Thursday, February 02, 2012

The Authors Guild on Amazon: Publishing's Ecosystem on the Brink

Posted by Victoria Strauss for Writer Beware

This article from the Authors Guild was posted Tuesday on the Authors Guild blog. It's a must-read for anyone interested in the ways in which the book business is changing, and how we reached the point where a single retailer has the power to dictate terms to publishers, and thus, indirectly, to authors and readers.

------------------------------

Publishing's Ecosystem on the Brink: The Backstory

Subtlety is out. Bloomberg Businessweek’s January 25th cover shows a book engulfed in flames. The book’s title? “Amazon Wants to Burn the Book Business.” A towering pile of books dominates the front page of Sunday’s NYT Business Section. The pile starts well below the fold (print edition), breaks through the section header at the top of the page, and leans precariously. Books are starting to tumble off. “The Bookstore’s Last Stand,” reads the headline.

These stories capture pretty well the state of book publishing: this appears to be no ordinary, cyclical crisis that future authors and publishers will shrug off. To understand how the book industry got into this predicament, however, a broader perspective may be needed. The cover story of February’s Harper’s Magazine provides that, discussing a fundamental shift in the federal approach to antitrust law that’s affected bookselling and countless other industries. It’s a story that hasn’t previously been told in a major periodical, to our knowledge.

We’ll get to that in a moment. First, let’s set the stage with the other two stories.

Burning Down the Houses


Brad Stone’s Businessweek story discusses Amazon’s campaign to prevent other booksellers from securing a foothold in the booming e-book market and the company’s furious reaction to Random House’s decision last March to adopt agency pricing for e-books, just as five of the other “Big Six” trade publishers had the previous year. (Before agency pricing, Amazon could sell e-books from Big Six publishers at deep discounts, taking losses at a rate that Barnes & Noble could never afford to match. See How Apple Saved Barnes & Noble, Probably for more.)

Mr. Stone writes that after Random House’s March 2011 agency-pricing announcement,
Amazon could no longer run the best play out of its playbook – slash prices and sustain losses in the short term to gain market share over the long term. … “For the first time, a level playing field was going to get forced on Amazon,” says James Gray [of UK bookseller John Smith & Son and formerly of Ingram Content Group]. Amazon execs “were basically spitting blood and nails.”
Amazon’s response to Random House’s move was stunning and swift:
The next month, an Amazon recruiter sent an e-mail to several editors at big publishing houses, looking for someone to launch a new New York-based publishing imprint. “The imprint will be supported with a large budget, and its success will directly impact the success of Amazon’s overall business,” read the e-mail, which was obtained by Bloomberg Businessweek.
Even with a large budget, directly affecting the success of Amazon’s overall business is a tall order for a new publishing imprint. Amazon pulled in well north of $40 billion in revenue last year (final numbers aren’t yet in), dwarfing the combined revenues of the Big Six publishers.

Luring a substantial contingent of bestselling authors away from the Big Six seems the only plausible route for an imprint to affect Amazon’s overall business. Amazon needed someone with a substantial industry pedigree to pull this off. Amazon quickly – in time for last spring’s Book Expo America -- landed just the man for the job: Larry Kirshbaum, formerly of Warner Books.

Just three months after Random House’s announcement, Amazon had all but declared war on the six unruly members of its book supply chain. Jeff Bezos had $6 billion in cash, the patience to absorb losses for years, and a former Big Six chief to lead the fight. The long-running behind-the-scenes battle for control of the publishing industry had finally broken into full public view.

Barnes & Noble’s New Role: The Contender

While Amazon directly threatens traditional publishers with its new imprint, it continues to undermine the ecosystem on which book publishers, and most new authors, depend. Julie Bosman describes this well in her NYT article, focusing on the last remaining brick-and-mortar bookseller with nationwide clout:
Without Barnes & Noble, the publishers’ marketing proposition crumbles. The idea that publishers can spot, mold and publicize new talent, then get someone to buy books at prices that actually makes economic sense suddenly seems a reach. …

What publishers count on from bookstores is the browsing effect. Surveys indicate that only a third of the people who step into a bookstore and walk out with a book actually arrived with the specific desire to buy one.

“That display space they have in the store is really one of the most valuable places that exists in this country for communicating to the consumer that a book is a big deal,” said Madeline McIntosh, president of sales, operations and digital for Random House.
Established authors, for the most part, do fine selling through online bookstores. It’s new authors who lose out if browsing in bookstores becomes a thing of the past. Advances for unproven and non-bestselling authors have already plummeted, by all accounts. Literary diversity is at risk.

To understand just how precarious things are, realize that last year’s Borders’ bankruptcy represented an enormous reduction in browsing space, shuttering 650 stores. (B&N has about 700 stores.) One benefit of the loss of Borders should have been a short-term lift to B&N’s 700 stores and the 1,500 or so remaining independent bookstores. B&N’s sales were indeed up in the nine weeks before Christmas, Ms. Bosman reports. How much? Borders’ collapse led to a bounce of just four percent, compared to the prior Christmas. That’s what’s passing for good news in brick-and-mortar bookselling at the moment.

