Author's Guild Boss On E-Book Price Fixing Allegations: But... But... Brick-And-Mortar!
from the you-rarely-find-so-much-'wrong'-all-in-one-place dept
No sooner had the Department of Justice announced its plan to investigate Apple and five of the Big Six publishers for e-book price-fixing than a representative of those benefiting most from this (alleged) collusion boldly stepped into the fray. Scott Turow, bestselling author and president of the Author's Guild, has issued one of the most profoundly self-serving and wrongheaded statements ever to grace the pages of a legacy industry's website. There's a ton to unpack here, so let's get right to it.Scott Turow's statement is presumably issued on behalf of the Author's Guild, although there's no indication that any author other than Scott Turow was consulted. (You may remember the Author's Guild as the cheery people whose fear of technology led them to a successful claim that e-books utilizing text-to-speech violated a never-heard-of-before "audio right", in essence stating that reading purchased e-books aloud is illegal.)
Turow's burns through a whole lot of words to arrive at three basic conclusions:
1. Apple is good.
2. Amazon is evil.
3. The future of books is brick-and-mortar.
Let's take a look:
Yesterday's report that the Justice Department may be near filing an antitrust lawsuit against five large trade book publishers and Apple is grim news for everyone who cherishes a rich literary culture.Obviously, the emphasis is on "rich." Rarely do resellers and publishers collude to lower prices. There are many out there who believe a rich culture can be synonymous with low-priced books, music, and other media, but obviously our opinions don't matter because we haven't written and sold enough books. (No, seriously. Read the comment thread on Turow's post.) Thankfully Barry Eisler and Joe Konrath, who have worked in the business and sold plenty of books, also completely dismantle Turow's arguments, especially his abuse of the word "culture."
Shouldn't those who cherish a rich literary culture prefer books at reasonable prices which allow that rich literary culture to be read by more people? All I can get from Turow's statement is: "the public must prefer their books to be more expensive." In what world is it "grim news" that our "rich literary culture" should be getting cheaper?
We have no way of knowing whether publishers colluded in adopting the agency model for e-book pricing. We do know that collusion wasn't necessary: given the chance, any rational publisher would have leapt at Apple's offer and clung to it like a life raft. Amazon was using e-book discounting to destroy bookselling, making it uneconomic for physical bookstores to keep their doors open.You might have no way of "knowing," but the conclusions drawn by the DOJ don't look too pretty. Secondly, if "collusion wasn't necessary," then why do we have the appearance of collusion? Did the publishers not have anything better to do with their downtime than push prices around, mainly in an upward direction? Point the third: I thought it was Amazon who used deep discounts on physical books to kill off physical bookstores like Borders, and Barnes and Noble, who in turn killed off independent bookstores, or so the narrative goes. Now all of a sudden it's re-killing off physical bookstores with digital goods?
Just before Amazon introduced the Kindle, it convinced major publishers to break old practices and release books in digital form at the same time they released them as hardcovers.Because windowing is stupid. Especially in a digital world.
Then Amazon dropped its bombshell: as it announced the launch of the Kindle, publishers learned that Amazon would be selling countless frontlist e-books at a loss... Amazon's predatory pricing would shield it from e-book competitors that lacked Amazon's deep pockets.Selling something as a loss-leader isn't new, it isn't "predatory", and it certainly isn't exclusive to Amazon. Retailers have been doing this for a long as retail has existed. It's no different than the local grocery store selling ultra-cheap cases of soda during the summer, in the hopes that you'll stock up on hamburgers, hot dogs, buns, chips, beer, etc. while you're there. Amazon selling e-books at a loss was a way to entice customers to purchase a fully-marked-up Kindle.
Critically, it also undermined the hardcover market that brick-and-mortar stores depend on. It was as if Netflix announced that it would stream new movies the same weekend they opened in theaters.If your business is dependent on a product whose popularity has taken a nosedive over the past few years, perhaps it's time to rethink your product line rather than blame the market leader's foresight. And since when is it Amazon's job to prop up brick-and-mortar stores?
