Booksellers Claiming That Competition And Lower Prices Are Bad For Consumers

from the yeah,-that's-convincing dept

Clay Shirky points us to a letter sent by the American Booksellers Association (ABA) to the Justice Department suggesting that a book price war between Amazon and Wal-Mart is potentially illegal. What they appear to be saying -- as Shirky also noted -- is that lower prices are a bad thing:
While on the surface it may seem that these lower prices will encourage more reading and a greater sharing of ideas in the culture, the reality is quite the opposite. Consider this quote from Mr. Grisham's agent, David Gernert, that appeared in 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. 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."
Basically the booksellers are saying they can't compete in the marketplace. That may be true, but if it's not actually harming consumers, what is the problem? There is no rule that says books must cost $25. If companies can figure out how to sell books for less, in ways that work for their bottom line, then what's wrong with that?


Reader Comments (rss)

(Flattened / Threaded)

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    Anonymous Coward, Oct 27th, 2009 @ 2:39pm

    Basically the booksellers are saying they can't compete in the marketplace.

    No, what they are saying is that if well established authors are $10, what price is an unknown or emerging writer going to sell at?

    It gets to the question of if they can put new authors out there are a price that would be profitable for anyone in the process. There is a point where it is no longer valid to publish.

     

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      Anonymous Coward, Oct 27th, 2009 @ 2:44pm

      Re:

      The new authors I purchase tend to be priced similar to established authors. I still think the argument fails to hold much weight.

       

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      Dark Helmet (profile), Oct 27th, 2009 @ 2:48pm

      Re:

      "No, what they are saying is that if well established authors are $10, what price is an unknown or emerging writer going to sell at?"

      Well, isn't that for the market to decide? Why should the government be involved in any price fixing for artistic works? What your describing sounds EXACTLY like an inability to compete in the current marketplace, no?

      "There is a point where it is no longer valid to publish."

      Perhaps not in the traditional format, no. It might be time for publishers of new/emerging authors (something I'm working on myself) to publish and market those new authors in e-format first, build a fan base through extremely low costs for the e-books, market to eReaders, etc., before justifying the higher cost, higher quality physically pleasing hard copy book.

      Or, if they're having trouble getting published as an emerging author and they truly believe their work is saleable, it might be time for more and more authors to build the fan base themselves through viral marketing campaigns combined with free, or near free, first works via filesharing. That's exactly what I'm going to be doing if things don't work out with my first choice of publisher.

      As an aspiring author, I would gladly give away book 1, and make some money selling certain options/scarceties, to get the 4 book deal with a major house after I have proven that my work is palettable to a decent sized audience.

       

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      DocMenach (profile), Oct 27th, 2009 @ 2:55pm

      Re:

      Last time I checked the book publishers set the price that they sell the books to the distributors, distributors set the price that they sell to the stores, and stores set the price that they sell to consumers. When publishers try to say what price the stores can sell to the consumers it is known as Price Fixing and is illegal. They can recommend a price (MSRP), but they cannot force the store to sell the book for any particular price.

      Now if the stores are able to sell a book for $10, why does it matter to the Publisher? The publisher is receiving the same amount of money when they sell to the distributor regardless of what price the store ends up selling the book to the consumer for.

       

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      Alan Gerow (profile), Oct 27th, 2009 @ 3:50pm

      Re:

      No, they ARE saying that independent booksellers won't be able to compete with the price war between Amazon & Wal-mart (click on the link and read the full letter). Whereas Wal-mart focuses on only the newest and best sellers, their selling books at $10 is going to affect the perceived value of a $25 book by a new writer at the indie bookstore.

      The letter is defending the ability of independent booksellers and emerging writers to compete with the big chains in a price war over best sellers, citing books not carried or involved in the lower prices as the casualties along with independent bookstores.

      The letter is entirely about saying that small bookstores and emerging writers can't compete in a marketplace driven by a Big Box price war and seeking the Dept. of Justice to intercede because if government is fixing prices then it's not illegal.

      Hopefully *crosses fingers* the DoJ will at least see through the thin veil and toss the letter in the circular filing cabinet.

      If all they were asking is "if well established authors are $10, what price is an unknown or emerging writer going to sell at?" Then the answer could be, I dunno, $10. But in all honesty, the true answer is: the price that the store sells the book at.

