There’s a story doing the rounds that Amazon is telling small presses to do their POD printing with Booksurge, enroll in Advantage, or Amazon will no longer directly sell their books, leaving them to Marketplace sellers alone.
Regardless of why they’re doing this, we small presses would be better off if they stopped. Legal action takes quite some time, if there’s any legal avenue to pursue. We’d be better off if we could persuade them that it’s not in their best interest either. So, why might they be doing this?
I see a whole bunch of possible reasons, including the recent trend toward non-trade discounts on some types of books sold through LSI/Ingram, a grab for vertical integration and larger market share in an evolving marketplace, or a mis-guided bit of executive hubris.
Let’s start with the discounting: There has been a trend lately for smaller presses to take advantage of the range of discounts that LSI allows publishers to set, and still sell their books through Ingram.
Instead of using the standard 55% discount for wholesalers, small presses have begun to tell LSI to sell their POD-original trade books at 20% discount. Amazon has been buying these, but it can’t be happy about the deal. Could it be that they’re trying to force this practice to stop?
It might be easier if it simply announced that it will only purchase trade books on traditional trade terms. When you think about that, however, its current actions are having that effect. Either they print through Booksurge, which offers only trade-type discount schedules, or they join Advantage.
If this is the issue, then, if LSI forces similar terms upon its clients, Amazon will relent.
An enormous proportion of the books printed using POD are sold through Amazon. They’re generally in the “long tail” and Amazon is one of the few booksellers to have mastered the techniques and built the expensive infrastructure required to sell such small numbers of so many different products cost-effectively.
I’ve blogged before about how the book business may be about to undergo a radical shift, as mass paperbacks in some genres are replaced by ebooks on something like a Kindle. If Amazon’s vision of the future is something like mine, they may be making a bid to establish significant barriers to entry in delivering ebooks or print on demand books.
It’s already going to be very expensive to try to duplicate Amazon’s search capabilities and their branded presence in consumer consciousness. But possible competitors, such as eBay or Barnes and Noble, both of whom have much of the infrastructure already, might be tempted in the coming evolution of the book business.
When bookselling is more about moving bytes than bits of paper and binding, what is to keep Amazon on top? Perhaps if they can push most of the on-demand printers and the “publish on demand” vanities out of the arena, they can make it that little bit more difficult to attack their supply line as well as their base with readers.
If this is their motivation, they’ll fight tooth and nail, because it’s a survival issue.
On the other hand, it could just be that some new executives don’t know what they don’t know. Never underestimate the possibility of cluelessness even in a small group of otherwise smart folks.
So, what’s your pet theory?
My pet theory is that MBAs are the real bodysnatchers. The brand name publishers and bookstores we grew up with have been turned into zombies, pretending to be their former living selves while their precious bodily fluids are used to fuel the soulless engines that churn out profits for the stockholders; and when they’re drained, they’re drained. RIP anything resembling a marketplace of ideas in the form of the printed book.
Oh, you mean my theory about this rumored Amazon maneuver? I think they’re going to get slapped upside the head, although I have no confidence that will bring them to their senses anytime soon.
Amazon has long been giving deep discounts on books and other media so that they can dominate other booksellers as much as possible. If they wanted to make a profit on books, one obvious thing to do would be to sell them all at list price or much closer to it . . . but they seem to be making no strong moves in that direction.
Instead, Amazon seems to be trying to bolster up their losses on all books by imposing extra fees and restrictions on the least powerful group of publishers, namely micropresses. First there was Amazon Advantage, where for many micropublishers Amazon imposes a wholesaler discount to themselves, instead of the retailer discount they actually merit, since they are only a retailer.
Then Amazon introduced their Kindle e-book reader–and now Amazon e-books have to be in the Kindle format. Now there is a move to make micropublishers use the Amazon proprietary POD print service. Note that forms of publishing that require less initial cost outlay, e-books and POD, are more popular with micropresses than with large publishers.
It’s just more of same: Amazon wants to make micropublishers help to subsidize Amazon’s discounts on books from all publishers.