Amazon quickly captured the e-book market as well, bringing customers into its proprietary device-and-format walled garden (Sony, the prior e-book device leader, uses the open ePub format).Oh, for the love of... Really? You hail Apple as the savior of the sinking USS Publishing Industry, and you somehow think you can still bash someone else's "walled garden" and "proprietary device-and-format?" Isn't it worth pointing out that one of the reasons Amazon has a closed, proprietary device-and-format is because the publishers demanded a locked up system for fear of "piracy"?
Two years after it introduced the Kindle, Amazon continued to take losses on a deep list of e-book titles, undercutting hardcover sales of the most popular frontlist titles at its brick and mortar competitors. Those losses paid huge dividends. By the end of 2009, Amazon held an estimated 90% of the rapidly growing e-book market.Well, looks like you should have gotten in on the ground floor, rather than ruefully envying a market that you seemed to want no part of.
Enter Steve Jobs. Two years ago January, one month after B&N shipped its first Nook, Jobs introduced Apple's iPad, with its proven iTunes-and-apps agency model for digital content. Five of the largest publishers jumped on with Apple's model, even though it meant those publishers would make less money on every e-book they sold.Enter Steve Jobs, creator of walled gardens and proprietary devices and formats. And look, the publishers jumped right in even though they were giving up a bigger chunk to the walled gardener. Wait. What are we arguing about? Oh, yeah. Amazon being more evil than price-fixing publishers. Got it.
Publishers had no real choice: it was seize the agency model or watch Amazon's discounting destroy their physical distribution chain. That's why we publicly backed Macmillan when Amazon tried to use its online print book dominance to enforce its preferred e-book sales terms, even though Apple's agency model also meant lower royalties for authors.I'm sorry. You lost me, Turow. You want to discuss e-book pricing and yet we keep finding ourselves wandering the musty aisles of brick-and-mortar. And I'm sure your lower-tier guild members are thankful to you for ensuring that they receive less money in your preferred walled garden, while simultaneously sabotaging their future sales by using inflated e-book pricing to protect hardcover margins.
Our concern about bookstores isn't rooted in sentiment: bookstores are critical to modern bookselling. Marketing studies consistently show that readers are far more adventurous in their choice of books when in a bookstore than when shopping online. In bookstores, readers are open to trying new genres and new authors: it's by far the best way for new works to be discovered.No. Your concern is rooted in unsustainable profit margins. And would it kill you to link to these "marketing studies" that "consistently" back up your rose-colored vision of bookstores as far as the eye can see?
Publishing shouldn't have to choose between bricks and clicks.It rhymes! And it's a false dichotomy! Publishing doesn't have to choose between those options. It can still have both. What it can't have is a return to the days of pre-digital book sales and the lush markups of first-run hardcovers. If you're looking to increase sales, it helps if you don't price yourself out of the market, via "collusion" or "agency pricing" or just flat-out refusing to align your e-book prices with reality.
A robust book marketplace demands both bookstore showrooms to properly display new titles and online distribution for the convenience of customers.Does it? If the marketplace you have now (you know, the one that seems light on bricks and/or mortar) isn't a result of "demand," than what is it? When you say "robust market", what you're really saying is "a market that favors major publishers". It has nothing to do with the actual robust market we have today, with millions of titles and hundreds of options for both customers and writers.
Apple thrives on this very model: a strong retail presence to display its high-touch products coupled with vigorous online distribution. While bookstores close, Apple has been busy opening more than 300 stores.So... if Amazon just opened a few retail outlets to sell its Kindle and deeply-discounted e-books, everything would be cool? Is that it? The retail world needs more brick-and-mortar foisted upon it simply because The Prices Are Too Damn Low?
Like rock bands from the pre-Napster era, established authors can still draw a crowd, if not to a stadium, at least to a virtual shopping cart.And this week's winner of the Godwin Achievement Award (Content Industries Edition) is Scott Turow! Between this and the gratuitious Netflix reference (the killer of brick-and-mortar movie rentals), Turow is only one dodgy metaphor away from sweeping the category!
