Amazon.com Widgets

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Send Me Down the River

I’d planned to address the topic of the Amazon/Hachette pricing war, but I’m glad I hadn’t gotten around to it yet. Amazon sent an e-mail over the weekend, which can be found in its entirety on Readers United. I’d recommend reading it, because this entire post is little more than a reaction to their letter and the situation as a whole.

Prior to this, I’d read a couple of articles/blog posts that left me with more questions than answers. Unfortunately, in both cases, the most illuminating aspect was found in the comments section, where authors and readers alike voiced their opinions on the topic (both for and against Amazon). Of course, loading them now, it appears that access to the comments has been restricted. Fantastic.

Apparently, the “Readers United” site—right down to the name—is a reaction to something called Authors United, spearheaded by an author named Douglas Preston. The open letter at Authors United makes the suggestion that Amazon’s purpose is to hurt authors:

As writers—most of us not published by Hachette—we feel strongly that no bookseller should block the sale of books or otherwise prevent or discourage customers from ordering or receiving the books they want. It is not right for Amazon to single out a group of authors, who are not involved in the dispute, for selective retaliation.

As a writer, it might seem crazy for me to come out on the side of the company “block[ing] the sale of books,” but Amazon is engaged in a fairly standard negotiating tactic. Hachette is being stubborn, so Amazon is taking measures to show Hachette needs Amazon more than Amazon needs Hachette. It’s unfortunate that authors get caught in the middle of this dispute, but it’s not dissimilar from employees of any company affected by negotiations beyond their control. Employees are often impacted by tough negotiations, and they grow to resent the fact that they have no say in potentially losing their livelihoods while suits duke it out in board rooms… But does the fact that they resent not having a voice mean they deserve one?

Let me play with an analogy. Say Hachette manufactured a fancy, stone-ground organic mustard instead of publishing books. (I…may have been looking for mustard over the weekend.) Amazon, a high-end grocery retailer, has four entire shelves devoted to multiple brands of mustard. They’re locked in a contract where Hachette sets a price on their mustard that’s a little bit too high to really catch fire with consumers. It’s great, and the people who buy it love it, but most people aren’t going to spend $14.99 on a jar of mustard. When it comes time to renegotiate the contract, Amazon says, “We’ll only do this if you lower the price so more people buy it.” They show Hachette rudimentary math that lowering the price will exponentially increase sales, thus making a price reduction more profitable for everyone. Hachette says, “Nope, we like our pricing, and we’re selling enough to satisfy ourselves.”

What should Amazon say? “Gee, okay”? Or should they say, “Sorry you feel that way. We’d really like to keep selling your mustard, so we’re going to continue negotiating. In the meantime, we’re pulling yours off our shelves to make room for more of the fourteen other mustard brands we carry, which are priced to sell.” Sure, it’s kind of a dick move to pull it—but that’s the price you pay when the sale of your product is dependent on, you know…being sold by a retailer. What value is there for Amazon to devote space to products that aren’t selling? Particularly if they know why the product isn’t selling, but the seller refuses to address the problem.

Now, in this mustard scenario, I could call the writers employees of the mustard factory, but I think the more apt analogy is that they would be growers or other forms of ingredient providers, assuming they’re locked into an exclusive contract with this manufacturer. Because yes, if Whole Foods decides to stop carrying mustard I like, the ripple effect goes beyond a customer being like, “Hey, where’s that mustard?” First, it impacts the factory producing the mustard (including its employees); then, it impacts the ingredient suppliers, who are typically (particularly with Whole Foods type organic/natural products) small family farms whose livelihood indirectly depends on Whole Foods…

…but that doesn’t make Whole Foods responsible for all of those people’s livelihoods, any more than it makes Amazon responsible for the livelihood of Hachette’s authors—or the authors of any other publisher with which they might play hardball. I wouldn’t make the argument that the authors are responsible for any of this. I might, however, suggest that Hachette bears much more responsibility than Amazon for affecting the livelihood and royalties of its authors. These authors entered into a contract with Hachette with the expectation that the company would do its best to (1) make the most money for both parties, (2) make the book(s) available to the widest possible readership, and (3) not screw up (1) and (2) by getting into a pissing match with (what I’m assuming is) their largest distributor. Hachette has not lived up to its end of the deal with its authors.