There is a bright spot, however. Barnes & Noble, led by William Lynch, has exceeded all expectations in the past two years with its launch of the Nook. B&N’s 300-member Silicon Valley office, after giving Amazon’s Kindle developers a two-year head start, beat Amazon to the tablet market by fully twelve months, and introduced what’s generally seen as the state-of-the-art e-ink reader, the Nook Simple Touch, eight months ago.

B&N, in other words, has been out-engineering Amazon, and Ms. Bosman’s story is the best account we’ve had of B&N’s efforts. In the process, B&N has seen its e-book market share climb from zero, two Christmases ago, to roughly 27% today.

B&N remains vulnerable, however. The engineering race against Amazon continues, and Amazon has leverage for acquiring content for its Kindle (see Contracts on Fire: Amazon’s Lending Library Mess) that B&N can’t match. And, critically, one tool that should help B&N, our antitrust laws, is instead poised to undo it.

This brings us to an unlikely tale of books, chickens, beer, and a Silicon Valley gentlemen’s agreement.

The Backstory: Amazon, Chicken Processors & Silicon Valley


Harper’s cover art rivals Businessweek’s: an enormous businessman wearing a gray pinstriped suit is preparing to literally eat the competition, a jumbo handful of gray-suited men and women. In the article, “Killing the Competition: How the New Monopolies Are Destroying Open Markets,” (key excerpts at link, full article by subscription) Barry Lynn views the state of book publishing through a different lens.

Mr. Lynn makes the case that Amazon’s dominance isn’t just a story of an industry disrupted by online commerce and digital upheaval, it’s about the abandoning of New Deal era protections of retailers in 1975 (promoted by backers as a means to fight inflation, says Mr. Lynn) and what he portrays as a shift in 1981 in the Justice Department’s interpretation of antitrust law based on “Chicago School” theories of efficiency and consumer welfare. The upshot appears to be that non-consumer markets (business-to-business markets and labor markets) are often insufficiently protected from monopolies.

To a chicken grower, for example, the relevant market isn’t restaurants or household consumers of chicken, it’s the market of chicken processors. Through a variety of machinations, including long-term contracts and the physical placement of processing plants (think baseball, before free agency), chicken growers now routinely have a market of only one processor to sell to.

Chicken growers own their land, buildings, and equipment, and all of the debt and risk that go with them, but these entrepreneurs have no real control over their economic lives. Growers buy their chicks and feed from their poultry processor, for example, and processors often require growers to make new investments in buildings and equipment. The processors, Mr. Lynn seems to suggest, have something much better than mere capital: the economic power to dictate how others use theirs.

It’s not just chicken growers who face constrained markets, Mr. Lynn writes. In free-wheeling Silicon Valley, computer engineers and digital animation workers employed by Apple, Google, Intel, and Pixar, among others, were subject to a secret agreement not to bid on each others’ employees, according to a Justice Department lawsuit filed, and settled, in 2010. (On Friday, former employees of some of the companies filed an antitrust lawsuit in federal court in San Jose based on the Justice Department investigation.)

It’s even hit beer. The 1,750 U.S. microbrewers may appear to operate in a competitive environment, but they nearly all sell through two distributors: ABI and MillerCoors control 90% of the distribution market.

For book publishers, the relevant market isn’t readers (direct sales are few), but booksellers, and Amazon has firm control of bookselling’s online future as it works to undermine bookselling’s remaining brick-and-mortar infrastructure. Amazon controls every growing segment of the industry: online physical books, downloadable audio books, online used books, and e-books. Amazon commands about 75% of the online market for print books, and 60% of the e-book market (a percentage that decreased from Amazon’s reported 90% two years ago, as a result of agency pricing).

Mr. Lynn reports on a conversation with the head of one of the largest publishing houses in the U.S.:
He explained that Amazon was once a “wonderful customer with whom to do business.” As Jeff Bezos’s company became more powerful, however, it changed. “The question is, do you wear your power lightly? … Mr. Bezos has not. He is reckless. He is dangerous.”
The head of a small publishing house in Manhattan, Mr. Lynn reports, was even more blunt:
“Amazon is a bully,” he said, his voice rising, his cheeks flushing. “Anyone who gets that powerful can push people around, and Amazon pushes people around. They do not exercise their power responsibly.”

Neither man allowed me to use his name. Amazon, they made clear, had long since accumulated sufficient influence over their business to ensure that even these most dedicated defenders of the book – and of the First Amendment – dare not speak openly of the company’s predations.
Mr. Lynn then turns to Amazon’s blackout of Macmillan’s buy buttons, two years ago this week:
At the time, Amazon and Macmillan were scrapping over which firm would set the price for Macmillan’s e-books. Amazon wanted to price every Macmillan e-book, and indeed every e-book of every publisher, at $9.99 or less. This scorched-earth tactic, which guaranteed that Amazon lost money on many of the e-books it sold, was designed to cement the online retailer’s dominance in the nascent market. It also had the effect of persuading customers that this deeply discounted price, which publishers considered ruinously low, was the “natural” one for an e-book.

In January 2010, Macmillan at last claimed the right to set the price for each of its own products as it alone saw fit. Amazon resisted this arrangement, known in publishing as the “agency model.” When the two companies deadlocked, Amazon simply turned off the buttons that allowed customers to order Macmillan titles, in both their print and their e-book versions. The reasoning was obvious: the sudden loss of sales, which could amount to a sizable fraction of Macmillan’s total revenue, would soon bring the publisher to heel.

