Most people will say that competition is good for business. Even the government thinks so: the Justice Department recently took five large scale publishers and Apple to task for allegedly colluding to fix e-book prices. Three of the publishers – HarperCollins, Simon & Schuster, and Hachette – have already folded and settled out of court, and people think the other three will likely follow suit, yet the big 800-pound gorilla in the room, Amazon, is pretty much let off without a second glance, allowing it to continue to run roughshod over its competition.
Today, Amazon.com is to booksellers as rohypnol is to sorority girls. It used to be that the independent bookstores were under siege from the Barnes & Noble and Borders megastores of the world, but now Amazon has become so massive and has the power to capture so much market share that even the huge brick-and-mortar chain booksellers are going under or scaling back at a startling rate.
I remember my days working at Book Revue, and how we fought tooth and nail to stay relevant and competitive in light of the Barnes and Noble 15 minutes up the road at the Walt Whitman Mall. We couldn’t afford to cut our prices as much as they could, as the company was so huge that they could afford to hemorrhage cash on sales for six months or a year if it meant stamping out the competition; we found ways to combat this by building a reputation for holding very well attended author events, focusing on excellent customer service, having an incredible array of used and remaindered books, and embedding ourselves in the community by acting as a place where people could hold book club meetings and things of that nature. That kept Book Revue afloat; even though the latest copy of James Patterson’s 184th Alex Cross novel was 40% off up at B&N, you could only get it signed by good old Jimmy himself at our store.
Well, now it’s the big megastores’ time to sweat, as Amazon moves in and starts slapping their shit. As deep as their pockets are, Amazon’s revenues are goddamn massive in comparison, which means that the online retailing giant can do what B&N tried to do to Book Revue – undercut the competition until their business dries up – and publishers are seeing the writing on the wall. The fear of being at the mercy of Amazon’s whims most likely played a huge role in any alleged attempts to “price fix” e-books, but it’s really just a case of chickens coming home to roost.
Big-name publishing houses are pretty much bastards. The amount that authors get for their stories is usually a pittance, as the lion’s share of the revenue goes right back into the publisher’s pockets. It works similarly to the music industry, where musicians usually get next to nothing after the record labels get their cut, and unless you’re writing bestseller after bestseller after bestseller, you’re not going to be getting those million dollar advances. Most authors know this and accept it – it’s usually more about the art than it is about the money. However, I don’t know an author who would turn down boatloads of cash, either, especially when they’ve got bills to pay.
The overhead on printing actual hardcover books is insane. In order to make any sort of profit, they’ve got to not only offer the author as little as possible per sale but also move a massive quantity of titles, and since the majority of people don’t walk down to Random House and fork over $25 for the whatever hardcover Oprah is reading, they’ve got to sell their stock to distributors or directly to booksellers in order to make any money.
I worked at Book Revue for six years, five of which I was in the receiving and inventory management departments. The average discount offered to us by our major distributor, Baker & Taylor, was around 43 percent. If we ordered directly from the publisher itself, we could sometimes push that as high as 50 percent or so. Considering the size of Book Revue and the fact that it’s been in business longer than I’ve been alive (I turn 34 this Friday), we had enough clout with our suppliers so as to get pretty competitive discounts – but I’m sure B&N up the street was big enough of a swinging dick to edge us out by a few percentage points if it came down to it. This means that they could afford to discount their stock more aggressively than us and still eke out a minuscule profit, especially when you take volume sales into account.
It doesn’t take a genius to figure out B&N’s strategy. Undersell your competitor long enough and hard enough and there’s a good chance their customer base will dry up to the point where they’re no longer turning a profit, and next thing you know is they’re having a “going out of business” sale. Do this enough times with all of your competitors and suddenly you’re the only game in town – and then you don’t have to discount your stuff any more. Charge whatever you want – if someone needs the book bad enough, they’ll have no choice but to pay whatever you ask (college bookstores are notorious for this).
Then came the advent of the e-book, and publishers rejoiced. They could suddenly start making money! There’s hardly any overhead in an e-book, which means much higher profit margins, especially when you don’t have to ship product to brick-and-mortar stores. Not only that, but the big bastard booksellers liked the idea too, because they could just sell e-books from their websites and not have to keep as many physical locations open, saving on costs there as well.
The problem is, nobody’s going to pay $20 for an e-book, unless they’re high as a motherfucker. And then, Amazon shows up and starts selling e-books for $9.99 and under, which freaked all the publishers and booksellers out, as they saw their profit margins vanish like a fart in the wind. The thing is, what happens when Amazon stamps out all their competition? You think e-books are going to remain at their current bargain prices? I don’t know – why don’t we ask OPEC when they’re going to drop the price of oil?
I’m not going to sit here and tell you not to buy from Amazon.com, especially since all of Twit Publishing’s e-books are currently available there. However, I will say that Amazon is not nearly the happy-smiley friend of the people that it promotes as its image. There are independent alternatives to Amazon, like smashwords, where you can buy Twit’s e-books for the same price as on the internet giant, and you get to choose the format you’d like and not be constrained by a Kindle. I will also urge people who do still like have physical copies of a book to order it directly from the publisher if they offer that option, or to go to brick-and-mortar booksellers to support your local ones if you have one nearby. Independent bookstore owners are like authors – most of them don’t expect to get rich off it… but it would be nice.