Are Books Commodities? Are They Speech?

Books, as well as magazines, newspapers, newsletters in all of their various formats: paper, digital, smoke signals, whatever, are not commodities. They are speech.

There is no hard and fast rule that books should be priced at $9.99 either.

Source: IPDA News Digest, 04/17/15

Source: IPDA News Digest, 04/17/15

Books are not widgets. They are not plastic tzotchkes made by low wage labor in China and packaged by low wage temp workers in overheated warehouses in exurbia USA.

Many readers consider books they love to be works of art (at least the really well written ones).

They are the result of hard work, hard effort, hard labor by the authors who often seek represenation by book publishers. Sometimes it’s Hachette. Sometimes it’s Penguin. Sometimes it’s  Amazon.

So as wonderful as Amazon is, at least to their consumers, they do come in between the reader and the author. In other words, despite what the fanboys and the trade press thinks, they’re middlemen. Just like wholesalers. Or publishers.

So, I’m sorry to point out all of the fans, apologists and futurists, but Amazon and many other e-tailers, are simply the latest thing that is “disrupting” a traditional economy. Just like the big chain booksellers disrupted the indy bookstore and newsstand economy in the 1980’s and 1990’s. Just like Pay-On-Scan has disrupted the traditional magazine distribution economy in the last decade. Just like Tesla is disrupting, to a certain extent, the car sales franchise market.

But to Amazon’s credit, they’ve taken advantage of a deregulated economy, and found a great entre into middle and upper class pocketbooks – reading.

I’ve never bought the argument that “books cost too much”. They don’t.  They are priced according to the market.

Is it fair that some writers never got published under the old regime? No. The world is not fair.

Is it fair that some visionaries (and not a few hucksters) got into the digital book market first and made a ton of money while some true craftsmen now find themselves self publishing books and making slave wages because they were late to the party?

No. The world is not fair.

Books (and magazines) are not widgets. We’d probably all make more money if we stopped trying to market and sell them like that.

Link to the article mentioned above is here.

The Trouble With Consolidation: Part 2

After taking a few weeks of some pretty harsh criticism from publishers, indy book retailers, and more importantly, authors, Amazon has responded with a blog post on the Kindle forum where they try to explain their position reagrding their dispute with book publisher Hachette in more detail.

Amazon Kindle

The bottom line is that Amazon wants the price of all electronic books to be $9.99. They want this price because as far as they are concerned, the cost of producing an electronic book is significantly lower than the cost of producing a print book. To a certain sense, this makes sense. There’s no printing, shipping, warehousing, showrooming or (if you’re lucky and have a hit) re-printing involved in electronic book publishing.

hachette_book_logo

Amazon also produces some pretty “compelling” math and statistics to prove that you can sell more e-books at $9.99 at a higher price and that in the end, everyone would make more money.

That sounds nice. And I confess that after reading all this I stood up to take a few turns around the office, and said “Hmmmm” to myself.

As it is Audited Media filing week (formerly known as ABC Audit week) I’m a tad busy. I can’t spend nearly as much time on this as I’d like to. However, here are a few thoughts:

  • Amazon is not the only e-book publisher out there. Who says they get to set the price?
  • Does the price of anything always really reflect the cost of production? Why is that such a big argument when we discuss e-media? Bottled water, anyone? A “small” cup of pop at the movie theater? Does the production cost of a luxury vehicle really reflect the final price the buyer pays? Breakfast cereal? Please.*
  • Continuing on that train of thought: If I want to buy the latest release of Brandon Sanderson’s “Way of Kings” series, I’m going to go to my nearest store and buy it (or download it) whether or not the price is $9.99 or $14.99 for digital or $28.99 for the hardcover, I’m going to buy it. Price sensitivity is important in publishing, but not that important. Although I will concede that I am thinking about established authors. Especially if we’re talking about established authors.
  • And why would you want to set the “high-end” so low? That strikes me as remarkably short-sighted. Does this mean that in a year or two we’ll have Amazon arguing with another publisher about setting the e-book price at $7.99?
  • I will also concede Amazon’s point about e-reading (and all reading) competing against many other forms of entertainment. In the year 2014, this mostly means electronic. But I don’t think price is the issue. It’s the other stuff. We’re a family of dedicated readers and there are books and magazines all over our home. But after a busy day the question is often: Reading or Netflix. You’d be surprised how often Netflix or On Demand win.
  • It feels like Amazon is trying to position themselves as the author’s ally.
  • But unless you’re an indy author self publishing on Amazon, an established author does business with their publisher. Why? Because Amazon is not the only retailer out there. And if you do self publish, then Amazon is both publisher and retailer so Amazon is the “middleman”. I know that must be a shock to all the fanboys out there who think the internet will be the end of all evil and dreaded “middlemen.”
  • And, as I understand it, Amazon tells their indy publishers that they can change the terms of their contract at any moment. As a representative of magazine publishers, if a national distributor or wholesaler or retailer had that in their boilerplate and that was their starting negotiating position, I would look a little askance at that contract, the people who created it, and be very wary about how much business I gave them.