       

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        Jake, Oct 27th, 2009 @ 6:00pm

        Re: Re:

        If independent booksellers can't compete with the experience of buying one of an unimpressive selection of books off a shelf crammed into one corner of a superstore, with no assistant around to ask for a recommendation or even pass the time of day, they deserve to go under. Sure, I might buy a paperback that looked mildly interesting to read over a coffee after I'd done my grocery shopping, but I'll do my real book-purchasing somewhere that can do customer service better than Wal-Mart, thank you very much.

        And if I was an emerging author I'd rather get a lot of sales at a low price than a handful at a high one. (Disclosure: I actually write fiction, and gave up on the big publishers in favour of the website linked at the top of this post.)

         

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        DS, Oct 28th, 2009 @ 3:51am

        Re: Re:

        I don't know about you, but I would think that the person going to an independant book store, with the specific intent of buying a book, might not be the same market as someone picking up the latest Dan Brown book to be made into a movie when they are picking up cat litter.

        That, and the DoJ has no place setting how much books cost. Might the problem with what books cost lie in the prices set by the publisher?

         

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      Spanky, Oct 27th, 2009 @ 7:14pm

      Re:

      So what you're saying, then, isthey can't compete in the marketplace?

       

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      Anonymous Coward, Oct 28th, 2009 @ 5:11pm

      Re:

      "There is a point where it is no longer valid to publish."

      This is like the nonsense argument that without copyright no one would ever come up with a new song. Yet, as we see, there are plenty of people that release songs (and books) under creative commons licenses (licenses designed to alleviate copyright restrictions) absolutely free (ie: creativecommons.org) there is absolutely no shortage of such material. You're just making up nonsense without anything to support your nonsense. Mike writes all these blogs and people read it for free, there is no shortage of literature. Heck, you just wrote a response and didn't charge anyone. You falsely assume that the only reason people write and publish work is to make money and that copyright and artificially expensive prices are required for anything to be published. Actually, you do not assume such a thing, you know better, you're just downright dishonest.

       

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    Anonymous Coward, Oct 27th, 2009 @ 2:43pm

    Confused...

    I thought I could understand the logic of people making copyright arguments, but this one completely puzzles me. The only thing lower prices is likely to do on the supply side is to reduce the number of books being written or offered for sale since the cost of marketing and distributing most books already exceeds the payback.

    People have always found new authors by talking to their friends, looking for recommendations from reviewers, and just plain old taking a chance on a book that looks interesting. New authors will have just as much chance to sell a book with lower prices than with higher prices. Perhaps more so since people are more likely to buy more books at a lower price than a higher price, particularly from a new author.

     

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      keven sutton, Oct 27th, 2009 @ 2:51pm

      Re: Confused...

      "People have always found new authors by talking to their friends, looking for recommendations from reviewers, and just plain old taking a chance on a book that looks interesting. New authors will have just as much chance to sell a book with lower prices than with higher prices. Perhaps more so since people are more likely to buy more books at a lower price than a higher price, particularly from a new author."

      Agreed, most of the new authors I have found came about in these ways. Only one that I can think of off the top of my head was Rich Wulf. But he started writing and posting stories on his web page rather than trying to get them published through traditional means. He now has a publisher and I've bought many of his books.

       

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      bigpicture, Oct 27th, 2009 @ 4:10pm

      Re: Confused...

      Why Confused? This is the same old argument that the recording companies have been using for years, and no matter who uses it, it does not fly. It is about the conveying media and who is most in control of that. There is and will be little use for paper books, and the same goes for CDs or any other form of HARD music media.

      Therefore little need for publishers or recording companies. The artists or authors can sell directly to the customer and use the services of some company such as Google etc. The plus side is that the item costs less to the consumer, and the artist or author receives more. Like getting your food from the farmer at half the price and cutting out the middle men. Market economics.

       

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    Anonymous Coward, Oct 27th, 2009 @ 2:49pm

    I would have to say that the booksellers' concern has some merit. Walmart has a a known history of taking a loss on a product in order to gain local market control. This is not a matter of bulk buying power, or a more efficient supply line. It is a matter of predatory pricing.

    Independent bookstores generally carry a range of books other than the bestsellers. I believe it is important the ability to purchase these books locally is important.

    I am not informed enough to comment on Amazon's role in this...

