, especially as nearly all are now owned by huge international corporations that want all of their divisions to make a good return – and publishers can’t do that if they compete with Amazon at the slashed prices.

Apple wanted to get into the market place with the iPad and made the agreement with the publishers to set a higher price at which everyone would sell the e-books, thereby achieving some sort of fair level where everyone would have the same chance. Theoretically.

Bear in mind, too, that it is estimated Amazon now ‘owns’ 70-80% of the e-book market. We’ve also read 90%. Whatever the percentage is, it is overwhelming. So why should you care? Really cheap books are a good thing, right? Welllllllll, no. Here’s why:

Big Time Publishing is Big Business, right? Lots of floors in high-rises, lots of offices, lots of workers in editing and marketing and the art department and sales reps and the legal department and the executives. Lots of payroll and rent and the basic bills of any business from pencils to copier toner to paying the light bill. And then they also have to pay the authors. To support all of that, you need to bring in a great deal of money. The way it has all been traditionally paid for is through the sale of hardcovers. Think about it: a publisher makes a great deal more money on the sale of the hardcover than they do on the paperback. You really cannot support all of that on the sales of paperbacks (one of the reasons that the good, ol’ mass market is threatened and why books are going to trade paperback). They simply do not earn you enough money (this applies to booksellers, too).

Here are some numbers for you to chew on. Publisher’s Weekly reports “Despite slowing growth rates in the final quarter of 2011, e-book sales rose 117% for the year, generating revenue of $969.9 million at the companies that report sales to the Association of American Publishers. Sales in all trade print segments fell in the year, however, with the mass market paperback segment showing the largest decline with sales from reporting houses down almost 36%, to $431.5 million. Adult hardcover and trade paperback sales were off 17.5% and 15.6%, respectively. In children’s, the YA/hardcover segment sales fell 4.7% and paperback sales fell 12.7%”.

Here’s a clear example of how e-books are killing the sale of hardcovers: the new Stephen King is $35. Amazon is selling the hardcover for $17.49 (which is less than publisher sold it to us, so, unless Amazon got a special discount - which is illegal - they're selling it at a loss). The Kindle version is $16.99. Barnes & Noble's Nook version is $14.99… Crimminy! There is no way for the hardcover to compete or for any bookseller who cannot afford to deeply discount to compete with those prices! With that in mind - that sales of printed books are crashing and sales of e-books are skyrocketing - how does traditional publishing survive? If the volume of e-book sales stays steady or continues to rise, that may help. But if the Justice Department’s lawsuit is successful and prices of e-books can plummet, can simple volume of sales make that gap up?

We don’t see how. If anyone is free to sell an e-book for as little as they want, how can a $27 hardcover - let alone a $35 behemoth - compete with a $9.99 or a $5.99 e-book? It can’t. That’s why sales of printed books are falling off a cliff. In fact, as e-book sales rise, publishers are taking a hit on two fronts: buying an e-book means that sales of the new hardcover decline and future sales of the softcover won’t take place (look back at those sales figures – mass market sales fell the most). Over a year ago, Fran wrote a post about the economics of selling e-books and how many you have to sell to just pay for the system to allow you to sell e-books. Read that and then think about how many e-books you’d have to sell to support a small independent bookshop. THEN think about how many you’d have to sell to support a major publishing house. You couldn’t do it.

If you can’t sell hardcovers because e-books cost a quarter of the price, how do publishers support the rent, the editors, the publicists, the art department, the staff lawyers and all of that? We don’t see how they could. Publishers go away, no more books, what do booksellers sell, what do libraries shelve? And if the major, corporate publishers can’t make it, there’s no hope for the small presses. They have no financial cushion to try to weather the storm. Yes, there are now the ‘espresso’ printing machines that allow the printing of books but they’re not cheap and you have to put them somewhere. Can they pay for themselves, a small staff and the rent to house them? Aren’t they undercut by the lower e-book prices as well?