Hey, not all of us MBAs are soulless monsters! And, there is an ethical question inherent in your post, too. When is it ethical for the managers to knowingly fail to take the most profitable legal route when they are acting for the true owners? When they have permission from the owners, of course, but how often do stockholders vote for lower profits? When it’s the obviously ethical thing to do? Then, given the broad range of opinion on ethical issues, could you guarantee that most of the owners would agree that any given action was ethically required, even if it wasn’t legally required?
Well, sometimes yes: a voluntary recall of possibly tainted drugs, for example. But is supporting indie publishing one of those things? No, I don’t think most Americans would care at all.
But to get back on topic, I am not sure that refusing to buy from a vendor counts as restraint of trade, especially when they’re less than 1/6 of the total book trade. Huge impact on POD printed books, not so big on the book business.
Then again, I”m not lawyer.
Thanks for tuning in and commenting. Do you have a post up on this?
PublishingGuide,
My son is about to get his MBA, so I agree you’re not all soulless monsters. You’re missing my point, though. Before you were born, apparently, most publishing companies were family-owned. They tottered along, often making foolishly sentimental decisions that benefited the world of letters more than the owners’ pocketbooks. They were not, with a few exceptions, highly profitable businesses. Once they sold out to publicly owned corporations, the stockholders had to be served, and the people who had managed them as publishing entities were supplanted by MBAs who came in to turn them into profit centers and the public interest be damned.
See my post, ” Books have gone from bad to wurst,” February 11, 2008.
Anyway, I didn’t mean to hijack Marion’s excellent post on the Amazon debacle. I was just responding to her question about pet theories.
With regard to Amazon, the current MBA-dominated corporate culture seems to be operating on the principle that scruples and laws are for sissies. Catch us if you can. I wouldn’t expect you to think what Amazon is doing could possibly be illegal, but my guess is that most people without an axe to grind would agree that it probably is.
I really can’t understand the theory that Amazon is doing this to alleviate the 20% discount that some POD publishers ask for thru Lightning Source. All they have to do is demand that they be given the 40% discount that most retailers get and what they probably get from Ingram. After all your corner bookstore owner (if you still have a corner bookstore) would tell you that he can’t get by with less than 40% discount. That’s understandable.
It may be that Amazon is tired of seeing vanity operations like PublishAmerica boast that they can get their authors on Amazon and then bleed the authors dry. Or they may just be trying to get more of that “Let’s get the author to shell out for their dream” money to their own operation of Booksurge.
However, there is still an FTC and I believe there are still anti-monopoly laws on the books (although the Bush administration has certainly little to administer any of those laws) and these can come into play. It’s up to every small publisher, every self-publisher and of course the subsidy publishers who are now under seige to complain loud and long to congressmen and bureaus that administer these laws. A few years ago Barnes & Noble tried to buy Ingram and they were stopped by the outcry.
I went to high school a long time ago, but I vaguely remember something about vertical monopolies and horizontal monopolies and farmers who protested when the railroads dictated obscene prices for their particular distribution services.
Marion, please do not scapegoat short discounters. Amazon probably makes just as much off a short-discounted book as a standard one, because it’s sold without any of the usual outrageous customer discounts. If short discount was a concern, Amazon could simply stop offering those books — including the short discount books they accept directly from technical publishers that are _not_ POD. They would not have to cripple the leading POD company in the world.
Aaron
Could it be the 20% wholesale discount? Perhaps, but you’re right, they could have addressed that issue more directly, by setting specific standards for Buy Now status.
Historically, though, Amazon wouldn’t discount a book they had to acquire at a 20% discount. A $20 book acquired at a 50% or 55% discount would be discounted 30% or more. In the case of a $20 book acquired at 50% and discounted 30%, Amazon would gross $6. Same is true if the $20 book is acquired at 20% and sold at a zero discount. It’s only when we get to that controversial 55% wholesale discount that Amazon makes more money.
So, I’d think Amazon could simply state, “Sell at X% to us, or your book won’t be discounted by us. If we don’t discount the book, the probability of selling your book drops by Y%.”
There is the free shipping issue when LSI drop ships. How is that handled? Has it been costing Amazon money?