This was not the first time Amazon had used this stratagem. The retailer’s executives had previously cut off small firms such as Ten Speed Press and Melville House Publishing for bucking their will. But the fight with Macmillan was by far the most public of these showdowns.

In the late 1970s, when a single book retailer first captured a 10 percent share of the U.S. market, Congress and the regulatory agencies were swift to react. As the head of the Federal Trade Commission put it: “The First Amendment protects us from the chilling shadow of government interference with the media. But are there comparable dangers if other powerful economic or political institutions assume control...?”

***

Today, … 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] 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 book industry is in play, and has been for a while. The good news is that people are finally starting to pay attention.

54 comments:

Lynn Price said...

Thanks to articles like yours, people *are* starting to pay attention. And they should because this mess doesn't just affect publishers. It hits every corner of the publishing industry. Fabulous article, Vic.

Victoria Strauss said...

I wish I could take credit, but I can't--the article (which has no byline) is from the Authors Guild, and appeared on their blog.

Anonymous said...

And the biggest predators: Kuzminski, Strauss, Crispin, SFWA, Glatzer, MacDonald, Nielsen-Hayden, Brewster, Spencer, Stone, Narayan, Valentine and company. Stop lying to authors about Miss Snark and all the other phony reports you have made over the years. You are just a bunch of grown up cyberbullies who take pleasure in doctoring lewd photos and googlebombing them. I am starting my own list called the 20 ugliest and you and agent Kristen are the first on the list

Anonymous said...

I have long thought Amazon an evil company. Worse for the country than Walmart. PUblishers and authors deserve what they are getting, though. They willingly dance with the devil.

Deb Salisbury said...

Thank you for this report. This is the first time I've seen all the info in a form I can understand.

I know you can't take credit, but I can't watch all the blogs. I do pay attention to yours.

Richard White said...

You know you've made the big time when you have your own personal troll. *grin*

I was discussing this with someone else. I've lived through something like this when the comic industry imploded and went from 13 distributors to one. Sure, it was great for DC, Marvel, Dark Horse and Image, but beyond them, if Diamond decides they don't like your comic, you're out of luck trying to get it into stores around the country.

Why authors want to allow ANY company to completely dominate the retail business, is beyond me. I wouldn't want B&N OR Amazon OR BAM or the Ghost of Borders to be able to say, "Since we're the only major retailer of books, publisher cannot set a cover price of over $10 on a hardback." (an absurd example but work with me.)

Not only would that force publishers to either cut back books they buy (driving more business to Company X's publishing wing), but it also would directly affect writer's royalties since many are based on cover price.

Oh, and self-publishing wouldn't be a panacea here either. If there's only one (major) retailer, can a self-publisher rely on simply selling books through their own web site? How will they get discovered?

You know, a bit of healthy paranoia is NOT a bad thing.

Robert Michael said...

I am afraid that the only way that we can maintain the open market in the book industry is for us to speak with our wallets. If we don't, Amazon wins. B & N, publishers, Independent book stores need to fight just as hard or harder. Without the cash, without our Jacksons, Lincolns, and Franklins, they have no chance against the big bully on the block.

At the same time, the Big 6 HAVE to realize that their models must change. Business as usual is swiftly disappearing. Authors and consumers are increasingly finding less value in thier ability to vet, their ponderous, bloated distribution and printing processes, and the attitudes of elitism that pervade their establishments.

The right to set prices that "make economic sense" is a valid argument, but a solid look at the model that determines the cost of distribution, the advances, and the royalties paid to authors must be re-evaluated. It isn't as simple as we try to make it sound, but the Big 6 have become as enamoured with their lofty towers, pet projects, senseless spending, and big budgets as our government. The solution, it seems, will be just as complicated, controversial and polarizing as our politics.

Omar Luqmaan-Harris said...

"Established authors, for the most part, do fine selling through online bookstores. It’s new authors who lose out if browsing in bookstores becomes a thing of the past."

This is a fallacy because new authors get 6 weeks or less to make their mark in book store shelves or there books get sent back to the publishers to the slush pile.

The ebook model, allows an author to secure virtual shelf space for an infinite space of time and con tiunally promote their titles without fear of getting shoved out of the ensconces of a bookstore.

Established authors get the best of both worlds but stand nothing to lose in the longterm with the shift from bookstores to online shopping and ereading.

Here is an article I recently contributed on my predictions for the publishing industry.

http://www.pantheoncollective.com/its-the-end-of-publishing-as-we-know-it-and-we-feel-fine

Thanks for posting!

Peter Dudley said...

Very interesting, with some good insights. But also some conclusions that are suspect, in my opinion.

For example:
It’s new authors who lose out if browsing in bookstores becomes a thing of the past. Advances for unproven and non-bestselling authors have already plummeted, by all accounts. Literary diversity is at risk.

On its surface, this might seem difficult to argue with. But here, the term "new author" is narrowly defined as "debut author with a certain level of publishing contract with a big publisher that is spending a certain amount of money on promotion." Amazon has enabled an entire generation of "new authors" that don't fit that narrow definition.

