Saturday, June 28, 2014

Book-selling wars

I have been following the dispute between Amazon and the Hachette Book Group with interest. It almost certainly signals a shift in the way the book business is run—hopefully it will be a shift away from both Amazon and the Top Five traditional publishers and toward a more independent industry controlled mostly by the authors.

In a nutshell, Amazon thinks that publishers do not deserve as much of the retail price of e-books as they get for paper copies. On the one hand, this makes sense because there is no paper or ink or trucking fees to pay. On the other hand, it is the same book as the paper copy, which has been through an expensive editing, proofing, and formatting process—not to mention an e-book formatting process, which a print book does not need. The retail price of the book also, of course, includes the cost of keeping the CEO of the company wealthy beyond dreams.

Amazon—because it is the largest distributor in the world—wants more of a percentage (currently 30 percent of the suggested retail price) than it has now. Publishers such as Hachette refuse to agree to this, especially since it has the current number one bestseller in Robert Galbraith’s The Silkworm.  As of this date, June 25, 2014, here is what the book is selling for by some of the mega retailers.
Barnes & Noble is selling the hardback copy of the book, which has a suggested retail price of $28.00, for $16.80, a 40 percent savings. They are selling the e-book, which has a suggested retail price of $14.99, for $11.00, a 20 percent savings.
Apple’s iTunes sells the e-book for $9.99.
Kobo also sells the e-book for  $9.99.
But of course Amazon refuses to be outdone by anyone and is selling the hardcover for $16.79 and the e-book for $8.99.

This cutthroat policy of Amazon’s is reprehensible, but no surprise. In addition to being the largest retailer on the planet, they are also the largest predator. Let’s face it; as long as Hachette wants to sell their books to Amazon for distribution, Amazon has the right to price them whatever they want to, even if they lose money on every sale. Who are the winners and losers here?
Winner: Hachette, because they get the price they want from Amazon.
Winner: The authors, because they get the same percentage of the suggested retail price despite what Amazon ends up selling their books for.
Winner: The customer. Anytime there is a fierce competition to sell a product, the customer stands to gain by the existence of lower prices.
Winner: Amazon, who will get the lion’s share of the sales, despite a lower percentage of profit. Because the more sales they get, the less their competitors get.
Losers: B&N, Kobo, Apple, and anyone else who competes with Amazon as an e-book distributor. But this has a caveat. Owners of Nooks, iPads, or Kobo readers will probably buy their e-books from B&N, Apple, or Kobo despite the difference n price. Buyer loyalty works both ways.

The above was the situation before Amazon decided it wanted a larger slice of the pie. Because almost everyone was a winner except Amazon’s competitors, it is difficult to see why Amazon would want to change things. Anyone who knows Amazon, though, knows that 1. Amazon will never be satisfied with its current profit margin, and 2. Amazon does not like it when it is not the only winner. It treats as competitors not only Apple, et al,  but also publishers and editors and yes, even the poor authors  If they could create a program to actually write the books themselves, they would do it in a heartbeat.

But let’s say that Hachette refuses to let Amazon distribute their books.—or, conversely, Amazon refuses to distribute them. Who are the winners and who the losers then?
Loser: Amazon, who will not reap any sales at all on certain titles.
Loser: The customer, who will not get quite as cheap a price on e-books from that publisher.
Winner: Kobo, Apple, B&N, and many other e-book retailers who will not have Amazon as a competitor for these titles.
Winner: The book industry, because any time Amazon is thwarted, the industry gains.
If this situation results in the publisher selling fewer books because of not having Amazon as its main distributor, then both publisher and author are also losers—at least initially.

But remember, this battle is between Amazon, who says that the distributor should get the lion’s share of the profit, and the publisher, who says that production is more important. Where does the author fit in all this? Well, nowhere; and that’s a bad thing.

Essentially, Amazon seems to want a monopoly. They will first corner the market on everything and then raise the prices. This is indisputable given their past performance. Yet the Big Five publishing houses (of which Hachette is one) remain annoyingly pompous when it comes to their own self-importance, and uncompromisingly thrifty when it comes to paying their authors.

The rise of independent publishing will be the sorting out of the Amazons versus the Hachettes. Just look at the price Hachette is asking for The Silkworm: $14.99! For an e-book that has no collectible value, no resale value, and in fact, no physical form at all! Under the “guidelines” followed by most major traditional publishers, the author gets 25 percent of net sales. So if a copy of The Silkworm is sold at that price, the author would get no more than $3.00—and probably less. An independently published book selling on Smashwords (who gives the author up to 75 percent of gross sales) for $4.99—$10 less than Hachette—would get the author about $3.75. Something is wrong here.

In my opinion, then, the future of book publishing will have to incorporate some of the procedures of Amazon, the Big Five publishers, and Indie authors. But they all will have to change some if they want to survive at all.
Amazon has proved to be bad for publishing, and worse, bad for literature. They need less of a market share and less profit margin. They need to pay more attention to their customers and their authors and less to their shareholders and to Jeff Bezos. They won’t, of course, so they will have to be forced into it.
Top Five Publishers (hopefully followed by the majority of all publishers): need to build their own storefront websites for both printed books and e-books. With their own sites—and not having to pay a middle party, like Amazon, they could afford to discount books for customers. They could also afford to charge less and pay their authors more. If they don’t, their authors will pay someone like me $100 to format their e-books so that they can get three times the money they are getting now on each new sale. This will happen anyway.
Authors:  need to retain your e-book rights. It’s not hard to publish an e-book yourself on Smashwords, Amazon, Apple, Nook, or any of the other major e-book retailing platforms. You will pay a small fee only on each sale, but will receive 75 percent of all gross sales. No more money to pay the CEO. You are the CEO. Some authors and publishers are self-important enough to deserve each other’s company. But they better enjoy it now, because it will soon be a very small party