Not a Simple Price War -- It's a Fight Over What You Get to Read

What looks like a simple price war between Amazon, Target, and Walmart over a handful of bestsellers is symptomatic of a much deeper problem in the book business. The larger fight is really over what you get to read.

The price war began Oct 15 when Walmart.com dropped its prices drastically on several bestsellers. Amazon.com and Target.com quickly followed suit, and within a couple of days the prices were down to $8.99 and heading lower. At this point, these behemoths were clearly selling those books below cost and engaging in an illegal form of predatory pricing.

The authors affected by this price-slashing were not amused. James Patterson said "Imagine if somebody was selling DVDs of this week's new movies for $5. You wouldn't be able to make movies." John Grisham's agent added, "I think we underestimate the effect to which extremely discounted best sellers take the consumer's attention away from emerging writers." (N.Y. Times, Oct. 17, 2009). The American Booksellers Association saw things the same way, saying in a letter to Christine Varney, Head of the Anti-Trust Division of the U.S. Department of Justice, that these companies are using books as loss leaders to sell other kinds of merchandise. "The entire book industry is in danger of becoming collateral damage in this war." (Bookweb.org, Oct. 22, 2009)

Predatory pricing is a means of driving other booksellers out of business. When this happens, the choice of books is one of the first things to suffer. Some readers think that if their favorite store closes they can always buy the book they want somewhere else. But that's a dangerous delusion -- the books they want may not be there at all. In fact, these types of disruptions in how books are sold or distributed has a profound effect on what publishers decide to publish in the first place.

Think of the book business as a giant funnel, in which millions of authors are trying to reach tens of millions of readers. The image is a telling one, because the literary life of America has to go through two very narrow choke points: publishing and bookselling. Both of these choke points have become more and more constricted in recent years as a result of economic concentration and market manipulation.

Publishing is now consolidated in the hands of a few large conglomerates that control most of what is published in America. There are, to be sure, many booklovers in the publishing divisions of these giant corporations, but they are outnumbered and out-maneuvered by the bean-counters. Sadly, many of these publishing divisions could probably be shutdown entirely without having any significant affect on the bottom-line of the parent corporations. It is not an atmosphere that favors innovation or literary discoveries. In many cases the attitude seems to be to hold on and hope that declining sales and stagnant readership doesn't cost you your job.

Concentration at the retail level is now becoming even worse. The chain stores had been doing their best to squeeze out the independent stores over the last 20 years or so, and now they in turn are being squeezed by the mass merchandisers. According to retailing expert Stacey Mitchell, big-box mass merchandisers, like Wal-Mart, Target, and Costco, have taken over 30 percent of the book market. These mass merchandisers are now selling as many books as Barnes & Noble and Borders combined. (Death of the Category Killers, June 28, 2009)

It's hard to exaggerate the consequences of this mass-merchandiser dominance. These outlets carry, at most, a few hundred titles at any given time. This means that a handful of books -- far less than 1% of all the books published -- are probably accounting now for more than 30% of all sales in America. Price wars in this segment of the market only make matters worse, driving more customers to these merchandisers in search of quick bargains on a handful of big-name books. Publishers are under more and more pressure to subsidize these new, ruinous prices, and they will probably end up pushing more and more of their resources in that direction. But it's a devil's deal. The time may not be far off when publishers decide they can make more money by shrinking their breadth of titles and concentrating even more on just a few bestsellers.

How does a new author break into this landscape? It's never been easy. The key has always been diversity at the retail level. There's a big difference, say, between 500 buyers all buying for their own stores and one chain-buyer purchasing for 500 outlets. Buyers for independent stores tend to cancel out each other's mistakes; no single error in judgment can sink a prospective literary career. But when the system is dominated by a small handful of powerful buyers, their decision can make or break a book. Often, there is no appeal from such a decision. One of the dirty little secrets of the book business is that publishers often check in advance with the buyers for the chain stores and mass merchandisers before agreeing to publish a book. If the answer they get is no, the book may never see the light of day.

One of the ironies of the current price war is that it includes The Lacuna, the latest novel by Barbara Kingsolver. But Kingsolver wasn't always a best-selling author. When her first novel The Bean Trees was published in a modest print-run in 1988, independent booksellers recognized it as a literary treasure and sold thousands of copies. After that the chain stores climbed on the band-wagon, but without that first push from independent booksellers Kingsolver's career might never have taken off.

Anyone who loves books should worry that the doors seem to be closing on the Barbara Kingsolvers of tomorrow.