I would contend that "literary diversity" has been under siege for some time due to the narrow pipeline and limited time of exposure offered by the big publisher/chain bookstore model. You can't swing a dead cat without hitting someone who complains, "The only books published today are celebrity memoirs and vampire books."

The last several times I walked through a bookstore, I saw mostly best-sellers on the high visibility tables and face-out on the shelves. Popularity breeds popularity in a profit driven world, and that has ever been the case. Amazon, if anything, has opened the floodgates for "literary diversity," for better and for worse.

Another example:
... 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.

Again, that same company has enabled an entire generation of authors to self-publish. So the phrase "the people who publish our books" doesn't mean the same thing it used to. As long as the book industry thinks of themselves as "the people who publish [our] books," the book industry will be "in play."

The fact is that Amazon has democratized the publishing process. I'm not a fan of Evil Empires--I used to work for a small company that competed directly with Microsoft and which felt the weight of their bullying tactics and eventually went out of business--but I also have little sympathy for those who choose to complain about change rather than adapt to it. No company is entitled to exist, or to do business the way they've always done. There is a certain indignation of divine right coming from the publishing establishment these days, and to me it sounds more petulant than righteous.

Personally, I find the whole situation fascinating and am having a fabulous time reading all the point-counterpoint posts.

Brett said...

Honestly, I don't think it's a problem. Monopolies in the digital economy are rather ephemeral - remember when Microsoft was the Big Evil of the late 1990s/early 2000s? E-books are a very open market, open to anyone with a website and the software to make one.

In the mean-time, Amazon got where it is because it's what most of the customers want. Me included - I haven't browsed to buy a book in years. If I want to browse, I do it at a library, but that's not how I usually find books these days to buy. I find them through blogs and other people.

And frankly, what are we looking for with competition as customers? Lower prices, better options, and better service . . . which honestly has fit Amazon to a t in my experience with buying books off the site.

Rick said...

If it wasn't for you, Victoria, I don't know how we'd all stay informed. Thank you, thank you, thank you.

Frances Grimble said...

Self-publishing has been around longer than the printing press. I self-published my first book in 1993 and I knew plenty of other self-publishers at the time. I marketed most books to consumers/readers by direct mail, and they paid full cover price for each book. I also sold through a number of small independent booksellers and I gave them a 40% discount as is usual for bookstores.

I still have to pay to do marketing directly to consumers. Although much of that is now by email I still have significant costs for consumers who prefer print brochures, as postage has gone up. Then, almost all of those who buy, buy from Amazon. I now sell fewer than a dozen books a year direct to consumers. Almost all the independent booksellers I used to sell to have been driven out of business, complaining to me that readers just use their stores as ways to browse books they later buy on Amazon.

In other words, almost all my full-price and 40% discount sales are gone. I sell to Amazon through a wholesaler, to whom I have to give a 55% discount. But if I joined Amazon's so-called Advantage program for small publishers, I'd have to give Amazon a 55% discount.

Amazon has not done me any favors. And no, I do not feel that publishing $9.00 e-books or lending books through KDO select is going to help. What I have noticed is that my books are discounted by Amazon by as much as 37%, yet I am still selling the same number of copies to the same kind of customers (often the exact same customers). I just make less. Many books have limited niche markets, as mine do. No matter how low the price is, you're not going to sell many more copies, so you need to charge a higher price to make back your costs and yes, earn enough to make it worthwhile actually writing the book. Books do not have infinitely large markets. That's why, before e-books, most books were not $6.50 mass-market paperbacks.

I will also say that a website, Facebook, and social networking don't sell books in much huger quantities than my mailing print brochures.

Amazon and the Internet just don't work any miracles for self-publishers. Sure, if you publish e-books you don't have to pay a book printer but otherwise costs are the same, and with e-books there is a greater risk of amateur piracy because it's easier than plunking a print book onto a scanner.

Jeremy Bates said...

informative report. thanks for sharing with us

docstar said...

I don't understand a lot of the details so this may be a stupid question, but is there any legal reason publishers have to use Amazon for distribution? Seems to me the best way to kill a monopoly is not to take part - use other distributors (such as B&N and others) and let Amazon play by themselves. Personally, I only use Amazon for info and purchase elsewhere. If people can't get what they're looking for on Amazon, they're not going to say, "Oh well, forget it then."

Morgen said...

I wish there were a viable alternative market to sell in. B&N is not as "friendly" to the self-publisher, but I'll do some more research in that direction. Maybe something can be done. If they would sharpen the online model, to match what Amazon is doing, I think we may have a good thing going...

Brett said...

@docstar

The problem is the sheer size of Amazon's share of the market for books, particularly e-books. It would be economic suicide to completely foreswear that, and that shows up in the Bloomberg Businessweek article. There were a couple of cited sources who asked for their names to be partially withheld, since they couldn't afford to alienate Amazon.

Of course, if they really wanted to annoy Amazon, they could insist on having their books published in a format that the back-supply of Kindles won't run (such as ePub), and which is accessible to other tablets/readers.

docstar said...

Brett - But what I'm saying is that Amazon has to get their stock of books from somewhere. If the Big 6 and many/most of the independent publishers boycotted Amazon for distribution, Amazon would be left with its own published books and self-publishers - and it's hard to maintain a monopoly under those conditions.