Despite its impressive number of signatures, the Authors United letter does nothing to address Hachette’s role in this. It mischaracterizes the authors’ role in “launch[ing]” Amazon, rather than crediting the company’s business strategies for that achievement. When selling books, authors are certainly important—much moreso than the branding of their publishers, which means virtually nothing to readers—but Amazon innovated the selling of these authors’ products. The mere fact that Amazon was able to buy books in bulk, and those books were necessarily written by authors, does not mean they “launched” Amazon, any more than they launched Barnes & Noble, or French’s mustard launched Walmart. (If I learn that Jeff Bezos relied heavily on a thinktank of authors to construct Amazon’s business model, that would be another story.)

Ask yourselves: if the authors’ names or books added so much value to their retailers, where did Borders go? The authors certainly didn’t kill it, but if the argument is that the authors are responsible for launching Amazon, doesn’t that also make them responsible for destroying Borders? What? It doesn’t?! Take a second to ruminate on that, and we’ll continue…

Amazon, like any innovative business, saw an emerging technology, saw inefficiencies in a business model (booksellers), sewed up those inefficiencies, and exploded. That’s how it happens. Whatever you think of what they’ve become, it’s how Microsoft happened, it’s how Walmart happened, and it’s how Apple happened. They saw opportunities, seized on them, and delivered what their customers wanted.

An argument could be made, as companies get bigger and more bloated, that their business model shifts from giving customers exactly what they wanted (or better—anticipating what they want before they realize they want it) to telling their customers what they want, to their growing dissatisfaction. It’s exactly this modality that leads to a competitor striking. Borders, Crown Books, et al, all got complacent, and Amazon pulled the rug out from under them. IBM got complacent, and Microsoft pulled the rug out from them. It even happened to A&P (which, at its peak, operated 5000 more stores than Walmart does today). In all these cases (especially A&P), the companies sowed the seeds of their own destruction by insisting they know what their customers wants instead of listening to their customers.

Amazon isn’t there yet, though. Yes, people have the usual gripes—underpaid fulfillment center workers slaving away, shipping problems, increasingly poor customer service—and I’ll put on my Carnac the Magnificent turban and predict that this will happen to Amazon, too, but we’re not ther yet. Not even close. And maybe Amazon will be smart enough to pull a Barnes & Noble and, at the eleventh hour, put their ears to the ground and give customers what they actually want. Right now, Amazon is interested in giving customers what they want: Kindle books at lower prices.

As a consumer, I can tell you exactly what my first thought is every time I see an eBook priced higher than $9.99: “Why the fuck does it cost so much?”

Publishers, unlike moody erotica writers self-publishing macabre sexual fantasies, have legitimate overhead. I’d never suggest or assume that it makes sense to price at $0.99-$2.99, but $4.99-$9.99? I’d buy every book I saw. Higher than that, and it becomes a real debate. Heck, over the weekend came the internal debate over whether or not to spend $9.99 on a Kindle copy of Circle of Treason by Sandra Grimes and Jeanne Vertefeuille.

I’m one of the fourteen people in the U.S. who dutifully watched ABC’s miniseries The Assets. I saw Mrs. Grimes interviewed on the news the night The Assets premiered (the only thing close to advertising I saw), and the story of Aldrich Ames and the hunt to find a mole within the CIA intrigued me. It’s sadly noteworthy for having the lowest-rated premiere of anything in the history of network television, and it didn’t quite compare to the fictional The Americans—but it was interesting enough to hold my attention, and when I finished up the last two episodes yesterday, I thought, “I’d like to know more. I’d like to know if X, Y, and Z events happened as portrayed. I’d like to know more about the other mole suspects.”