It’s important to retailers to develop their brand and create a look and feel for their customers. If they are smart, like Amazon, they have excellent customer service and a friendly shopping experience. One of the big raps on Borders towards the end of its life cycle was that shopping in the stores was not a pleasant experience.

Do readers really care about the publisher? No, they want a book by a particular author or a book in a particular genre. That will always be the case and that’s what makes this fight a hard one for Hachette. Authors are the brand. Their publishers promote the brand. Retailers can behave like a brand.

Authors, like magazine publishers, are the producers of a very specific, very unique product. It is not anything like toiletries, food, office supplies, dog food or kitty litter or any other retail product. Amazon has been succesful because they did cleverly take advantage of an industry that was complacent, short-sighted and didn’t understand the benefits of the nascent world of e-commerce.

A world of books (or magazines for that matter) that is dominated by only one or two retail outlets is a world that is dependent on the whims of a conference room full of people and their own objectives and algorithms. They may or may not be looking out for the producers or the consumers no matter what slogans they repeat.

And that is the trouble with consolidation.

*: Seriously, this whole “it costs less to produce a book, magazine, newspaper” on the web so the price should be $9.99 or $2.99 or $0.99 really drives me crazy. Since when? What’s the profit margin on your latte this morning?

And let me ask you, if and when Amazon or Alibaba or whoever might win it all owns 85% or 90% or more of the market, do you honestly think the price will remain there? Do you think the offer to the publishers or suppliers will remain where it is now? At what they deem “fair”? Do you really think your customer satisfaction will remain as high as it is today? I’m sorry, I don’t mean to be cynical, but seriously…Oh, look! A pretty unicorn….

The Trouble with Consolidation

Update (05/15): Today’s Publishers Weekly included an article with a copy of a letter from the Association of Authors Representatives, a trade association of literary agents. In the letter to Amazon, Association President Gail Hochman called out the harm that the dispute is doing, especially by Amazon in restricting the availability of Hachette authors to the said authors as well as the readers who want those books. She closes by saying “This is a brutal and manipulative tactic, ironically from a company that proclaims its goal to fully satisfy the reading needs and desires of its customers and to be a champion of authors.”

Over at Politico, columnist Dylan Byers points out that several media critics had noted that Jeff Bezos owned Washington Post has yet to cover the dispute between Amazon and Hachette. Ironically, in 2010, the Post covered the dispute between McMillian and Amazon at length.

 

Update (05/13): From an article in Publishers Weekly: Books A Million has stepped up and decided to take advantage of the disagreement between the two parties. BAM is now pointedly advertising Hachette titles on their cover page (See below):

Screen Shot 2014-05-13 at 3.05.00 PM

There’s no reason that any bookseller shouldn’t capitalize on this dispute.

Update (05/12): There are two excellent articles out today about what is going on in the tug of war between Hachette and Amazon. The issue, of course, is one of discounts. In today’s New York Times it is noted that so far 15 authors have complained to the Writer’s Guild about the issue. Noted author Richard Russo said, “If you’re a monopolist, you get to be a bully.” It should be pointed out that Amazon is not, technically, a monopoly.

Today’s Publishers Weekly also has an article on this issue that interestingly concludes with this quote:  “We as an industry are in the odd position of pushing Amazon away with one hand and hugging it closer with the other. We need them…but we need them to be reasonable.”

 

A number of years ago, a major publisher I was working with entertained a presentation from a distributor. The distributor wanted us to switch our specialty business from a long-standing distributor to them. We piled into the conference room and sat through a very entertaining and well thought out presentation. We were thoroughly impressed.

We spent the next few weeks poring through charts, statistics, financial analysis and came to the conclusion that while we were impressed, we really liked who we were doing business with currently and there was no compelling reason to switch.

As it turns out, there was. The distributor who presented to us also controlled about 30% of the rest of this publishers’ business and their management at the time did not take kindly to being told, “No, thank you.” When we got our next order from them, it had been cut 85%. When we asked them why, they said it was a “Business decision.”

A middle school business decision, perhaps, but theirs to make.

Long story short, there were a lot of phone calls between the parties. The publisher called in a lot of favors. Many old friends made appeals to the distributor on the publisher’s behalf. Eventually things returned to “normal” and the appropriate numbers of copies were shipped and sold.