 

Comments

[DannyK]

So money is more important? So you advertise on Channelone, where school children have to watch the advertisement during school hours. It is a win win situation. Channelone makes money, School districts get equipment for exposing the children to Channelone and the taxpayer helps to make money for the writer, publisher, Channelone, and the children don't have to learn while they are watching Channelone. Who is the real victim here?

[Dan Holloway]

So yes, I can understand concern people have that the big guns, through loss leading, are squeezing out a lot of mid-tablers. But if you truly want to preserve the health and diversity of literature, don't forget the much larger pool of tiny players who will be the real losers if the squeeze is put on loss-leading. As with so many things in business, the choice isn't, as is often portrayed, between big and small. No, what is portrayed as small is actually medium, and the real choice is between "big plus REALLY small" or medium. And - in all areas I've encountered from wine and restaurants through soft-furnishings and automobiles - I tend to think the former is more valuable than the latter.

[Dan Holloway]

As a small-time author of literary fiction that's hardly of the commercial variety, I find this worrying - but not for the same reasons everyone else does.

What goes on at the top of the tree doesn't bother me in te slightest - that's not my market place. As a self-publishing member of a reasonably well established collective (http:www.yearzerowriters.wordpress.com) I am very happy that the choke points you mention aren't an issue - I self-publish, removing that problem, and through social media we reach people interested in our books (18-35 year-old urban indie types)

What worries me is the clamping down on loss-leading, because I worry that the next thing to come under scrutiny is "free". It's all very well decryong the use of loss-leading by big companies, but for small-timers like me, loss-leading and free are the primary tools of accessibility to readers. Why should a reader pay for something from an unknown? no reason at all. We need to remove barriers to being read. And the two big barriers are price and obscurity. The latter we can do something about by using our initiative. The former we can only do something about by offering our work free or at a loss (in order to gain fans who will then pay a la Anderson/Kelly blah blah blah).

[racetoinfinity]

Another example of the damage that giant monopolistic corporatist capitalism that only concerns itself with short-term profits is damaging our culture and society and economy. The model has to change to small-is-beautiful and values have to be added to the economic equation besides short term profit and shareholder value.

[Janet Gendler]

Thank you for your clear explanation of the problems with publishing consolidation. So much has already been lost. Although there is much that is wonderful about the internet, I am terribly sad about the loss of so many small businesses in the face of online retailing, most especially bookstores. I miss my local bookstores (Cody’s and Gaia, Shambhala and Black Oak) not just because of the books but because they were such distinct and specific, special places. Intermediate zones for introverts. When I had been working all day by myself or when I was on my way back from a day teaching in the suburbs, I loved to stop in and browse and talk with book people, occasionally join in a conversation that was already going on. I have been delighted and educated, nourished and sustained by my conversations with my bookseller friends. And I have often been disappointed by books I have ordered online, well-aware if I had spent ten minutes browsing through the book in a bookstore, I would not have bought it.

[marielamba]

Wow, all I can say is AMEN! As an author who has had a book killed at the publication stage based on what 2 chain buyers said, I speak firsthand when I caution folks about giving in to the big shiny discounts offered at huge retailers.

These businesses DO have a chokehold on publishing. And if you think you can find all the books in the world on-line, I want you to give thought to all the books you will never see because they don't appeal to one or two buyers for a chain of stores....and so the publishers decide to cancel the titles completely! And think of all those authors who have had their careers killed by what is going on. You'll never see them grow and become the Barbara Kingsolver's of tomorrow. It'll be bestseller, or bye-bye.

Thank god for the independent bookstores who really judge books based on content. I urge everyone to go to www.indiebound.org to locate an indie near them. You can even buy online through your local independent. You'll be supporting independent bookstores, independent thinking, and a future of great books and talented authors.

[MichaelNMarcus]

As an author, publisher and reader, it's obvious to me that the price war is dangerous and destructive. Readers will benefit in the short term, but if the war continues and grows, the eventual consequence is that no bookstores will be able to afford to sell books.

Petrocelli said, "...selling those books below cost and engaging in an illegal form of predatory pricing."

While it is certainly predatory, until and unless the price warriors are found guilty of a crime, their price cuts are not illegal.

As an attorney, Petrocelli should not do the work of a jury and judge.

Michael N. Marcus
author of "Become a Real Self-Publisher"
http://BookMakingBlog.blogspot.com
http://www.SilverSandsBooks.com

[marthamcphee]

Thank you for spelling this out so clearly. Friends and I were speaking about this subject last night at the Whiting Awards celebration and I didn't want to believe it. It's horrifying.