Anonymous said...

It is obvious that book stores will be a thing of the past. Amazon has opened the door to self-publishing, whereas it would be impossible for individuals to publish their books and for small publishers to get their books out in the market place. Amazon also offers the Kindle to read these e-books. B&N has also opened their door for individuals and small publishers and also offers the Nook to read their e-books. POD is also in the offerings.

If the big six publisher and other medium size publishers are upset and disturbed by Amazon, then why don’t they just join together and offer another independent Internet book service to challenge Amazon and B&N, and they could also offer their own e-book reader. They certainly have the finances to do so. Or is the problem that they are so much in competition with each other that a uniting of these publishers into a new joint but independent Internet book service would be impossible?

Monette said...

I do not like B&N for the specific reason that they are not supportive of the local writing community. I am much more a fan of independent book stores, and if B&N collapses, suspect these will take over. I agree Amazon is too big for its britches, but government regulation needs to step in. Government however believes the economy will take care of itself. What Amazon can do, it will. And as the most important place that supports my books, I can’t stop supporting it. It accounts for half of my sales because searching there is so easy. Thanks for the read.

Richard White said...

Anon 11:41

First point, do not for a second believe Amazon is "helping small and self-publishers" from any altruistic point of view. They're selling electrons and taking a cut of every book they make. If they weren't turning a profit (regardless whether the publisher is making a profit or not), you can guarantee they'd drop the independents in a heart beat.

Second point, if the Big Six or any group of publisher banded together to compete with Amazon, there'd be lawsuits and investigations in to collusion, restraint of trade, and so on. That would be like GM, Ford and Chrysler getting together to sell their used cars at a joint lot to put CarMax out of business.

Again, it's not what Amazon (or ANY company) is doing right now. It's what do they have the potential to do down the road once they achieve an overwhelming dominance in any industry.

I'm a huge fan of "competition leads to innovation".

Andra M. said...

@Monette: At my B&N, not only do local authors have the opportunity to set up book signings (self-published or not), but there is an entire shelf devoted to local authors.

It's likely a problem with your local B&N; it doesn't seem to reflect B&N's overall company policy. Have you talked to the manager to see if they could give more attention to local authors?

As others have noted: It's easy to complain. When we do nothing to change it, who's fault is it in the end?

Marla Miller said...

You know, I just don't know how I feel about this---I don't see Amazon as the bogey man--I don't see the big 6 as victims---I think the lines are drawn according to one's history in this business----
My hypothesis: established authors already in the established system are more likely to believe/support the big 6 and their subsidiaries. I have never seen the big 6 as anything but 'insiders supporting insiders'--all you have to do is visit any one house in NYC---it's an inside game--agents pander to them and we pander to agents---at least that's how I have always experienced it in my 20 years of writing for publication. I have welcomed this change in publishing so I just don't know about this---Thanks for your posts about this topic---I'm reading them carefully.

Anonymous said...

So you all think that $9.99 for an ebook loses money for the Big 6? Obviously you haven't been in the business of creating an ebook. It takes time, but very little. It costs nothing, but the time. It takes no dead trees, no huge equipment to manufacture the product, and instead of a year to produce, it can be as little as a day to as long as a few weeks. Amazon is right--more than $9.99 for an ebook is price gouging and customers know that. It's digital 0s and 1s, people. The author might not get but 17 1/2% off that ebook through a Big 6 publisher, but on his own gets 70%. It's ridiculous to side with print publishers who are overpricing their ebook offerings when you know it's out of line.

docstar said...

Anonymous - up to the point of printing, it costs the same to produce an ebook as it does a print book, and the costs of printing are not the major cost of producing a book.

Brett said...

@docstar

My point was that they can't afford to walk away from Amazon right now. If any of them tried it, they'd take a huge financial blow - and there would be big incentives for at least one of them to "defect" and reap the games of Amazon's business.

docstar said...

Brett - I understand they couldn't just yank everything right now. But they could start the weaning process, and as long as they do have other viable distribution routes (B&N) I think they could survive very easily. Customers will go where the stuff they want is.

Rashad Pharaon said...

Love this post, thank you for sharing. Good arguments on both sides, however, free market competition prevails. Times are changing, technology is moving ahead at a rapid clip, and companies like Amazon are capitalizing on new models. Publishing houses need to eventually revamp their business structure or face the same dilemmas as companies such as Kodak; having invested in e-technology a little too late in the game, the largest film/camera maker now faces bankruptcy in light of digital competitors. As for Amazon.com, you need only look at Amanda Hocking and the likes of her to see the silver lining for new authors.

C.K. Garner said...

It will be interesting to see how the business mutates with Amazon at the head of the pack, and the Big Six jockeying for position. Certainly the traditional publishing business model is becoming redefined, but I wonder how smaller e-publishers such as Smashwords and Xlibris will be affected. What will all of this ultimately mean to aspiring Authors and new Authors? I chose to go with a traditional small press for my first submission, but admit, I'm keeping my options open.

Shockgrubz said...

If unchecked, those big boys,(i.e. ,evil companies) could end up making it a requirement to burn all physical ones. Sock it to them!

Shaun J. McLaughlin said...