For new authors, however, a difficult profession is poised to become much more difficult. The high royalties of direct publishing, for most, are more than offset by drastically smaller markets. And publishers won't risk capital where there's no reasonable prospect for reward. They will necessarily focus their capital on what works in an online environment: familiar works by familiar authors.Yeahyeahyeah. This argument. "Now things will suck for the lower tier of creators because no one will know or care that they've made anything, least of all those in the business of curating and selling creative content. Woe is everybody, especially those that find themselves handcuffed to a disinterested publisher who won't promote their latest and won't allow them access to their own back catalog." This thing that you think only works in an "online environment," Scott? "Familar works by familiar authors?" That's the same thing that the major publishers have been doing for years. This isn't an unfortunate side effect of the digital era. Mainstream publishers push mainstream offerings.
The indies and the self-published are where the new, exciting things will happen. And they'll do it all without your precious walled-garden-of-choice, the one with the letter "i" in front of everything, crafted entirely out of brick, mortar and windows. They'll do it on their own. Or they'll find a few like-minded writers and start their own publishing house
Any final words, Scott?
Let's hope the reports are wrong, or that the Justice Department reconsiders. The irony bites hard: our government may be on the verge of killing real competition in order to save the appearance of competition.I can't even parse that sentence. Are you implying that price fixing is "real competition?" Or are you saying that windows, e-books at hardcover prices and walled gardens are the "real competition" and any entity working outside those self-imposed confines is only offering the "appearance of competition?" Or does "real competition" only include those that are looking to see how high they can price their offerings? And anyone who fails to price accordingly should be investigated for "predatory pricing." Is that about the size of it?
This would be tragic for all of us who value books, and the culture they support.
Let me FTFY:
That would be tragic for THOSE OF US who OVERVALUE our LEGACY, CULTURE BE DAMNED.
Valuing something doesn't mean paying top dollar for it. Does the person who owns 30 hardback books purchased at full retail respect culture more than the person who has 30 lower-priced e-books on their reader? If you believe that, you've got to let it go. Trying to convince the rest of the world that the only way to "value" culture is to pay top-dollar isn't going dispel that aura of entitlement that seems to surround every legacy industry.
Everyone values books and supports culture in their own way. What you want, Scott, is control over all of it. You want to be able to set the prices, timetable and delivery system. Unfortunately, you no longer have that option. Whether or not the DOJ finds evidence of collusion is largely unimportant in the overall scheme of things. If it does, prices will fall to market levels faster and windowed releases will become rarities. Even if the DOJ clears Apple and the publishing houses of any wrongdoing, prices will fall and windowed releases will become rarities. It's already happening. The future belongs to other people and businesses who move faster, respond to change quicker and are free of the fears that have held legacy industries back. This "statement" of yours is nothing more than the bitter noise of someone waist deep in water, cursing the incoming tide.
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Filed Under: antitrust, authors, brick and mortar, ebooks, price fixing, scott turow
Companies: amazon, apple, authors guild
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Always Relevant In These Discussions
If you charge too little, you're "dumping".
If you charge the same as everyone else, you're "colluding".
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curious as to why this is being investigated by the DoJ but the other is being defended rigorously to the point of having new laws introduced? a monetary deficiency, perhaps?
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That's exactly it. The DOJ and the government are asking for something in return for leaving them alone and defending them, namely, in the form of campaign contributions an revolving door favors.
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As long as an author has an exclusive right no true competition can exist.
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If I sell books, I can buy a crate of an author's books just as easily as the guy down the street can, or Amazon can. And if I'm a publisher, I'm more than able to make my own offer to an author to publish his or her work, so I can compete there, too. Stop acting like it's okay to take a product that someone else came up with and use it for free or profit off of it when you did no work nor made no investment to allow it to come into being.
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I've yet to see a single book on sale in an Apple store. Am I missing something?
