Oct 23 2009
The Cost of the Price War: Too Damned High
The short version, if you haven’t been reading up on it:
Wal-Mart slashes prices on bestsellers that will be out for the holidays. Books that have a cover price of $25-$30 will be sold for $10. Amazon, not to be outdone, drops their prices on those titles to $9. Wal-Mart thumbs their nose and goes to $8.99. Target joins the $8.99 party. Wal-Mart goes “Oh, no you don’t” and drops to $8.98.
That’s where they’re holding at the moment.
Looks awesome for people buying books for Christmas gifts, doesn’t it?
Let’s talk a little about bookstore and publishers and discounts (oh my.)
Say a book has a cover price of $27.99. Depending on the publisher, bookstores will receive a discount between 44 and 46% on those books. Let’s go in the middle, and say that Books That Don’t Suck ordered some copies of Huge Bestseller at a 45% discount. They pay $15.39 per book to the publisher, which means that if they sell it for any less than $15.39, they’re selling it at a loss.
Bookstores simply can’t afford to “break even” on these books. Sure, they usually pass on some sort of discount — in my bookstore days, the top ten New York Times bestsellers were 30% off (“35% if you’re a member of our Frequent Buyer Club!”). But 45%? More? No way, not if we wanted to, y’know, stay in business and keep selling books.
The sad thing is, most customers don’t know that. Joe Shopper sees that Amazon, Wal-Mart and Target are selling Huge Bestseller for $8.99, so he goes into his local bookstore and says “I can get it from the big guys for cheaper. Can you match it?” When he’s told no, he says thanks but no thanks and orders online. This was happening even when I worked at the bookstore, when Amazon was just starting out.
Here’s the other thing: that $8.99 price is $6.40 lower than what the publishers are charging the bookstores. Publishers really can’t match that themselves, so some booksellers are cancelling their bestseller orders from publishers and ordering them direct from Amazon/Wal-Mart/Target. (Though it seems from a couple of Mr. Kashkashian’s updates, Amazon’s putting a 3-book limit on orders.
It’s a kick in the teeth to independent bookstores, and could have a frightening affect on authors as well. Amazon has already forcefully set e-book prices at $9.99, making other e-book retailers follow suit or lose sales. By deeply discounting the bestsellers, they are harming other, lesser known books. As David Gernert, John Grisham’s literary agent, said to the New York Times,
“If readers come to believe that the value of a new book is $10, publishing as we know it is over,” said David Gernert, Mr. Grisham’s literary agent. “If you can buy Stephen King’s new novel or John Grisham’s ‘Ford County’ for $10, why would you buy a brilliant first novel for $25? I think we underestimate the effect to which extremely discounted best sellers take the consumer’s attention away from emerging writers.”
Remember, once upon a time, John Grisham was one of those debut authors.
What’s heartening, at least a bit, is that some of the heavy-hitting publishers and authors get it. David Young, CEO of Hachette Book Group, told the Wall Street Journal, “”I’m worried about the major book-selling chains, and I’m concerned about the implications for publishers and the public alike.”
The e-book version of Stephen King’s Under the Dome won’t be released until more than a month after the hardcover comes out on November 10th. King wanted the delayed release so that bookstores could have a chance to sell it in hardcover first and make some money. The price wars (yes, Under the Dome is on the list) surprised him. From his interview in the Wall Street Journal (via the Christian Science Monitor) : “I never thought we’d see people preordering a copy for $8.98,” he said. “My thinking was to give bookstores a chance to make some money.”
James Patterson, whose I, Alex Cross is also on the $8.99 list, had this observation in the New York Times article:
“Imagine if somebody was selling DVDs of this week’s new movies for $5,” Mr. Patterson said. “You wouldn’t be able to make movies.” He added, “I can guarantee you that the movie studios would not take this kind of thing sitting down.”
It’s true, the movie studios wouldn’t. Someone, somewhere, has to take a stand against this. The ABA made a move yesterday, filing a suit with the Department of Justice. They declare that Amazon, Wal-Mart and Target’s actions constitute illegal predatory pricing. They point out the danger to independent bookstores from this practice, saying
For our members — locally owned, independent bookstores — the effect will be devastating. There is simply no way for ABA members to compete. The net result will be the closing of many independent bookstores, and a concentration of power in the book industry in very few hands.
They also go one further, pointing out the danger of having the decisions of what books are readily available in so few hands — books are ideas, remember, and the beauty of independent bookstores is that there’s always someone out there thinking differently. They’re going to support smaller, local presses. They’re going to carry books by local authors that mean nothing to Amazon’s bottom line. They’re going to champion books because they love books, not because of the bottom line. And when those independents are gone, when there’s no competition left? What do the people controlling the market do with their prices then? The ABA has an idea:
We would find these practices questionable were they taking place in the market for widgets. That they are taking place in the market for books is catastrophic. If left unchecked, these predatory pricing policies will devastate not only the book industry, but our collective ability to maintain a society where the widest range of ideas are always made available to the public, and will allow the few remaining mega booksellers to raise prices to consumers unchecked.
There are a ton of great articles and blog posts out there. I’m going to link to several of them, most who say all of this far, far better than I have. But before you click away, I’m begging you again as I have before many, many times: support your local independent bookseller. Telling me “I don’t have any nearby” is no excuse. You don’t physically walk into Amazon when you buy from them, do you? You can order online from an independent bookstore just as easily as you can order from Amazon. So hie thee to IndieBound and find yourself a bookstore. If you need some suggestions, there are a few in my profile. And one in Marty’s.
The ABA is taking a stand. Independent booksellers are taking a stand. Publishers and authors are voicing their concerns over what this price war means for the future of books and bookselling. You can help all of them take a stand, too. It’s as simple as buying your books from independent bookstores.
Milwaukee, Wisconsin Journal Sentinel Online, “Some fear giant book retailers’ deep discounts will hurt stores”
New York Times, “Book Association Challenges Retailers’ Price Plan”
TG Daily, “Booksellers Accuse Amazon of Illegal Price War”
Skylight Books, “This Microwave Would Go Great With That Copy of Infinite Jest You Just Bought!”
Bear Pond Books, “Race to the Bottom”
The Dallas Morning News, “Will $10 bestsellers doom independent bookstores?”
Shelf Awareness, “Wal-Mart vs. Amazon: ‘Let’s Start an Industry Conversation’”
These are just a start. If you find other great posts, feel free to link them in the comments!