Still, I think it does go deeper than a matter of per-tranaction margins. Just as Amazon has tightened-up the Advantage program, we’re looking at another indicator that Amazon may be tiring of being the “retailer of last resort.” While Amazon’s costs for handling slow-selling titles are better than brick and mortar stores, they’re still higher than zero. Perhaps now, with their new-found primacy among book retailers, they’re finally ready to become “selective” by setting economic barriers to entry, like all the retailers, wholesalers, and distributors before them.
An entire sub-industry has emerged that specifically takes advantage of Amazon’s title acceptance policies (or lack therof). Without that all-important Amazon listing, what could today’s vanity publishers promise that would have the same sort of appeal? “We’ll print your book, and people who know about it can special-order it?”
Generally, it’s no skin off the vanity publishers’ teeth to sign up with BookSurge instead of LSI for future titles – they’ll just pass the costs along to their clients anyway. That would give Amazon a much nicer piece of a business that Amazon enabled in the first place. And that might be exactly what they’re looking for.
This is fairly consistent with their e-book file format policy, too. “If you want to play in the Kindle playground, you’ll play (and pay) by our rules.”
Meantime, so long as Amazon can make an economic case that the LSI relationship is harmful, I suspect they’d be able to dodge the anti-trust bullet.
I’m expecting to see some sort of “solution” whereby LSI becomes an Amazon Merchant. Amazon makes a nice skim on the transaction, shipping costs are removed from the Amazon free shipping program, and Amazon’s own POD/vanity publishing “solution” has an advantaged, although not exclusive, position.
Mainstream publishers that use POD as an end-of-print-life solution may not be badly hurt by that. Either the publisher or Ingram may find it useful to print 10, 20, or more digital copies at once and stock them in the warehouse, rather than depend on one-off printing every time someone clicks. Small pubs that depend on POD might also be forced to do something similar – go to a longer digital press run, rather than depend 100% on POD.
Aaron,
I didn’t mean to scapegoat the lower discounted books. And I now see that it looks like I did. However, I do think that the transaction costs on the long tail may be eating Amazon’s margins. Remember, most short discount books are at a higher price point than most trade books. They also have more predictable demand. That’s why short discounts survived, even before Amazon.
Short-discounting trade books, however, brings us into different territory, and may be a problem for Amazon.
It may even be a problem for Ingram. I do wonder if there were deniable hints passed between execs in Ingram and Amazon before this was unveiled. Certainly we’re not seeing much ruckus from Tennessee, are we? Odd, don’t you think? Maybe that’s too cynical. It could just be that this is a weekend, and the folks in LaVerne are taking a moment to think things through.
Dave,
Your point about shipping is well-taken. That could be a major issue, and the LSI as Amazon Marketplace merchant idea might be the intended end result. I hadn’t quite seen that as a solution. Thanks.
As for shifting to minimal inventory, doing your own fulfillment and getting an Advantage account, I’m afraid that it will remove tens of thousands of books from the stage. They just won’t be financially viable anymore. But maybe they never were. It could be that the losses were shifted to Amazon, without any of us ever knowing it.
If so, then the only option for publishing these titles will be the ebook. Interesting times, they are a-coming.
Barbara,
Amazon may not be a big enough piece of the whole book market, or the market for any given segment, to be defined as a monopoly. Ingram, now, they’re a much larger portion of the market. And so are B&N. THAT merger just didn’t have a chance.
Or so it seems to me.
Dick,
It’s okay, I know you were joking about MBAs. But I chose to respond anyway, not because I thought you were serious, but because I’ve heard so many others who hadn’t quite thought through the complexities say such things in all seriousness.
As for the shift from small family-owned publishers to larger corporate ones, well, that’s the way our economic history has gone over the those 80+ years. (And I know you’re not all that old!)
In the end, we’ve all got more real wealth because of the aggregation, and the economies of scale achieved, but it has come at a price, as you discussed. Not sure whether it would be better to have much more expensive books, and fewer of them, produced with less attention to profitability, or many more different books, in much more affordable price ranges. It doesn’t much matter, because it isn’t going to be reversed in the near future, but it’s an interesting question.