What’s that mean to you?

- Little to no filtering of books: traditional publishing gives you the sense that any given book has been vetted, that others have read it, made editorial suggestions about characters or plot, caught the typos and thought it was worth publishing. With self-publishing, you have no guarantee any of that has taken place.

- You’ll have to decide if that matters with fiction, but what about non-ficiton – histories and biographies? Who is going to preview them to make sure they’re valid and accurate? Who is going to stand between you, the reader, and the writer to assure you that what you’re buying is credible? Granted, there are instances of plagiarism in traditional publishing but we seem to hear, more and more, about entire e-books being copied and sold on-line by someone else.

- No filtering of books from booksellers you trust, or librarians, in the worst case.

- Without the filter of the major publishers, how will reviewers decide what to read and review? You can’t imagine the flood of advance reader copies we get. What if we had to do it electronically, with authors we don’t know flooding us with unsolicited files of their new book? How could you possibly weed through them all? We know you’re not supposed to judge a book by its cover but what do you do when there is NO COVER? Or if the pixellated cover is generic, as many are?

- More and more authors will self-publish e-books, if they can afford it – no more contracts with publishers to allow them to write full-time means that they won’t earn anything on their writing until the e-book versions begin to sell and all of the expenses of getting it ready (copy editing, etc) will have to be paid for ahead of time, out of their own pockets. It will work in their favor that, theoretically, their books will never go out of print and could therefore keep earning them money. Still, their old books and new books will have to struggle to get the attention within the massive flood of a gazillion self-published authors. Remember – these days the idea is that everyone can be a published author, whether they deserve to be or not. Those that do deserve to be read will have to somehow rise above the rapids to be found. They say cream rises to the top, but in the floodwaters of unedited, poorly written and possibly pirated e-books, even the cream will curdle and sink. 

- No more signings. Authors could still have appearances but, without printed books, there’d be nothing to sign. No more tours. Perhaps remote, on-line talks or chats or conferences, but they’d have to fund that themselves. No corporate publisher paying for the marketing or publicity.

- Will printing companies stay in business? If everything is going digital, maybe not. Or, to make ends meet, they’ll need to charge more to do what printing they do. As they raise their prices, doesn’t that mean they perhaps price themselves out of business? So add printers and everyone who works at printing plants to all of the people who work for publishers – from the janitors to the receptionists and on to the executives – who will be out of work. Oh, and the booksellers. Count us in, too. 

Why should you care about the Department of Justice’s case against Apple and the five major publishers?

Because the survival of publishing as we know it may depend on it.

Perhaps the future of the printed book, as well.

Watching the Thug Play the Game

On Feb 21st, fantsy author Jim C. Hines wrote a post about how Amazon has been monkeying with the prices of e-books, which affects the amount the authors get from the sales. As he points out, if a pubisher puts a printed book on sale, his share of the purchase of the book is based on the cover price (if a publisher cuts the price of the book they make less on the sale of the book and the author still gets their full share). According to the contract Amazon has with authors, they can change (i.e. lower) the price of an e-book at will and the author’s cut will be a consistant percentage of that price. He points out that his income from royalties was therefore lower. Royalties with Amazon are not based on list price – as with print publishers – but on the sale price.

On Feb 23rd, it was announced that after a major distributor refused to give Amazon new, much lower terms on items purchased, Amazon removed all Kindle versions of books distributed by IPG. [A little explanation here: major publisher – such as Random House or Penguin – distribute their own books and sometimes some smaller, ‘client’ publishers. Then there are distributors – Independent Publisher’s Group is one of them – that sell and ship for a large number of smaller publishers. We don’t order Bitter Lemon books directly from Bitter Lemon, we order them from a distributor.] IPG – Independent Publisher’s Group - is therefore the main way these small publishers to easily get their books out to shops like this one. Theoretically, everyone gets the same discounts so that there is a level playing field and everyone gets the same amount of money on the sale of one of IPG’s books, or e-books. Amazon wanted ‘more favorable terms’, which means they wanted a higher discount so that they could make more money on sales of IPG books. For Amazon to keep a larger percentage of the sale of IPG titles,  IPG and its authors would make less money. IPG said no and Amazon, in retaliation, removed ALL of the e-books, depriving not only IPG of e-book sales but all of their authors as well.