[Paul Loeb - Huffpost Blogger]

[Continuing the earlier comment because I ran out of space]

The problem of centralized decision-making is also true, to be honest, with the chains, because the pre-sell is everything, although they can correct it by giving more discretion to store managers. If they don't, though, it's a problem. On my Soul of a Citizen book on citizen activism, which has over 100,000 in print, Borders modeled the book in its computer at 1 copy for years in most stores. That meant that it was replaced when it sold, but that it could gain the momentum to become really visible. But at least Borders and Barnes & Noble do have staffers and managers who can relay customer responses up the pipeline, and give customers a sense of the books that they're excited by. When you buy in a big box store, you're not talking to a book person, so you'll never get that perspective. And while Amazon has done some great things with their algorithms, they can't substitute for actual knowledge of the books.

It's easy to assume that good work will find its way in the marketplace, but the narrower the choke points on the channels, the harder it is for this to happen.

Paul Loeb, author Soul of a Citizen and The Impossible Will Take a Little While www.paulloeb.org

[Paul Loeb - Huffpost Blogger]

Can't agree with this post more. As the author of five books, it's been the independents who've championed my books from the start, secondarily the chains, and although my last two, Soul of a Citizen, and The Impossible Will Take a While, have 170,000 in print between them through 32 printings, I've never yet been in a Wal-Mart, Target, or Costco. Without the independent booksellers in particular, I'd never have gotten visible enough for people to discover they existed.

The question of gatekeepers is key. If one buyer makes a decision affecting a category containing 5,000 books, they're not going to be able to read them. So they're going with which ones are easiest to describe in a nutshell, That means books on Brittany Spears or Michael Jackson are easy sells, but if you have a new novel or serious nonfiction book by an unknown author, you're not going to have time to even glance at it. But as pointed out, if you have individual decision making by 500 or 2000 store managers and owners, they'll still stock the best-sellers (and make desperately needed revenue off of them), but they'll also be able to make their own judgments on works that take a while to find their audiences.

[continued in next comment]

[tompoe]

http://www.gutenberg.org/wiki/Main_Page

Hundreds of thousands of free books. So what's the issue?

[Axley]

From the Project Gutenberg website: There are nearly 30,000 free books in the Project Gutenberg Online Book Catalog.

So there are a lot of books but not hundreds of thousands.

[Axley]

The place to sell books and make people aware of books is online. I am not concerned that there is not a huge diversity of books locally because i can find a huge diversity online. With ebooks gaining market share every year and print-on-demand publishing authors can make their works available.

The problem then becomes making these books known. If a site like Huffington gave exposure to books that were obscure they would sell as long as people could find them online to buy them. This site should review books from small publishers.

[William Petrocelli - Huffpost Blogger]

I agree with your point to some extent: e-books and print-on-demand books are an important supplement to the printed book.
However, electronic books are not a complete substitute for the printed book.
Most publishers will not publish a book at all unless they can foresee a minimum audience for the printed edition. Once they take that first step, they may make e-book and print-on-demand editions available. But without that first step, they will probably not make the book available in electronic or any other format.
While it’s true that authors can self-publish in electronic format, books published that way rarely reach any kind of wide audience.

[TrueSmallCaps]

I agree. Ten years ago, almost all the books I bought were discovered in bookstores. Nowadays, almost all the books I buy are discovered on the internet.

Also, looking at the books I've bought recently, I see that many of them are from university presses who wouldn't have their titles in trade bookstores anyway.

As William's article says, this discounting undoubtedly will affect the Big Six publishers.

But it won't affect me in the slightest.

[trkravtin]

TrueSmallCaps, it has already affected you, and you reveal it in your own remarks. "Ten years ago, almost all the books I bought were discovered in bookstores." Did you stop shopping at those bookstores, or did they go out of business because of competition from the national superstore chains? Many bookstores are able to stock a wide variety of university presses, when there is a demand for them in their community. If you take your demand to the internet, then how does that create a more diverse culture where you live?

As long as we only look at this situation from our own personal viewpoints, then we don't consider how our actions impact the larger industry as a whole. Which is also true for a number of issues to be concerned about it our society and economy. The book business is always in a state of evolution, just as retail in general changes reflecting new marketing and merchandising ideas. Consumers can have an impact on how this evolution takes place, by the choices they make, and which business they choose to support.

TrueSmallCaps, it will certainly affect you in the largest sense, as it will all of us, because nothing happens in a vacuum as you seem to suggest. When you can, support your local businesses of all kinds, and try to keep more of your dollars in the local community and you might find that there are others out there who also benefit from the efforts you make.