This article is of tremendous value to writers and indie publishers. As a person who writes long blog posts, I respect the good research and time investment this article represents.

Oli HIlle said...

As an independent author I cannot agree with most of this article. Amazon has finally leveled the playing field for me and enabled me to reach a potential audience of millions of readers. I had never sold one book to anyone three months ago. Now I have had over 10,000 downloads of my books on Amazon.

I can now finish writing a book and have it published on Amazon within 12 hours. How does that compare to the 18 months lead time with a traditional publisher IF you even get a publishing deal?

Oh I also get 70% of the cover price from Amazon compared to maybe 10% if I am lucky from traditional publishing.

Oli Hille
Amazon #1 Bestselling Author

docstar said...

Oli - no disrespect intended but finishing a book and having it published 12 hours later doesn't sound all that great to me. Most self-published books I've looked at reflect that fast turnaround (with a few exceptions). Personally, I'd consider the 18 months of editing, formatting, cover design, marketing, plus the *advance* the much better deal. But I think that whole issue is a different discussion.

Shawn James said...

I went through this in the comic book industry in the 90's. Publishers tried to take over distribution. It led to the collapse of the industry. A collapse the industry never recovered from. Greed, greed, greed.

Why do I have a feeling at the end of the day everyone is going to lose?

BuffySquirrel said...

I haven't had much luck persuading my family not to buy from Amazon. They just don't see why it's a problem. Heck, for years I didn't see the problem.

I wised up when they told my friends they couldn't sell their ebooks in open format any more, and they had to wait six months for the proprietary format to be rolled out. Six months with no income from the primary vendor.

Frances Grimble said...

Amazon also appears to be now penalizing micropublishers who use print-on demand services other than Amazon's. See:

http://www.thebookdesigner.com/2011/09/amazon-and-lightning-source-the-end-of-an-era/

http://www.newselfpublishing.com/PlanB.html

Anthony said...

Amazon is now a monster less because of business practices but more because it's the prime enabler of emerging markets.

Yes, ebooks have been around forever. However, there was a significant gap, and I mean a mega-huge, miles wide gap, between what publishers (in general) were publishing and what many people wanted to read (note I did not say "most"). In other words, there is a untapped reader market out there. How big is it? Who knows.

But one thing is for sure, Amazon is trying to capture that market. This is not the era of Amazon vs. Publishers. That boat has sailed. In 1999 (all the book pulling who-has is mere fallout). Which is why the article highlighted and most of the commentary here is shortsighted. It's all about who can fill the electronic distribution channels with quality books people want to buy.

It's a great time to be a reader. It's also a great time to be a passionate writer.

It's also a great time to be a publisher, but only if you're nimble and quick, with modern business practices and a forward-facing understanding of readers.

M.K. said...

Based on what I have read recently, I am not nearly as bullish on the future of Barnes and Nobel.

Still, I am looking forward to reading more of your blog.


WeeklyScribbling.Blogspot.com

Anonymous said...

It's like the Cola wars. Amazon is Coke and Pepsi, and B&N and all the others are RC. It's going to be sad to see them completely destroyed.

ScotCat said...

Let's not forget the Booklocker lawsuit. Small self-publisher takes on Amazon giant and wins (kind of).

I'd like to say I'm surprised by all of this, but I saw this coming (and wrote about it) many years ago and was mocked for suggesting such a foolish thing, since "it would never be allowed to happen."

Kat Richardson said...

I shall ungraciously say "what took them so freakin' long to notice this?" Some of us have been screaming in the dark about this for years. Amazon is NOT your friend, writers.

Knave said...

@ Monette: "I agree Amazon is too big for its britches, but government regulation needs to step in."

I'd suggest reviewing the past cases when the government stepped in. You might have missed a few key points.

1) Amazon does not have a monopoly on anything. They are merely a large company that is good at what they do.

2) The government stepped in against the Microsoft Monopoly when they were able to PROVE that Microsoft seriously abused it's power. For instance Dell tried to offer PCs (special ordered only) with Linux installed. Microsoft informed them that if they sold any other OS with their PCs, their favored rates for OS licensees would go up...dramatically. Thus greatly increase their cost of doing bushiness and disadvantage them in the market. That was one of SEVERAL things they did.

3) There is currently a law suit forming against the Big 6 for price fixing, in collusion with Apple, to Force the agency agreement.

Nancy said...

In the last few years, Amazon has done more to promote reading in this country than anyone else in publishing. They've stepped into publishing with the crazy notion that authors deserve to be treated like a vital part of the publishing process, which is something the big publishers haven't done for decades.

They are incredibly passionate about books, and their stated goal is to make every single book ever published available to anyone who wants it in less than a minute.

Yes, change is hard, and sure the people who refuse to change are going to go under, but if you've been paying attention to how publishing has been going lately, and you're not completely irrational, you'll see that Amazon is a Godsend for readers and writers, aka, the people who matter. Bookstores and publishers who are only concerned with the corporate bottom line are a thing of the past, and as far as I'm concerned, good riddance.

Knave said...

@ Docstar
"Seems to me the best way to kill a monopoly is not to take part - use other distributors (such as B&N and others) and let Amazon play by themselves."