On Feb 24, author Jim Hanas, disgusted with Amazon’s treatment of IPG, removed the buttons to buy his books from Amazon from his own website. He had a balance on an Amazon gift card and used it to buy a Kobo Touch e-reader.

 On Feb 24, Melville House publisher Dennis Johnson detailed his reactions to the Amazon/IPG battle, drawing paralells to the fight Amazon waged against MacMillan two years ago and Melville’s own battle in “2004 about what we thought — and our attorney confirmed — were illegally high discounts. We refused to pay, and our buy buttons disappeared overnight.”

Later that day, Johnson wrote more, detailing international reaction by authors, publishers and in the media to Amazon’s removal of IPG e-books. (By the way, Johnson is one publisher who has rebutted the argument put forth by Nancy Pearl and her agent that Nancy’s reissue program was offered to every publisher and none wanted it. Johnson has written that he, at Melville House, was not approached about the plan.)

Here’s another small independent bookshop that is waging its own education battle with the public about Amazon, and why it is important to support independent businesses. They make their points succinctly and sharply.

On that same day, Feb 27th, O’Reilly Media Joe Wikert wrote about how he, too, is ‘kicking the Amazon habit’ due to their strong-arm practices. This appears to be a personal decision. He doesn’t mention anything about O’Reilly Publications’ own books availability through Amazon. The title of his post is "Why I’m Breaking the Amazon Habit and Why You Should Too!"

There is one issue that no one seems to be addressing.

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, elimiating 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.

That's when you will find yourself living in the company's town, having nowhere to shop but at the company store, playing and paying by the company's rules.

 

Patchett vs. Colbert

 

The Colbert Report
Get More: Colbert Report Full Episodes,Political Humor & Satire Blog,Video Archive

 Award-winning writer Ann Patchett faced off with Stephen Colbert about the benefits of a small independent bookshop vs ordering on-line. She recently opened Parnassus Books in Nashville after the city was left with no open bookshops. It's a fun and sharp exchange.

Shopping at Borg & SPECTRE

The rumor has been drifting around for a few days and yesterday Reuters confirmed it:

Amazon is said to be preparing to open a good 'ol brick-n-mortar storefront. Reports have varied and this may have to do with the rumored nature of the stories. According to the Reuters piece, the idea is to have an Apple-like storefront where people can go in to handle and 'experience' the various proprietary gizmos that Amazon makes and sells. Other versions have it that the storefronts will be to showcase the books that they will be publishing themselves. Other versions have it that the stores will be places to showcase both books and electronic doohickies.

Many things come to mind.

First of all, the entire idea of Amazon was that it would be a system by which people could and would order books from Amazon, Amazon would then order them from a supplier and have them sent directly to the customer. The great genius was supposed to be that this would be a 'warehouse-less' bookstore. No physical inventory, no physical warehouse, no pickers or packers or boxes, tape and packing peanuts. It would be immensley profitable becasue it wouldn't be weighed down by pedestrian things like rent, utility bills and payroll.

That didn't work. Pretty quickly, they were building warehouses.

Now, the store-not-chained-to-a-storefront is going to open a store, here in Seattle, as a test. In theory, anyway. There will be rent and utilities and payroll.

One wonders if they do sell their books in this pleasure palace, will they be discounted at the same rate as the books are on-line? If they are, they'll have to sell a hellovalotta books to pay those bills. They regularly discount the on-line books 40%, selling them at nearly half the cover price. That means they'll have to sell two books to every one at full price to make the same amount of money. If they don't match the discounts offered on-line in order - well, what's the point of going into buy one of the books?