    I believe that the other matter to bring up with in terms of books is the prices that the publishers themselves charge the booksellers. The books themselves cost little to print. The publishers claim that the additional covers marketing &c. However, if you ask any author, most publishers require the authors to do their own marketing. Don't even get me started on the discrepancy on book prices between Canada and the US...

    In short, the publishers could learn something from CwF + RtB.

     

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    Dan, Oct 27th, 2009 @ 2:53pm

    They are fighting the same market pressures as every content provider does, free market price stabilization. They are loosing control of the market and don't like it one bit. A classic example is the newspaper business. News is no longer a scarce resource, controlled by a select few companies. Its called disruptive technologies and it requires evolving business models for survival. Think Darwin, evolve or perish.

     

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      Anonymous Coward, Oct 27th, 2009 @ 3:10pm

      Re:

      It's not a disruptive technology, it's just big companies with too much money trying to buy marketshare, likely with the full intention of pushing all the small booksellers out of business, and becoming dominant in the market. Then they can pretty much dictate to the publishers how much books will cost, no matter if that number is below the publisher's own cost.

      Pretty soon, all the books will be bad chinese to english translations printed in a factory in china, shipped over because it's 6 cents cheaper per book.

       

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        :Lobo Santo (profile), Oct 27th, 2009 @ 3:20pm

        Re: Re:

        It's not a disruptive technology, it's just big companies with too much money trying to buy marketshare, likely with the full intention of pushing all the small booksellers out of business, and becoming dominant in the market. Then they can pretty much dictate to the publishers how much books will cost, no matter if that number is below the publisher's own cost.

        (Ha ha ha ha ha ha ha.) Ha. In today's age of internet, while they may manage to push some of yester-years' booksellers out of business, there is no way they could dominate the market--unless of course they also dominate the FEOPI* on the internet.

        *(free exchange of other people's ideas)

         

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          Anonymous Coward, Oct 27th, 2009 @ 6:56pm

          Re: Re: Re:

          hahahaha.

          That WalMart has apparently already got Amazon "reply pricing" suggests that WalMart can in fact wag that dog.

           

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    Pwdrskir (profile), Oct 27th, 2009 @ 3:12pm

    Why do they think a book is worth $25? Is there some “invisible hand”, palm up, demanding that price point? Could be a story adapted to fit their illusion or a fully integrated Trust that needs to be examined.

    Any way you look at it, they are mimicking the others who think their content is worth a price not supported by basic economics. EX: Real estate “market” - Something is only worth what the buyer is willing to pay.

     

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    Space Pirate, Oct 27th, 2009 @ 3:33pm

    Muahahahaaa

    Is it possible that one must receive a full lobotomy to lead or provide legal council to an industry association? Are there any examples of industry associations NOT completely ignoring history, law and 'common' sense to promote whatever crutch they think they need at the moment?

     

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      DocMenach (profile), Oct 27th, 2009 @ 3:40pm

      Re: Muahahahaaa

      Is it possible that one must receive a full lobotomy to lead or provide legal council to an industry association?

      "Good news! You have made it through the interview process and we have decided that you are the most qualified candidate for the position. Now if you will please sit in this chair and lean your head back while we insert this ice pick...."

       

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    Griff (profile), Oct 27th, 2009 @ 3:53pm

    The Net Book Agreement

    In the UK there used to be a thing called the net book agreement. This seemed to mean noone could sell a book for less than the RRP.

    This means supermarkets made a huge markup on the few books tghey sold, for example, but tiny specialised bookshops could still survive qas some margin was guaranteed. In those days it was believed that if the NBA went away, small niche book shops would disappear because they'd never sell any "normal" books and the specialised books would not keep them in profit.

    However, there have been a couple of developments since then.

    One, Amazon etc al and the "long tail" have made it possible for a book that sells only 100 copies to just as profitable per book as one that sells a million.

    Two, small niche dealers can still reach a worldwide market via Abebooks.

    With these two developments, I don't think anyone could defend the NBA today.

    You could maybe criticise Walmart for selling books dirt cheap as they only carry high volume books and don't care about the low volume stuff which might suffer as a result, but Amazon don't suffer from that problem. No reason why they can't sell every book cheap if they want to.

    Plus Amazon can reprice everything in minutes if they want and Walmart simply can't be that responsive.

    Can't see the problem, myself.