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They're evil, they're making money, and Scott Turow wants so- err, I mean, Scott Turow deserves some.
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Are we really going to go through DRM, overpricing, walled-gardens, etc. again, only this time with books? Can we just skip to the part where ebooks are less expensive than the paper versions, and authors are getting good royalties, or are we really going to spend the next decade dragging you into the digital age?
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How much does it cost to sell a book online?
$0.18?
Any money from those sales to publishers is free money since they have no costs for storing those books which is covered by Amazon, they have zero costs distributing those books which is covered by Amazon so I'm curious to know what loss?
How many publishers build a datacenter anywhere to distribute their own books and pay all the costs related to that?
Do Amazon charge them for their costs or they pay them something, if they pay something then where is the loss exactly?
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Well that and a case of Hollywood accounting. I find it surprising that they said the authors get less when the publishers use Apple's agency pricing, which costs far more. Someone is getting rich, and I am fairly certain it isn't the producers or the consumers. The middlemen can fudge the numbers and pocket the difference easier with agency pricing.
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Re: costs
They support several formats (mobi, epub, sony, rocket, html, ...) and do not use DRM. Basically a publisher that 'gets it'. No I don't work for them, I just buy their stuff.
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Darn you, Tim.
Can you get your own website? Or put Mike's "talents" to work...adjusting Pantone shadings in your logos or something?
xoxo, Anonymous
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Re: Darn you, Tim.
Let me know if there's anything I can do to get you over the hump.
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But...but...how will I know what's good?
Online shopping is great when you know exactly what you want. You want World War Z? Done. You want it as cheap as possible? Great, we can give it to you as an ebook for less then a coffee or even if you want the hardcover we can still sell it to you for less then those chumps at Barnes and Nobles.
The problem is that people will not only buy cheaper books (can you even call them books? Arn't they just texts without the physical element?), but they'll buy fewer books, because they won't be able to seek them out as thoroughly. Yes there's the 'we recomend' thing, but you can't compare that to a guy physically showing you another book he likes, explaining why he likes it so much, and possibly even showing you his favourite sections or points. I never would have read some of my favourite books if I didn't see them on the shelf of a book store. ("Strategic Ignorance", "Theories of International Politics and Zombies", and "Is Eating People Wrong?" just to name a few).
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Re: But...but...how will I know what's good?
Do you not have any friends who share your likes and dislikes with books? Do you not know of any online resources that can link you to people who have similar interests? If your answer is no to these questions, I can't help you out. But don't expect me to help support the local bookstore just because you find it worthwhile.
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And online sites you can never be sure of the authenticity of someone's review (see: the many stories of companes paying people to write reviews) and even if they are, you can't look at the book the way you can in the bookstore (if you really wanted to, you could read the whole book). Furthermore, even if there are sites out there it's entirely possible that a really great book gets missed by the greater community or even by me as I'm searching for something to read. Most of the time when I do look online for a new book, I see alot of websites pointing me to the same books, and usually very recent ones. Granted, that's anecdotal evidence, but try it for yourself and see how often the same books tend to pop up across multiple sites. There's no way that every book I would like has been reviewed and prominently displayed online in the way a store would have it. And even if they were, would I neccassarily buy it based on the review of someone I've never seen, and at best a chapter or two I can skim through? Again, not only are sales lost, but now I'm not even reading the books.
Tim asked if "A robust book marketplace demands both bookstore showrooms to properly display new titles and online distribution for the convenience of customers." The answer is yes, because a book store is still the best place to look for new books.
PS You totally could 'help me out;' you could have said 'try this site' or 'I like this independent author�s book, try him' if you wanted to. Instead, you simply chose to get high and mighty about how you don't give a shit about supporting a store. That's a very bad attitude to have if you care about the books you read or the authors that write them.