It is already well documented that the Kindle is sold at such a low price that Amazon loses money on the sale of each reader. They're willing to do that to rope buyers in on buying content. No one else can sell the Kindle versions of content. Whatever money they lose in selling a Kindle, they are assured of making it up from you later. It would make sense that they would have a uniform price on their books - on-line or in-store being identical. There is nothing to say yet if they will be making any money on the sale of printed books or if they'll be selling them at a loss as well. Impossible to say what it costs them to print a book and what they do or do not make on the sale of one, even at 40% off cover. Certainly, if they're selling the e-book versions at a lower price than the printed book, you have to assume that they're not making that much on the sale of a physical book - if they're willing to undercut themselves by selling the e-version more cheaply, they can't be that worried about not selling many printed books, right?

But then with a physical bookstore, they may not care about making a profit. If they're openly willing to lose money on selling you a Kindle, they may equally be willing to lose money on a physical space just as an experiment. Why not - it's a tax write-off, isn't it?

But to a company sitting on a reported pile of $9 billion, why not just buy the building outright and do away with the issue of rent. While we're at it - just buy the block, or the city?

Oh, wait...

 

Incidentally, you can buy a Reuters app for your Kindle... just $9.99 at Amazon.com.

Welcome to the Company Town and the Company's Rules

We’re gratified to know that others, finally, are beginning to pay attention to Amazon's practices and take action.

The Sunday New York Times on Jan 29th ran a lengthy story ominously entitled “The Bookstore’s Last Stand”. While we’re glad to see someone else reporting on it all by major media, we have to take issue with the idea that it is only B&N that can save book industry; it is you book buyers who have that responsibility and power, not the guy who runs B&N and who hadn’t sold a book before three years ago is the guy to do it.

On Jan 29th, NPR ran a story about the allegations of plagiarism and the lack of compensation from Amazon.

In Shelfaware on the 30th, an article was included about the NYTimes article, how it neatly ignored us independents, and then reported on American Booksellers Association CEO Oren Teicher's recently listed statistices to show that bricks-n-mortar independents are doing quite well.

That same morning, a local author (THANKS, JANE!) forwarded an essay from Author’s Guild that was both depressing and heartening. Depressing because so many people are pessimistic about publishing and heartening that more people are talking about the problems. “Publishing’s Ecosystem on the Brink: The Backstory”. The essay cited two major articles: one in Bloomsburg Businessweek (hardly an alarmist or leftist outfit) that explained the roiling going on within NYC’s publishing; and one in the new issue of Harper’s, “Killing the Competition: How the New Monopolies Are Destroying Open Markets” by Barry C. Lynn: “Today, by contrast, a single private company has captured the ability to dictate terms to the people who publish our books, and hence to the people who write and read our books. It does so by employing the most blatant forms of predatory pricing to destroy its retail competitors. It does so by gathering up massive amounts of information about the most private thoughts, interests, and habits of the American citizen. And all the while, this new sovereign justifies its exercise of raw power in the same way our economic autocrats always do: it claims that the resulting ‘efficiencies’ will serve the interests of the consumer.” [The Businessweek article is linked in the Author’s Guild piece; the Harper's article is quoted – to read it all, you’ll have to do what we did and go support them by buying a copy.]

Then, later that afternoon came shockingly cheerful news: Barnes & Noble announced it would not stock or sell Amazon’s printed books. Their decision had more to do with Amazon’s exclusivity with e-books. Amazon would ‘let’ anyone sell their printed books but refused to allow anyone else to sell their e-books. Without that reciprocity, B&N said no dice. This article from the NYTimes – by the same reporter, Julie Bosman, who wrote the Sunday article – ends with this: “It also seemed unlikely that many of the 1,900 independent bookstores in the United States would be willing to stock Amazon books. “There are no circumstances under which we would do that, none,” said Vivien Jennings, owner of Rainy Day Books in Fairway, Kan. “If Amazon wants to publish books, let Amazon sell them. And I think that’s what they’re going to have to do.”