     

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    ColonelPanik (profile), Oct 27th, 2009 @ 4:17pm

    Only a problem for the middleman

    Google up some info on Cory Doctorow. He has been
    very quick to use alternative marketing ideas.
    He is a best selling author and still puts his
    work on the net for free. Uses Creative Commons
    license.

    I attended a Jack Williamson Lectureship this year.
    The authors (SF) were happy, writing, excited about
    reaching out to their fans. The agents and publishers
    were crying and wringing their hands.

    It is a new world.

     

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    Anonymous Coward, Oct 27th, 2009 @ 4:30pm

    If Amazon and Walmart think they can put each other out of business by dumping, they may be breaking the law, but they're going to fail so miserably that the problem will solve itself without any legal action.

    If these books are just loss leaders, intended to get customers to buy other things at their store&website/website, then it's probably perfectly legal the same way the $2/gallon milk at a supermarket near my house is.

    Other nearby supermarkets seem to be doing fine despite charging the usual $3-3.5/gallon for milk because they offer other advantages (e.g. better selection, other things on sale) to get people into their stores. In fact, I sometimes even end up buying milk at those other stores despite being "used to" a much lower price.

     

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    Farrell McGovern (profile), Oct 27th, 2009 @ 4:37pm

    It's bad news...for the publishers, that is. Under the present system, an new or not well known author, at least in the SF&F field, may make a $1,000 to $5,000 advance on their novel...and many of those books don't make back the money spent on them. That's how tight the margins are in the book field.

    Now if the author set it up for download, and 50,000 downloads happen, and only 10% donate a dollar to the author, he is in the same boat, without any obligations to a publisher.

    What we are going to loose is the editorial direction that publishers give the field. If you buy a book from TOR, you know you are going to get a well written book. If you buy a book from BAEN, it's bound to have a military or right wing slant on it.

    And then there is still the thrill of getting the writer/artist to sign their work at conventions...so at very least, there is bound to be at least a boutique market for printed books.

    Of course, if we didn't use trees to print on, but some weed or something, printing costs wouldn't be so astronomical...but that would only delay the inevitable...

    ttyl

     

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    Colin (profile), Oct 27th, 2009 @ 5:28pm

    Cost of printing

    Does anyone actually know what it costs to print up one of these $25 (or $10) hardcover blockbuster books in the volumes that they must be producing? Just curious....

     

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    n00b, Oct 27th, 2009 @ 6:06pm

    This is why I rarely buy booksmagazines these days

    Why waste my money when I know I can get much better content at a lower cost (free) by reading blogs and fanfiction? You can keep raising prices as high as you like, there's nothing that says I need to pay them.

     

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    Anonymous Coward, Oct 28th, 2009 @ 4:53am

    So either way we end up with a monopoly?

    My concern is that to protect "small" booksellers and "new" authors, the government gets involved and eliminates market forces on pricing.

    The alternative is that Wal-Mart, Amazon, or another large volume seller allows competitive market forces to push costs down to the point where only extremely high volume retailers can survive. With only a very few extremely high volume retailers in the game, the market forces gear towards high volume stuff and you end up with a ton of crap books.

    Either way the consumer ultimately loses as the market seems to eliminate itself. Either through capitalism destroying culturally valuable works for profit engines or through the government eliminating the market.

     

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    Andrew D. Todd, Oct 28th, 2009 @ 6:58am

    How Much Does it Cost to Print A Book?

    Colin (Oct 27th, 2009 @ 5:28pm) asks how much it costs to print a book. Well, the short answer is, about as much as it costs to print a newspaper or magazine. Both kinds of printing use substantially similar machines to perform substantially similar processes, such as printing sheets of paper, and folding them, and, in the case of magazines, "perfect" binding, etc. The main difference is that most book titles are printed in vastly smaller quantities (5000 or less), and have correspondingly higher fixed overheads. Economically viable magazines have circulations of 50,000 and up, and the same goes for newspapers. The big "drug store magazines" tend to have circulations in the range of one or two million. When you are talking about best-selling authors, whose books are also sold in drugstores, their economics are very much the same as those of magazines. The books don't rely on advertising, so they could sell for maybe twice as much as a magazine of comparable thickness. Bear in mind that the magazine's normal price is the subscription price, not the cover price, and is typically about a dollar an issue.