But $9.99 for an eBook I’m guaranteed to read only once? I’d actually drop that much if I couldn’t find it—digitally or physically—at the library, but a nearby library has a hardcover. I’m not saying they should have priced the Kindle book at $5.99, but if they had, I would have bought it without blinking. A lot of factors like these run through the mind of the consumer before making a purchase. For instance, I have a tendency to spend more (and more often) on lit’rature than nonfiction, because nonfiction enriches my knowledge, but fiction enriches my mind.

What I’m thinking when I see a Kindle book with a high price is, “I know they have pay their editors and other staff, I know the authors get royalties, I know that the distributor takes a cut, I know there are marketing and all sorts of other ancillary costs… But I also know they’re transmitting a text file that, in most cases, would fit on a 5.25″ floppy disk.” Granted, I might be a teensy bit savvier than the average consumer, but perhaps not. Sales speak volumes, and Amazon’s data supports the idea that lower prices translate into higher sales. The only data I’ve seen from Hachette regarding eBook sales comes from a price-fixing antitrust lawsuit that all the named defendants lost. All of these factors and more play into the decision of whether or not to pay for a book at a given price. The higher the price, the harder the decision—but, because I’m not made of money, usually the answer turns out to be “no.”

Buying Kindle books at higher prices is compounded by the fact that there’s not even an option to get a little scratch back once you’re done with the book. Say, for instance, I couldn’t find Circle of Treason at any libraries. I’d be pretty close to buying the Kindle book, except for the fact that the paperback is currently selling used—used!!—for $14.63. I could easily buy it, read it quickly, and resell it. I know publishers don’t want to factor decisions like this into their pricing schemes. I also know not everyone is as cheap as I am… But if I could pay $15 for a book, sell it back and net $10, that’s a much better option than paying $10 for something that will simply sit in my Kindle library until either Amazon’s collapse or the singularity (whichever comes first).

I’ve long thought hardcover books priced higher than $29.99 are a total rip-off, but I acknowledged that (in addition to all the other costs) the books require materials and manufacturing. When there’s no materials or manufacturing, and the cost of housing and transmitting the digital file is negligible, why should they be priced so high? What, exactly, is the margin on these eBooks? Why should an eBook ever be priced higher than the retail cost of a trade paperback? (Note: This is not a suggestion for publishers to raise their trade paperback prices.)

These are questions I ask myself every time I look at eBook prices. As a writer who values traditional publishing channels (to an extent) and would be eager to work with one, I still wouldn’t want anyone looking at one of my eBooks faced with the questions that I ask. I want them to look at the price, think “That’s a fair value,” and buy. Not (just) to line my own pockets—but because, as a consumer without a lot of money who really likes books, I wouldn’t want my name associated with price-gouging. I’m shocked that so many authors would.

Edit, later on 8/11/14: It’s being reported that Amazon mischaracterized a quote by George Orwell, a fact I thought I should mention considering this blog post heavily supports Amazon. In response to the claims that Amazon selectively edited the quote to omit its implicit “dry British wit,” even Penguin’s own history page reprints this quote in full after stating that “Traditional publishers tended to view Penguin with suspicion and uncertainty, as did some authors.”

Without the broader context of the full article (according to the Times, it’s from The New English Weekly, week of March 5, 1936—anyone have a copy for sale?), I won’t make any judgment over whether or not Amazon misused the quote. I will, however, offer an opinion on Penguin’s use of the quote: If this quote is, as the Times and others suggest, pro-paperback, why would Penguin’s official history characterize it as the opposite? It’s entirely possible—perhaps even probable, given Penguin’s use of it—that the “splendid value” remark is the sarcastic part, and the collusion clause was sincere. Perhaps Penguin misunderstands its own author, but it could be read either way without more context than one full sentence.

Per Wikipedia, Orwell regularly wrote both book reviews and articles for The New English Weekly between 1935 and 1940. There is a broad rainbow of possible larger meanings for this single, isolated sentence: a scathing review of a new paperback, an op-ed about this new emerging market, a personal essay about his own experience with books being reissued as cheaper paperbacks, maybe even a vaguely satirical prediction of how paperbacks might impact the world of publishing and literature. If anyone has the full article, I’d be interested to see it.

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