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I spend quite a bit of money on Amazon doing exactly what you say, and I have yet to find a book there that I didn't like. On the other hand, I've been in bookstores where the employee recommended a book that I didn't like. They don't know my tastes any more than Amazon does, and just because they like a particular book doesn't mean I will. Most of them didn't even ask about my tastes before recommending a book, and thus had no idea what I liked or didn't like. Amazon has a list of my previous purchases and thus had a better idea on what I purchased before.
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Yes, that's how reality works. People often don't shell out for something they haven't tried and people have always shared. Someone lends me a book, I like it and maybe I go out and buy OTHER books by that author thus enriching the producer. Maybe if I really like it I go buy my own copy so I can read it again.
Except that again reality intrudes since physical book prices are jacked up to the level where it's still doubtful to take a flyer on other offerings unless the book was REALLY good, and because of the publishers demands and stupid DRM almost every legitimate e-book is worthless because it has LESS functionality than a paper book when it should have more and too often costs more when it should cost less.
As for browsing, at least online you can often preview a part of a book - unsatisfying and incomplete, but rather better and more comfortable than standing in a bookshop reading bits of books and getting at best dirty looks from the staff.
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Which is apparently an evil money-losing thing to do by your definition, as is using the library and presumably buying second hand.
The point is, these are things that have always been part of the publishing industry, and any publisher who doesn't account for this fact deserves to lose out. I'm not going to buy physical copies of books at inflated prices just because a store I wouldn't normally go to prefers it that way. The fact that you prefer to go into a store and physically handle a copy for however long you wish rather than browsing online doesn't change this, nor make the opinion of those of us who prefer to shop online less valid.
As for recommendations, I tend to like www.goodreads.com for discovery and discussion.
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Re: But...but...how will I know what's good?
As far as browsing benefits? There are these things called libraries. They tend to be even more plentiful than bookstores and are well-networked and their use is inexpensive and convenient. Now you might recall that such things are also the target of publishers. Don't be fooled. They're not concerned about the end of the great hardback novel or the neighborhood bookstore. They never were. They're concerned that they aren't holding all the cards anymore. Their monopoly grip on the market is being chipped away by modern competition, and they demand that it stop at no expenditure or effort on their part. They're also probably a bit sore that they can't get away with the same bullshit that the rest of the IP industry does. Either way, I can't see anything respectable about their position.
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I mean think about it, when the publishers put an ebook out to be sold they have to pay for... umm... well I'll have to get back to you on that, but I'm sure there's some reason they price them almost identically to physical books, other than sheer wanton greed.
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If you ask me, when a glue-bound hardback sells domestically for $250+ and the exact same book comes from the same presses, has a sticker put on it and is sold overseas and is still available for $60 shipped back from Qatar, something leads me to distrust every word a publisher shill might say to defend the domestic market value of these products.
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Re: But...but...how will I know what's good?
I too long for nostalgic elements of my past. Anyone remember being able to watch two movies from the privacy and security of your own car while bringing your own soda and snacks that cost 1/8 of the concession stand price? Anyone remember ordering a burger and root beer and having some cute girl on roller skates bring it to your car?
But, alas, those things are no more (or extremely rare), even though both the movie and fast food industries are thriving today.
Adapt or be left behind is the only advice I have for you Endtimer.
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Re: But...but...how will I know what's good?
More people than ever are reading books thanks to Amazon and ebooks, and they're not just buying the well-known authors. Check the Amazon bestseller lists and you'll see names you've never heard of, books published by the authors themselves.
Rather than limiting choice, Amazon and ebooks are EXPANDING choice and the readers are responding.
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The latest news does not support what you are saying at all. The industry is not dying, it is growing. People are buying and reading more books than even in both print and digital formats.
Suppose I have a hypothetical monthly 'book budget' of $60. I can buy two $30 hardback novels at my local bookstore or three novels for $20 each at the online retailer of my choice.
How many books am I going to read this month?
Answer: Depends on where I shop!
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Like I said I haven't seen it anywhere but what's the bet that book publishers, just like RIAA and MPAA, give different royalties on ebooks (licences) and physical books (sales).
