Amazon is not the Antichrist
With headlines like “The Justice Department Jumps into Amazon’s Pocket” and “The Justice Department Just Made Jeff Bezos Dictator-for-Life,” you’d think all bookstores would be closing up shop tomorrow and publishing executives would be joining lines at soup kitchens. But before we dish out that chicken noodle, let’s consider a few things.
1. Amazon is a for-profit company. Just a year ago, people everywhere were insisting that Amazon was unethically pricing its Kindle devices at a loss in order to make money on the content. Now people are insisting that Amazon is unethically underpricing its content to make money on the devices. Stop the madness. If you want to argue conspiracy theories, at least go with the popular theory that Amazon is content to lose money on everything in order to fulfill its evil plans of world book domination at some future point, when it will have the power to charge an arm and a leg for the next J.K. Rowling or Suzanne Collins offering. But then again…
2. There is no such thing as a monopoly in digital media. Maybe twenty years ago there was, but those days are long past. Every media seller — of music, movies, TV shows and, yes, books — knows that there is now ALWAYS a competitor: piracy. It doesn’t get the same hype as movies and music, but books are pirated too. It’s child’s play to remove the DRM from an e-book. So once Amazon has finished stabbing its voodoo doll and won Dictator-for-Life status for Bezos, what it will find when it jacks up its prices is that few will pay them.
What keeps people from pirating, if it isn’t DRM? Ask iTunes. Make it really easy to purchase and make it reasonably priced, so that piracy isn’t worth the bother. The music industry howled at iTunes demands for 99 cent songs and $10 albums. If you ask them, I’m sure there are music execs who will tell you that the industry is on the brink of disaster. And yet somehow the hits keep on coming.
3. Independent sellers won’t be muscled out. Well, that depends on who you count as independent. Apparently, we’re only supposed to count indie book stores as independent, because they’re cool and moral. Except that there’s a new world of independent seller coming to life out there. Self-publishers like Amanda Hocking are carving out their own niches. Established authors are starting to go that route as well — and not just famous authors who can be attacked for riding the coattails of the publicity earned through the hard work of their previous publishing houses. Traditionally published authors who aren’t bestsellers have been finding that the benefits of being backed by a traditional publisher aren’t what they used to be. The idea that all published authors get a devoted publicist and marketing support is a fantasy. Most writers have to put a lot of work into their own marketing, setting up — and paying the expenses for — their own book signings and readings. John Grisham, no doubt, gets subsidized book tours. Most writers are not Grisham.
Artists of all stripes are looking for a different path. Radiohead and Louis C.K. have sold their own content. Bestselling author Barry Eisler reportedly turned down a half-million dollar advance to self-publish. And print-on-demand technology has created new possibilities for small indie publishers. And in case you forgot, one of the options for self-publishers is CreateSpace (my own choice), which is owned by, yup, Amazon.
4. Amazon is just the new publishing bad boy on the block. Remember the good ol’ days when Barnes & Noble was the evil villain, because they demanded — gasp — lower prices and more favorable return policies from publishers? Then big box stores like Walmart got the spotlight for demanding even better terms, and Barnes & Noble cried foul because B&N provides the real market for publishers. They should be rewarded. About those rewards…
5. The publishing industry is so miserably inefficient, if it were a horse it would be shot. First off, much of the hard data from publishing is kept a big secret. After reading this, you might understand why.
Numbers vary, but the estimate of traditionally published physical books runs about 100,000 titles per year. The figures I’ve seen show that around 90% of these do not sell over 1,000 copies. (I don’t have links for all of these figures — some of this research I did back when I was trying to determine what percentage of traditionally published books sell substantially better than self-published ones.)
Bestsellers are usually measured by how many copies are sold to bookstores, not by how many are sold to actual customers. Plus, publishers don’t want to run out of copies if a book hits it big, so there’s a big incentive for publishers to have large print runs, even if most of those books don’t sell. Bookstores are fine with that, because they can return unsold books to the publishers for credit. The bigger the chain (think B&N and Walmart), the bigger the credit — up to 100%.
So what happens to all those returned books? They go into warehouse storage, millions of them. One publisher estimated that 25% of their sales were returned. Of course, those books may then be shipped out again to other stores or even to the same store, if demand picks up. Usually it doesn’t — once books are eventually deemed unlikely to sell, they get pulped. Destroyed. How many are pulped? An estimated 40% of books. Yes, you read that right.
Enter the publishers, who swear on a stack of many, many unsold Bibles, that they can’t sell e-books for less than physical books because all the costs are in development and marketing. What can you say about a business in which removing the cost of materials, storage, transportation — and then possible repeated storage and repeated transportation — of items, many of which are never sold, doesn’t help the bottom line? Remember, there are NO returns on e-books. No shipping, no storage. Yes, they have to create the book in different formats — Kindle, iBook, ePub. I know how long that takes. It’s not excruciating difficult or time-consuming.
As for the marketing costs, the bulk of that goes to a small percentage of bestsellers. As mentioned earlier, many writers get little or no help with marketing once it’s clear that the book will not hit big. That can happen before the book is even released, if the frequent turnover in the publishing staff results in a book being reassigned to someone who isn’t quite as excited about it as the previous editor.
There’s another big cost that ought to be considered marketing — huge advances for famous authors that have no chance of being earned. Remember Hillary Clinton’s $8 million dollar advance from Simon & Schuster? They would have had to sell over 1.5 million copies to make that back. But they didn’t expect to, did they? They won the auction and got a lot of press.
Seriously, it’s time for a shake up. I’m not an Amazon fan-girl — I have an iPhone and a MacBook but I still understand the blessings and curses of Apple. I wouldn’t be terribly surprised if Amazon tried some questionable tactics as a result of its market share, just as others did before them, but the pirates will still be out there if things get out of hand.
I love books of all kinds, physical and digital. I love bookstores. But the times they are a changing’. E-readers appear to be encouraging people to read more. Let’s figure out what that means in terms of meeting places and connecting over reading. Let’s figure out how the new indie sellers — self-publishers and small POD micropresses – can get the word out about their offerings. One of the brickbats leveled at big sellers has been that they have too much power to control what gets sold. The Internet can help level that playing field if we stop insisting that the independent bookstore is the sole protector of the mid-list novel.
One last comment on the Justice Department case: those who want to excoriate Amazon for sacrificing profits in exchange for a long-term strategy, you might want to check out the full statement by Hatchette Book Group, who joined the settlement. They did not admit to any illegal price fixing, but they did note — presumably as evidence of their good intentions — that the new policy for which they were targeted actually earned them less than the previous pricing plan. So why did they go with it? Long-term strategy, perhaps?