That would be a paradox. http://www.merriam-webster.com/dictionary/monopoly

If it were really a monopoly, there would be no other viable options. There are other options in the market, the real issue is that the other options often make very poor long term goals.

"up to the point of printing, it costs the same to produce an ebook as it does a print book, and the costs of printing are not the major cost of producing a book."

The major costs in a book are related to printing. They need paper, ink, space, time and equipment. Even for a print run of 50,000 copies, that will quickly add up.
After the copies are created and checked, they need to be packaged and sent to the distributors. This adds expenses to the paper version. From the distributors they need to sit for a while until they near their official release date. Since space and time are money, this is going to come out of someone's pocket somewhere.
From there they get shipped all around to book stores, warehouses (Amazon, etc) and the like. Then the books can sit in a back room and wait for their release date to magically appear on the shelves. This takes money to get them there and book store employees to stock them on the tables.
Once all is said and done, the book store has until the bill comes in to actually sell them. If the books don't move fast enough, they aren't paid for but returned to the distributor. From there, they are either pulped for paper or end up in bargain bins around the country.

If you think I've gone off topic, think about this: Printing isn't the most expensive cost in the books, but it is costly. Also it is followed up with being-in-print, which incurs some costs from the above.

Devil's advocate moment: To a degree it is easier (thus cheaper) to format for an e-book. You no longer have to focus on correcting the gutters, verifying line matching, preventing orphans, etc. and then manually verifying the test print results. Flowing text format is a lot easier to handle.

docstar said...

Knave - If you do just a quick google, you'll find several sites which break down the costs of book publishing - and all of them show that the printing costs are around 10% of total costs. The costs of equipment, supplies and maintenance are fixed costs, spread over all book printed. The big costs are in acquiring and preparing the book for publication.

Doug Brunell said...

For the record, the comic book industry didn't collapse. It changed, and many things (including something just like this) attributed to that change. Greed is not good. It is greed. That said, I believe the readers are correct in saying anything more than $9.99 for an eBook is too much. They tell me that all the time.

docstar said...

"That said, I believe the readers are correct in saying anything more than $9.99 for an eBook is too much. They tell me that all the time."

Which, of course, goes right back to Amazon, willing to take a loss on all those 99 cent books because they had so much else to make money on. And who really ends up on the short end of the stick? The writers, of course. I mean, come on - do any of us really feel our blood, sweat, and tears are only worth 99 cents? Or worse - we should be giving them away? That's what we've allowed Amazon to convince the readers of.

Peter Dudley said...

Not Amazon. Over a decade of computer, software, phone, and other industries training consumers that any content delivered electronically should be cheaper, if not free outright. When was the last time you paid for online delivery of a newspaper article, for example? Heck, most TV is "free" to consumers. Can't blame all that on Amazon. When books went electronic, consumers had already been trained to expect the costs of physical manufacturing and delivery to be removed from the mix. Right or wrong, consumers think those costs are a considerable portion of the total price. Amazon, coming from a tech background, understood that in a way publishers could not. So while publishers were trying to figure out how to preserve margins in a digital world, Amazon was figuring out how to deliver to consumers' new expectations. Amazon did not create those expectations. Those expectations created Amazon.

docstar said...

Peter - you have a point. Of course, all the self-publishing gurus didn't help matters, turning it all into a marketing strategy - which is now shooting everyone in the foot.

Knave said...

@Docstar
I looked up the following one.
http://www.davidderrico.com/cost-breakdowns-e-books-vs-printed-books/
The number I focused on are the Mass Market books. Why? Because I didn't grow up cash heavy, if I wanted a book...that's the type I got.

In their numbers 50% of the book price went into the distributor/merchant duo. IE, they made 6.25 times as much of the book as the Author did! So yes, printing the book cost very little, but being in print costs a good deal more.

For humor sake I will point out this link to DWS about Indie Publishing costs.
http://www.deanwesleysmith.com/?p=6347

"Which, of course, goes right back to Amazon, willing to take a loss on all those 99 cent books because they had so much else to make money on."

Amazon is not taking a loss on those books. Neither is the writer. Taking a loss implies your expenses to sell are higher than your sales income. Amazon is making something like $0.64 for every $0.99 unit sold. The writer is making something like $0.35 per copy sold.

Once it is up for sale on Amazon, there is no additional cost. Anything that comes in is a return on previous investments. For the rest of your life, thanks to copyright law.

Another key factor about $0.99 books is that most of them are really just short stories. By themselves those would traditionally not sell at all.

You may also wish to take note that a lot of the well known self publishers are NOT advising $0.99 price points. They are suggesting you price your book for what it is worth. Many of their full length novels are priced at $4.99 or $5.99. If it's a shorter piece it often comes with a smaller price tag.

Not to mention that even at $2.99 in most locales, the writer can receive 70%. That's about $2.09 per copy of their book sold. If it only sells 100 copies a month...that is still an extra $209 in income. And it wont fall off the selves tomorrow to make room for a twilight prequel...as happens in book stores. It stays there until you take it down, hopefully continuing to bring in new readers for years to come.

So even with some people pitching low priced books, I don't see how the ended the future of writers. I see this as a new beginning, one that looks a lot brighter than yesterday. The frightening part is that I'm not an optimist, I'm a realist.

docstar said...