That would answer a lot of where this guy is coming from. He makes more off physical sales as he gets a better percentage, so he whants higher ebook prices because otherwise he gets less income, every "licence" generates less income, and most likely prevents a "sale".
I sort of feel a little sorry for him as I expect he is getting screwed bu his publisher... not too sorry for him though, since he clearly needs to wake up and smell the 21st century. He signed a contract he can live with it and learn from the experience... and hopefully he has learned he can make more by going indy and surviving in a purely electronic market only letting publishers have rights to physical copies (If he must bother with physical copies)
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Then, not than. it's driving me insane man
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I'll go down with the ship, but...
But that said, the Author's Guild is fucking terrible. They've been terrible time and time again, and I enjoyed this takedown of their latest misguided screed (for the most part).
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I'll take self-publishing over the whole "traditional publishing, rah rah" bullshit any day.
We are agreed on how miserable the AG is though with their regular habit of selling out its membership. Scott Turow defending lower royalties for authors in order to give higher profits for publishers is par for the course.
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You can be an incredible writer and a terrible salesperson/marketer. And you can be a terrible writer and a wonderful salesperson (see: JA Konrath).
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My point is Amazon is awesome. Clearly, a lot of people agree with me. Turow is so obviously talking from what he thinks are his own best interests.
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Unknown and Amateur Authors
Realistically, new/unknown authors are simply going to have to give away free samples, and you don't need a publisher to do that. The only question is how big the free sample is to be. At minimum, that means web-publishing the first chapter of a book, or however much it takes to establish characters, setting, and relationships, so that the reader can at least see whether the author can write or not. It is a well-known fact that a great many aspiring authors simply cannot write to the standard required to earn a liberal arts B.A.This distribution of free samples has to be done without copy protection, or anything like that, effectively writing the published portion off as advertising. One thing is that, on the internet, you have to manage free samples formally, rather than on an ad-hoc basis. You have to decide up front, which pages, chapters, or books constitute the first increment of free samples, which constitute the second increment, and so on, until you get down the the fully free book, which is the equivalent of the traditional remainder bookseller and storefront used book market.
This free distribution of samples is not something new, incidentally. This kind of publication has always taken place-- in magazines. Authors have traditionally gotten short stories, or excerpts from books published in magazines, which were sold by subscription, at rates not quite sufficient to cover the cost of printing and mailing. If the authors were paid at all, the money came out of the advertising revenue.
Publishing used to be more of a gentleman's club than it is now. If one looks back to Neville Shute, his publishers, Cassell, and Heineman, and William Morrow, were willing to accept that his primary commitment was, successively, to DeHavilands, and Vickers, and Airspeed, and the Royal Navy; and the publishers were willing to work with him on that basis. In the same way, Unwin, Allen was willing to accept that J. R. R. Tolkien's primary commitment was to Oxford University. Nowadays, publishers expect authors to be young men who undertake careers as authors of marketable books. Hence there is all this stuff about authors doing book-signing tours. This "marketing orientation" means that there is a large class of very good authors who are well-advised to stay as amateur as they can manage. An example might be someone who got academic tenure, and promotion to full professor before deciding that he was a novelist. It is perfectly reasonable for such an author, writing in his spare time, to accumulate ten unpublished novels over fifteen years, and periodically re-write them, and eventually set about web-publishing them as free books after he has retired, and no longer needs to worry about what his colleagues would think. Under modern pension arrangements, Joseph Conrad would have fallen in this category. After he got his tropical illness in the Congo, a modern shipping company such as P&O, organized in a manner similar to the Navy, would have found him a post as a deputy shore superintendent or something like that. Of course, in the old days, publishers were not publicly traded-- they were family proprietorships, and often the senior members of the family were at least as concerned with obtaining public honors for themselves (eg. knighthoods and peerages in Britain) as they were in maximizing profits.