Next, we hope the NYTimes will do a story on the math involved in Amazon’s discounting of its own publications.

Today, Feb 3, Publisher's Weekly reported that Books-a-Million, one of the last indie bookseller chains left, announced that they, too, would not be carrying Amazon's printed books.

Something else occurred to us: so many people seem to think it is just wonderful that Amazon sells its goods at such high discounts. The customer can save so much money. The Author’s Guild article noted that Amazon director Jeff Bezos had a $6 billion cushion which gave him the patience and ability and willingness to absorb years of financial losses in order to lock up market share. Let’s play it out to that possible endgame:

Amazon absorbs years and years of losses. The big bookselling chains and the independents can’t meet the discounting that Amazon gives, and buyers expect and demand, and they crash. Major publishers lose so many outlets that they need to sell their books that they cannot survive and they crash. Small publishers are so assaulted by Amazon’s financial demands that they can’t stay in business. Amazon is the last bookseller and publisher left standing.

At that point, they no longer need to discount. There is no competition. They have a virtual, if not complete, monopoly on new books. They stop giving authors such sweet deals on what sells so that they keep a higher percentage of the sale. They can then eliminate all discounts and begin to jack up prices on their own printed books as well as their e-books to recoup years of loses. Readers and authors will have no alternative: no one else prints books, few other outfits can afford to produce e-books and Amazon can easily freeze them out by not making Kindle versions (the Nook no longer exists because B&N went bust, there are iPads and so forth but, with Amazon the Whale in the Pond, no one can make enough money to make non-Kindle versions if Amazon won’t sell them), libraries cannot afford to order Amazon’s products and, really, Amazon doesn’t want you to use a library – they don’t make any money if you do. You’re stuck. You have to deal with Amazon or just buy used books. How did it get this bad? Why didn’t anyone stop them?

Do we sound like Cassandras? We hope it won't come to this, but the prospect is bleak.

Going back to the Harper article – which is about monopolies in general and just uses Amazon as one of four examples (it is a wonderful, eye-opening and disturbing article, go find the issue and buy it) – Barry Lynn writes: “Today, a single company – Amazon – accounts for more than 20 percent of the domestic book market. And even this statistic fails to convey the company’s enormous reach. In many key categories, it sells more than half the books purchased in the United States. And according to the company’s estimates, its share of the e-book market, the fastest-growning segment of the industry, was between 70 and 80 percent in 2010. It’s share of the online sale of physical books is roughly the same.”

You’re going to be living in a company town, where the company owns the store, sets the prices and rakes it in.

Don’t want to live like that? Fight it now. Talk about it with the people you know.

Friends don’t let friends support the Borg.

Resistance is not futile.

The Vulture Capitalist Game

Now that our battle with Amazon has hit the front page of the Seattle Times, allow me to highlight the background of all of this in order to explain a few things to those who have not been following it for the last few months.

First of all, this is not simply a matter of Nancy Pearl’s new gig. She’s just the latest name that allows us to put a face to the math of Amazon’s game. The first blog post we did on the subject dates to June 22, 2011. This covered the back and forth between me and an author who was publishing through Amazon and wanted to have a signing. I said no and explained why. This post contains his message to me and my reply, as well as a few other thoughts.

This turned into a frenzy when it was picked up and mentioned by a few other book-related blogs and resulted in a number of additional posts in which I quoted and answered point raised by readers. It has always been my intention that the point of all of these posts is to enlighten and educate people who don’t know the nitty-gritty of the book world. At the bottom of that June 22 blog (Can’t Shake the Devil’s Hand and Say You’re Only Kidding) are links to the subsequent entries. [You can also find the blogs grouped under the category Bookselling These Days and they touch on more issues than what is being raised in this blog.]