Knave - I was only pointing out that the major costs to publishing a book are not in the printing, as you had previously stated. What the publisher earns compared to what the author earns is all up to the contract signed, bearing in mind that it's the publisher spending all the money to get the book out there.

Jennie Rogers said...

Ugh. The people hailing Amazon as the Game Changer for authors looking to self publish need to read that affront to all writers Amazon calls their contract.

Yeah, they are changing the game. But I would argue it is definitely for the worse. And sadly, authors are getting sucked into the deathtrap simply because it is free to start using.

At least with traditional self-publishing, my right to take the printer to court is kept intact.

You can argue that any author who doesn't read the contract deserves what they get, but with all the deliberately misleading information out there it's hard to determine what is actually going on. And unfortunately, Amazon has the resources to weather the bad press that usually chokes out this kind of crap.

Do the Big Six need to get their act together? Absolutely. They need to be able to compete with Amazon. That means muscling into Amazon's market much more strongly. They need to re-think their business models, and adjust for the new market. They need to COMPETE.

Without competition, everyone is going to suffer.

Knave said...

@Jennie
Which of their Contracts?

"Ugh. The people hailing Amazon as the Game Changer for authors looking to self publish need to read that affront to all writers Amazon calls their contract."

KDP, KDP Select, CreateSpace, Amazon Imprints or that horrible thing that was linked to the Penguin contest?

Those are all separate contracts. KDP at least allows you to remove your book from their listings if you wish. CreateSpace allows you to end your dealings with them as well. KDP Select however is a far pickier beast, it has perks and drawbacks that a given writer must weigh.

If it is the KDP contract that you think is a monstrosity, you should have a glance at the boiler plate contracts that the Big Six want.
http://www.thepassivevoice.com/11/2011/how-to-read-a-book-contract-%e2%80%93-non-competition-2/

Or a good example of some of the misunderstandings people lay onto CreateSpace: http://www.thepassivevoice.com/08/2011/how-to-misunderstand-a-contract/

Or, just for fun. One more cringe worthy item found in some of the traditional Big Six contracts.
http://www.thepassivevoice.com/08/2011/want-to-write-a-blog-post-get-permission-from-your-publisher-first/

Yes. I will readily admit I get a lot of my legal heads-up items from PG. But given that they are a lawyer, they do tend to be fairly educated on the subject.

All things I have seen, I'd sure as heck go with KDP before I went with Book Country or Publish America. Cringe

docstar said...

re: contracts - They are always negotiable. No one in their right mind expects authors to sign a contract without some revisions. (Except perhaps vanity publishers.) I don't know if one can negotiate with Amazon or not, or if that's a take-it-or-leave-it.

thehatguy said...

Now, years after this post, I have a couple things to say. It seems to me that this posting contradicts itself. It was saying how distribution and monopolies of business to business transactions are of greatest risk. Ok, i get that, but when amazon is the median between authors and readers, and they allow pretty much everyone to say what they want, that's only bad if you're a censor.

I suppose amazon could have a "monopoly" on sales for ebooks, but the print industry seems to be selling just as much as they used to, from what I've read anyways. And I read a lot. The thing about any monopoly amazon could have is that if anyone gets upset with amazon, they can sell directly to the reader, or try to compete with amazon on a new platform by offering authors better deals, and doing a better job at promotion than amazon, which wouldn't be hard if they suddenly make it so authors don't get nearly as much, start censoring, or just piss people off.

Before, an author had no choices really. The big six gatekeeper told you what to write and if they didn't like it they as good as burned it. Now people can read a much larger range of things, and even try their own hand without worrying for years and sending drafts to hundreds of publishers who have to invest a lot into something they aren't sure of.

What do you have to invest into an ebook only? Time and effort. It's not as much of a risk, so there's more of a voice. Sure, some people write pure crud, but the crud that people like floats to the top so everyone can taste it. It used to be that the big six spoon fed it to you.

I believe that amazon is doing wonderful things for readers, and authors, but frustrate the big guys who can't control the market anymore. And sure, ebooks are destroying retailers, but so what? There's other things people could be doing than standing there selling books, if you really enjoy that sort of thing you can get a job at the library. I'm sure people still buy books at the mom and pop store that wants to stay in business, and I'm sure authors will still go to those stores and sell/ sign books.

What I'm not sure about is whiners who complain about how things unfold, and how to convince them to shut the hell up and work as well as you can within the parameters available to you. For now, amazon owns the game, ten yours from now, who knows? Personally, I don't really care all that much about publishers having problems. Not nearly as much as I care about the ability to publish anything you want, and the ability to get it in front of someone's nose accross the world without five people taking a cut and or anyone telling you how to do it besides the end consumer.

All it takes is a little reason, and a little flexibility in thinking to see that competition is a good thing, and in this world it's always been sink or swim. Well amazon is flying, and until it crashes, which all things do eventually, my advice is to grab hold and see where it takes you. Or you can vehemently defend, patch and repair you sinking ship.

I don't think it's my aspergers that makes this issue so clear to me. I think it's my ability to read all sides of the argument, and form my own conclusion. They are likely to be wrong, I'll be the first to admit it. But to me, this whole defend the publisher thing seems stupid to the point of "do you need someone to hold your hand while you think so you don't hurt yourself?"