I remembered this story this morning when the following article appeared in my Shelf Awareness feed. It appears that Amazon has decided to delay from three to five weeks, the delivery of a number of very popular books from Hachette. As near as Hachette can tell, there is no real reason for this to be happening as no other retailer, online or bricks and mortar, is experiencing these delays. So the rationale must be that there is some dispute between Hachette and Amazon and Amazon is punishing Hachette for it.

If Amazon was one of twenty some odd book distributors, this would not be that huge a deal. But Amazon is, well, Amazon. And while many book people I know have a hard time feeling sorry for Hachette, you do have to ask, “What the…?”

The book distribution industry, like the magazine distribution industry, is not a monopoly. But in both cases, one or two major players controls the lions share of the business and a dispute between a publisher and that large distributor can be a disaster.

Source: Firstnovelsclub.com

Source: Firstnovelsclub.com

My publisher narrowly avoided a disaster and relations ultimately reverted back to normal. Most likely, Amazon and Hachette will resolve whatever their differences are.

But businesspeople should ask themselves: Do you feel comfortable competing in an environment where one company can control your destiny to such a great degree?

 

 

For Your Consideration

This is offered for your considertion. I will leave out my own comments and snarkiness.

Below is a quote directly from this mornings reading of Shelf Awareness. It is a discussion of a very interesting article in The New Yorker by George Packer entitled, “Cheap Words.” You can find a link to the article here. The editors at Shelf Awareness  have this to say:

Another “former Amazon employee” who worked in the Kindle division said, Packer writes, “that few of his colleagues in Seattle had a real interest in books: ‘You never heard people say, ‘Hey, what are you reading?’ Everyone there is so engineering-oriented. They don’t know how to talk to novelists.’ ”

Packer doesn’t talk much about alternatives to Amazon, including independent booksellers, Barnes & Noble or nonbook retailers who sell books, saying that publishers’ “long-term outlook is discouraging. This is partly because Americans don’t read as many books as they used to–they are too busy doing other things with their devices–but also because of the relentless downward pressure on prices that Amazon enforces. The digital market is awash with millions of barely edited titles, most of it dreck, while readers are being conditioned to think that books are worth as little as a sandwich. ‘Amazon has successfully fostered the idea that a book is a thing of minimal value,’ [Dennis] Johnson said. ‘It’s a widget.’ ”

Packer quotes a literary agent saying that book world trends are leading to ” ‘the rich getting richer, the poor getting poorer.’ A few brand names at the top, a mass of unwashed titles down below, the middle hollowed out: the book business in the age of Amazon mirrors the widening inequality of the broader economy.”

Packer concludes: “Bezos is right: gatekeepers are inherently élitist, and some of them have been weakened, in no small part, because of their complacency and short-term thinking. But gatekeepers are also barriers against the complete commercialization of ideas, allowing new talent the time to develop and learn to tell difficult truths. When the last gatekeeper but one is gone, will Amazon care whether a book is any good?”

Richard Russo: Eloquence and the “Amazon Jungle”

In the early fall of 2002, I herniated a disk in my lower back and spent three weeks lying on various floors in my house: The family room, the bedroom, my office. My family’s memory of that time is bringing me dinner while I was lying on the ground and how interesting it was to find me lying on the floor next to the bed at night like a loyal pet.

For me, the memory is of Richard Russo’s Pulitzer Prize winning novel Empire Falls. A timely, eloquent story of decline, fall and a middle aged man who must come to grips with the choices he has made in his life.

Ironically, the Kindle version would have been handier while I was stuck on the floor.

Time and hydrocortisone injections can heal wounds. The memory of physical pain quickly fades. While I could easily picture and identify with the fading New England mill town featured in the story, there was really nothing in Miles Roby’s life that remotely mirrored mine.   So I was able to move on and heal and be grateful to Mr. Russo for a comforting and interesting read at a time when I really needed one.

In Monday’s New York Times, Russo wrote a very thoughtful Op-Ed piece entitled “Amazon’s Jungle Logic” that bears close reading. In it he discusses a series of emails he exchanged with other American writers as he solicited their opinions on Amazon’s smartphone app.

If you’re an avid reader, bookstore browser, library user, novel collector, wouldn’t you love to be able to exchange emails with the likes of Stephen King, Dennis Lehane, Ann Patchett, Anita Shreve, Tom Perrotta and Andre Dubus, III?

What was perhaps most interesting, to me at least, was the rather balanced, almost resigned approach the authors took to the latest flare up regarding this internet retail giant.

Blockbuster seller (and blog topic) Stephen King acknowledged that Amazon had done well by him in selling his books. He has a Kindle that he loves. But maybe the promotion was a “bridge too far.”

Other authors like Scott Turow offered more lawyerly thoughts. However I think Ann Patchett, author and now part owner of a new independent bookstore in Nashville Parnassus Books summed it up best when she noted that:

There is no point in fighting them or explaining to them that we should be able to coexist civilly in the marketplace. I don’t think they care.”