On July 10, 2011, I tried to explain the math that is at the heart of the mess. Please read it for yourself – if you have read the recent post about Nancy Pearl, you’ll see that I was pointing out the problems with the math nearly six months ago, but what held true then for the McBains holds true for the Pearls. The post of Oct 7, 2011 deals with yet a different author but ties into the math. This post explains Amazon’s position about selling to other booksellers.

Dec 8, 2011’s post concerns Amazon’s app that would allow anyone with a smart phone to scan an item and check the price against Amazon’s. In effect, as many pointed out, it turned any brick-and-mortar shop into a showroom for Amazon – an outfit without a place where you can go in and handle the merchandise. The app did not apply to books but we saw it as yet another challenge to independents/small businesses as a whole and an unfair business practice.

On Dec 16, 2011, I constructed a post of various stories about Amazon’s business practices to try to show the greater problem and to convey that this isn’t just petty crankiness on what they’ve done to books and bookselling. These sorts of stories continue to appear. The latest that we saw this past week was about plagiarism and the wholesale passing off of another author’s e-book as your own through Amazon and whether Amazon is or will do anything about it.

There is still the issue of our ordering Amazon’s books and selling them at full price anyway. Why not do that? We could, sure, and have in a few instances, reluctantly. It financially supports a corporation that we think is fundamentally bad for our industry. Don recently posted a comment on our blog: “I understand that Amazon is really hurting independent bookshops, and I could understand not stocking their books because you don't want to send any money to your competition, but to be honest, Amazon isn't going away, and your existence is dependent on your ability to provide the things that Amazon doesn't have: readings, ambience, personal service, and a hand-curated selection of great books instead of a massive virtual barnload of every book in existence.” I’m glad that he grasps that but he also then misses an important thing: those things that we provide – readings, ambience, our recommendations and newsletter, even this blog – all go away if people don’t support it though buying books from independent businsses. Amazon’s deep discounts are then a threat to what he says he cherishes in an independent. It isn’t really a pickle, Don – support that which you want to enjoy, pay for what you use and, if you don’t, don’t say “Gee, that’s too bad, I used to shop there all the time” when Amazon is picking clean the bones of small businesses across the nation.

To be clear, we have special ordered a couple of these Amazon books for long-time customers. We won’t stock them not only for financial reasons but because that would also give Amazon a tiny slice of advertising through the spine of the book on our shelf. We reject the accusations that this is censorship. As pointed out in one of the earlier posts, there are all sorts of books that we choose to not carry – some just don’t sell well or at all, some just sound dumb or uninteresting, and some may claim to be ‘mysteries’ but the solution to a crime is not the central point of the book so we bypass them. And then there is the fact that we’re a specialty shop so there is a wide range of styles, genres and topics that we don’t stock. No bookshop stocks everything. Maybe Amazon says they do, but then they’re not a bookshop.

So you can see that we’ve been writing about this for months, long before Pearl joined forces with Amazon. I hope you'll take the time to read through these past posts to see what points have been raised, what issues have been addressed and what concerns have been aired.

According to the article that appeared in this morning’s Seattle Times, she laughed when told of what I’d said. Gallows humor – who knew it would tickle her!

Why us, why me, why should we speak out? Well, someone has to. What is going on is wrong.This is not just about Nancy Pearl, the Seattle Mystery Bookshop and Seattle. This is far bigger than just these little pieces. I’m insulated, somewhat. I have a specialty bookshop and Pearl hasn’t done much with mystery or crime or thriller books. She’s stuck mostly to children’s and general fiction. Those independents who have benefited from her past efforts have been the general bookshops. It is clear and understandable that they, along with publishers and other book-industry figures, would fear angering her. But I can say that I’ve talked to sales reps, booksellers and publishers and, while no one feels safe raising their voices, everyone tells me to keep at it. I hope that more of my colleagues will begin to speak up about all of this. It is something upon which we cannot stand silent. It is too important. 

If you agree with me, speak up.

~JB