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And it's interesting, Falkvinge had an excellent article on the MAFIAA monopoly crazies and I see many comparisons with old buggy whip industries and others that died because stuff evolved and they weren't needed anymore. I don't think these middlemen are obsolete. I share Mike's belief that they will still be very useful as enablers, supporters of the artists if those choose to go down that route.
It's not like the labels, publishers etc will die because they are useless (notice: they will not be necessary but it doesn't mean they won't be useful). They'll die (or rather be replaced by newer businesses) because they refuse to let go of their gatekeeper functions.
Much like the US are drowning in debt because they refuse to let go of their global control.
falkvinge.net/2012/02/04/nobody-asked-for-a-refrigerator-fee/
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The argument is made that by entering into an "agency model" with Apple the publishing companies appear intent on imposing their will on Amazon. I am not sure this is even possible. By all accounts I have read Amazon seems to hold market share that largely overwhelms all the other of its competitors combined. If Brick-and-Mortar are reduced to rubble, it would seem, to me at least, that Amazon would dominate the physical and digital sales of books. With a single dominant player in the retail market, I am left wondering if Amazon will wield it dominant position in a manner that ultimately will truly benefit the consumer.
If monopolies in a market should be matters of concern, I have some difficulty squaring a single retail source with a market having a plurality of retail sources.
Perhaps I am missing something, so I solicit comments that may help explain away my admitedly feeble understanding of this market.
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price fixing already fought out in music
The DOJ filed an antitrust action; I don't remember if it went to trial or if there was a settlement, but the conclusion was that the Minimum Advertised Price was struck down; the major labels paid off governments by giving them stacks of crap CDs for libraries as "donations", and also consumers could get pittance cash settlements; the big box stores went on to mostly wipe out old-fashioned CD stores.
Sorry I don't have the time to research more details on this case, but looking up "minimum advertised price music" should get you there.
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eBook price fixing
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Re: eBook price fixing
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books
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http://www.salon.com/2012/03/13/scott_turow_on_why_we_should_fear_amazon/
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Dumping
Amazon really is showing classic signs of dumping here, attempting to force all other smaller retailers out of the business by selling at an unsustainable prince until they are the only retailer left (creating a monopoly for themselves, which is a big reason dumping isn't legal)
Selling something as a loss-leader isn't new, it isn't "predatory", and it certainly isn't exclusive to Amazon. Retailers have been doing this for a long as retail has existed. It's no different than the local grocery store selling ultra-cheap cases of soda during the summer, in the hopes that you'll stock up on hamburgers, hot dogs, buns, chips, beer, etc. while you're there. Amazon selling e-books at a loss was a way to entice customers to purchase a fully-marked-up Kindle.
While it's true retailers do this, the issue it that amazon is doing it with an infinite number of copies, the sale on soda only goes as far as the surrounding area and only as many as the number of cases of soda in stock. Amazon is dumping, actively attempting to remove competition with unsustainable prices because it know that smaller retailers don't have the capital to keep up with their pricing scheme. This is definitely the definition of predatory, so while I disagree with the point of Turow writing this and his support of apple, I don't think amazon is the one we should be rooting for either.
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To: Matt, "Dumping," #56, Let Us Define Dumping Carefully, In Terms of Marginal Costs.
I know something about my own costs of production, as a small internet publisher. The marginal cost of distributing a free e-book is much less than a tenth of a cent. In fact, I'm not precisely sure what it is, because my hosting company has now gone to "unlimited" bandwidth for about a hundred dollars a year. If I wanted to do video, or host a Linux distribution, of course, we would have to clarify what "unlimited" means, but, as it is, a book is only a megabyte or so, and that's too cheap to be worth measuring. I am sure that Amazon has much lower costs than I do. In the case of pay-e-books, of course, there is the credit card company's premium, let us say, on the order of one or two percent, to allow for the risk of chargebacks. Distributing e-books costs Amazon almost nothing, on a marginal basis, except the royalty to the publisher and author. Amazon's published terms are 70% royalty if they think the book priced appropriately (up to ten dollars for a novel or something like that), and 30% otherwise. At the bottom end of the scale, Amazon insists on making, what is it, at least thirty or seventy cents on each copy of an e-book. I don't know, specifically, but I presume they accumulate charges for e-books, so as not to have to ask the credit card company to make too many small transactions. Amazon's e-book delivery process is so systematically automated that it runs without human intervention. Obviously, those terms are ample to allow Amazon a good marginal profit, and they cannot, by any stretch of the imagination, be described as "predatory" pricing.