    The marginal cost of printing an additional hardcover book during a print run, and shipping an additional copy to a customer or a retailer, or a distributor, as the case may be, is extremely low, typically less than a dollar. There is essentially no hand-labor in the book manufacturing process. In the case of a best-seller, the costs of copy-editing, pre-production and set-up are distributed over a sufficiently large number of copies that the per-copy share is only a penny or so, the same as they would be for a newspaper, or a telephone book. The author's royalty is of course based on the list price, say 10% of $25.00, or $2.50. That said, the publisher can probably make a marginal profit on sufficiently large orders at anything above $3.50, and considerably less if the author agrees to make concessions about royalties in exchange for volume (eg. a paperback deal, or remaindering, where the author might accept only fifty cents per book).

    The publishers are not giving special privileges to Wal-Mart. They are simply saying that if you buy books by the truckload of each title, you can have them for something like five percent above actual costs, viz. paper, ink, and the author's royalty-- mostly the latter. Wal-Mart, in turn, believes in selling things for about five or ten percent above cost-- and doing quite a thorough job of driving its own internal handling costs down. To have any kind of anti-dumping case, the price of a hardcover best-seller would have to be less than four dollars or so, and maybe one dollar for a paperback.

    Wal-Mart already has a mail-order book operation, partially modeled after Amazon. However, thus far, it has not handled used books. For a super-bookseller, such as Amazon, the used-book operation is quite important. It provides a means to discipline publishers of "'backlist" books. The bookseller can say, in effect, either sell us new copies on advantageous terms, or better still, participate in our print-on-demand and e-book systems, or else we will sell the customer a used copy, and you will get nothing. Amazon's used-book operation is still only moderately efficient from an industrial standpoint. It could be improved considerably, with more automation, and more outsourcing of cataloging to India, and could probably get its costs down to a dollar a book. Well, presumably Wal-Mart will step up the pace somewhat, and Amazon will have to match them.

    Once you have print-on-demand in place, of course, with a sufficiently large number publishers participating, a little kiosk can sell essentially everything.

     

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    Anonymous Coward, Oct 28th, 2009 @ 8:29am

    There is no problem. Walmart sells only the most popular books, you won't find stuff there that you find in a local bookshop. The atmosphere is different, it doesn't lend itself to browsing the shelves, looking for something cool. Nor does it encourage finding other works by popular authors. Instead, they rely on people buying a book simply because it's popular at that time. Indie bookstores can compete by offering a much better selection and a better shopping experience.

     

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    Stephen, Oct 28th, 2009 @ 11:12am

    a few words from an editor

    1. Indy stores generally don't cater to the Grisham crowd because those books can be bought anywhere, so how Wal-mart prices them is irrelevant.

    2. It's rich that Gernert is harping about $10 books. It was Grisham, thanks to his staggering advances, who pioneered the $7.99, then $8.99, then (wait for it) $9.99 mass market paperback. His agent doesn't want prices to drop because then Grisham's advances will have to drop.

    3. If the new Grisham sells like Painted House (1,000,000+ sales according to Bookscan), then a 1.25 million first print would cost $.69 per unit, and 1.5 million first print would cost $.68. The actual costs will be higher because the first print won't be that high, not in this economy, and those earlier sales were likely the result of multiple reprints, which would be more expensive, but you get the picture.

    Stephen King sells between 400-500,000 copies in hardcover. His new book, substantially larger than Grisham's, would cost $2.33 a unit for a 400,000 print and $2.31 at 500,000 copies.

     

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    Anonymous Coward, Oct 28th, 2009 @ 12:16pm

    Just out of curiosity, how much per unit does it cost to print only 1000-5000 copies of a hardcover book?

     

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    Andrew D. Todd, Jul 22nd, 2010 @ 9:04am

    Cost Figures for Book Printing.

    ELAINE KURTENBACH, AP Business Writer, "Companies brace for end of cheap made-in-China era"

    http://www.gmanews.tv/story/195603/companies-brace-for-end-of-cheap-made-in-china-era

    say s: "Printing a 9-by-9-inch, 334-page hardcover book in China costs about 44 to 45 cents now, with another 3 cents for shipping, says Goodwin. The same book costs 65 to 68 cents to make in the U.S."

    Hat Tip: Tioe Dong, on History News Network.

    http://hnn.us/readcomment.php?id=143513&bheaders=1#143513
    in:
    http://hnn.us/roundu p/comments/128896.html#comment

     

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