(Bold face emphasis mine)

Russo summed up his piece with this memorable thought:

“Is it just me, or does it feel as if the Amazon brass decided to spend the holidays in the Caribbean and left in charge of the company a computer that’s fallen head over heels in love with it’s own algorithms?”

Not a computer, Mr. Russo. Most likely a whole team of very well educated, highly paid, nicely talented, and probably rather friendly staffers who believe in those algorithms and can show you lots of charts and graphs (with the appropriate circles and arrows) that point out why what they are doing is right. The Amazon brass left them in charge because they make money and improve shareholder value.

There’s nothing inherently wrong or evil about making money or improving shareholder value. We can certainly agree that giving consumers a “good deal” is a worthy goal. But unless we want our future to look like a grimer version of Max Barry’s “Jennifer Government” we should probably decide on which comes first, community or shopping; and how we balance the two.

Thoughts on Amazon’s Price Check App and Independent Bookstores

The American Booksellers Association responded to Amazon’s Price Check App promotion yesterday. In the letter, CEO Oren Teicher pointed out:

We could call your $5 bounty to app-users a cheesy marketing move and leave it at that. In fact, it is the latest in a series of steps to expand your market at the expense of cities and towns nationwide, stripping them of their unique character and the financial wherewithal to pay for essential needs like schools, fire and police departments, and libraries.

Although the app does not directly apply to books, many independent bookstores are clearly upset as the app could apply to their sideline items like cards, gifts and games. Already under enormous pressure from the online retailer, many retailers are clearly fed up with customers who come in, check prices, look for new things to read and buy, then leave to get them more cheaply, and often without having to pay local sales tax, on Amazon.

What does the future hold for independents. Survive? Thrive? Extinction?

There’s a school of thought out on the ether that the internet always wins. Most likely true. We will be a poorer society if thirty years in the future we buy everything online and public spaces and daily routines are limited to a few mega corporate show rooms. While nature may abhor a monopoly, the crash that occurs when monopolies fail, as they ultimately do, is not something anyone should have to live through. Especially when we don’t need to have monopolies (except as fun board games).

Does Amazon play fair?

I’d like to offer three additional thoughts regarding this issue:

1) Amazon’s policy with regards to hiring, firing, and maintaining warehouse facilities is simply wrong. The use of “facilities” companies and hiring these workers at extraordinarily low wages and as “temporary” workers when they  really are full time employees is inexcusable. I know, they do it so I can buy stuff from them at incredibly cheap rates. But I don’t want to be responsible for the fact that some person in another state has to work two jobs so she can drive a twelve year old car and skip lunch so her kid can have cough syrup just so I can buy a cheap scarf or the latest Stephen King novel for half the price I would pay at Anderson’s Bookshop. It’s just wrong.

2) Their efforts to not have to charge local taxes  strikes me as rather unpatriotic. No one likes to pay taxes. I’m self employed so I know what it’s like to feel overburdened with taxes, paperwork and health insurance. No, it’s not like a major corporation, or even a small one. But I get it. However, I live in a community. That means I have responsibilities. I want my roads paved, my police and fire. I want safe water. Roofs on schools. Taxes are a part of life. Deal with it.

And of equal importance:

3) Markets need to be flexible. When markets consolidate in the name of efficiency, what you really have happen is the market becomes fragile. We’ve seen it in the newsstand business with the consolidation of magazine wholesalers. The fewer there are, the more fragile the market becomes if a major player gets into financial trouble. Or, if you, as a member of the market fall foul of one of the few remaining major players. If ultimately there are only three or four places to get either your e-books or your physical books, how healthy is that market? How much will the consumers choice be at the whim of the remaining major players?

I would contend that a community that is a mixture of independent and small franchise retailers and national chains is a healthier community than one with an empty downtown and a strip center on the outskirts full of big box stores and the usual remora retailers. The money stays local. The jobs stay local. The rents are reasonable.

This isn’t a screed against big, corporate America. I am enough of a realist to know how things work and understand that nothing is ever how it was and there are no clocks to turn back. But what I am opposed to is movement without thought and reflection. What, exactly, are we building and will it be better than what we have? Amazon is not inherently evil and independent retailers are not always good citizens. However, there’s no reason that we can’t have Amazon and independent bookstores. There is no reason they can not strive to provide not only affordable goods but also quality service. One does not have to be the death of the other. Both can be good corporate citizens.

The Kindle Fire – Make it Work?

The ad is slick. It starts with a quote from Voltaire. It shows the history of how the printed word was created.

And it lists what the device can do in a specific order: Movies, music, web, games and reading.

This is our future, maybe. Can we make it work?