Amazon has free public-domain e-books as well, from the Gutenberg Project and the Hathi Trust, and it loses some small fraction of a cent on each copy of these books. These are true loss leaders. Amazon is not offering any terms better than Gutenberg and Hathi Trust offer to the general public-- they are merely offering the material within the Kindle framework, declining to make a special charge for processing public-domain material. As long as Amazon sells one pay-book for every hundred free books, they are not engaging in predatory pricing in respect of free-books.
Similarly, Kindle readers seem to be sold for just a little bit less than they cost to manufacture. In this case, the situation is expected to correct itself with falling hardware prices within a year or less, and is not a long-term issue. Amazon is not taking any great risks with its loss-leaders, not the way game console companies do.
Looking in at the local Walgreen's down the block from me, I took the opportunity to census the book department, which turned out to have forty book titles, and seventy or eighty magazines. There was a heavy emphasis on women's romances and fashion magazines, of course, but Scott Turow was represented. However, you can't get Shakespeare at Walgreen's. In a very real sense of the word, this means that Scott Turow is not a bookstore author, so much as a drugstore author.
Given the size of the Walgreen's store, and given the number of bases it has to cover, I don't see how the book selection could be much larger. However, based on the other kinds of electronics they sell, Walgreen's probably could sell Kindle Readers, once the price comes down a bit more. Walgreen's, in its limited size, sets out, not to carry everything that Kroger's carries, but at least, reasonable substitutes for most of the things Kroger's carries (*). For example, you can get sliced Swiss cheese, blocks of Mild Cheddar, shredded Mozzarella, shredded Monterey Jack, shredded Mild Cheddar, and cream cheese; that is five different kinds of real cheese, as distinct from Velveeta. They sell these cheeses at substantially the same price as Kroger's, not at the higher prices a convenience store would charge. Walgreen's makes its money, of course, by filling prescriptions. Its marginal cost of carrying the cheese is not all that great. The store's location and business hours are determined by the need to attract prescriptions. They make a marginal profit on the cheese.
(*) This is relative. A shopkeeper in rural Scotland once sent a note to the author Gavin Maxwell: "cannot supply methylated spirits [methanol, camping stove fuel], am sending five pounds of [cooked] sausage instead."
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For me this is true, but the truth is in the why. I am more likely to try different books because I can pick a copy up off the shelf, walk over to the coffee shop that is in the bookstore, buy a coffee, sit down, and read the book. It is a comfortable, cozy environment. It lacks any DRM-like limitations. It is, in fact, encouraged. I don't get to read a pre-selected page or two, but the whole damn book and if I like the book, I buy it, if not, I put it away. I do not buy every book, but I buy a hella lot more than if I cant read it at all (yes that includes the obligatory page or two selected by someone else.) I could go in and read the whole store and not spend a cent yet this is the preferred method of modern guildies. If I was not allowed this freedom, I would not even enter the store because online is easier, so changing this is bad for business.
Now lets take another look at why physical bookstores are selling more. I can read as much as I want before I make my choice and I have no obligation to buy, yet I buy one in three books I look at. I do this because of the freedom and encouragement to find what I want before committing to a purchase, not because of the "bricks and mortar" used to build the store. An online store could use the same principle and if they did book sellers would have to find new ways to spend their massive increase in earnings. Unfortunately, this will not happen because guildies are scared of this type of sales method, mainly because they have been trained to be.
Ultimately, things can be shown both ways but what is important is not the results but how they are obtained, and why.
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Re:
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OK you thieves!
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