Marion,
First of all, dope slap to me for not recognizing “PublishingGuide” as you. Sorry for addressing you as if you were, um, three or four years younger than you actually are .
My point is that the cultural aspect of publishing has been completely abandoned by the majors, and they used to be (within my lifetime, maybe within yours, too) the great bastions of serious literary publishing, the houses that had the financial wherewithal to put out a book just because it was good, and to put out the more commercial books with a high level of production quality. The small publishers were pluckily trying to make a go of it with lowest-common-denominator trash. Now that has completely flipped, and the only place to find decent books is from small presses and micro-presses.
You’re an accountant; I’m a craftsman. It’s natural that we emphasize opposing viewpoints on this. But somewhere along the line, the corporate mission statements of these companies got rewritten in Newspeak, and any care for quality, culture, or civilization was tossed out in favor of worshipping the Golden Calf.
True: Amazon could just say that they will not buy books at under a 40% discount–like so many other bookstores.
And I say again, that if Amazon wants more profits they could just quit giving deep discounts off cover prices on most books. Remember when getting 10% off the cover price of a few dozen bestsellers was a big incentive for consumers to buy at Crown? Also, Amazon could quit giving free shipping off all orders of more than $25–that’s only about two books.
Once an entity has files, they can so easily become a publisher . . .
Fran
It is not only MBAs in the current climate that are taught the ‘profit at all costs’ mantra. The idea that shareholders want only profit or capital gain, and that *now*, conflicts with wiser company objectives.
The baby that has gone with the bathwater in the current business philosophy is the idea of being long established. Even Banks have disappeared [Bear Sterns in the US and Northern Rock in the UK just recently] in the pursuit of what used to be called greed.
But it is not just the issue of returning shareholder value [and the real controllers are managers of various investment organisations] that is at issue, but the methods used. And in the hands of trained managers the idea of company purpose is less observed.
As we have seen with Google and now with Amazon size added to this attitude limits the opportunity for discussion. And the freedom for creative bonus schemes adds a further barrier to reason.
So, at the moment, there is a lot of guesswork about Amazon’s motives, and even whether the move is corporate or that of only one head! I wonder if, without bombarding the head of the organisation for aswers, we will ever know.
Anyone have a contact for him?
If a publisher sets a 20% discount with LSI, does that full 20% pass along to the buyer? I.e., if I have a $10 book set at 20% discount thru LSI, does Amazon get it at $8? What about other retailers besides Amazon? Do LSI and/or Ingram take a piece of that 20%? -Lee
I still don’t understand how squeezing out potentially thousands of titles is going to jibe with Amazon’s long-established banding as “Earth’s Largest Selection.”
Maybe they have some internal reason for wanting to stage a protracted court fight, and pissing off tens of thousands of authors and publishers.
I have very little respect for PA as a company and as a business model, but I do respect that they didn’t cave on this, even if “it’s no skin off the vanity publishers’ teeth to sign up with BookSurge instead of LSI for future titles – they’ll just pass the costs along to their clients anyway.”
And keep in mind that it is some skin, because they also want to keep the pipeline open to traditional bookstores–something else they promised their customers.
Yes, they could print at both LSI and Booksurge, but that does increase costs, of course.
The fundamental issue here is that it’s a monopolistic power grab–Marion’s analogy on Self-Pub about Standard Oil is appropriate.
Interestingly enough, one of the books I’m currently reading is “It’s The Crude, Dude” by Linda McQuaig–which goes into some detail about Standard Oil’s heavy-handed bullying/bulldozing of its competitors.
–
Shel Horowitz, publishing/marketing consultant and author of Grassroots Marketing for Authors and Publishers
If there’s a basis for legal action here, it might be one involving antitrust and extortion. To announce a blanket policy change, as Barnes and Noble did when it dropped ebooks several years ago, is basically a business decision. To contact publishers one by one and say, “If you don’t change your POD printer, we’ll hurt your business” is a little different. That would be especially true if publishers had to pay a setup fee or annual service fee to BookSurge, but I don’t know whether that’s the case.
We could all sit here and speculate on why why why…but it seems to me the energy would be better spent in all the affected publishers getting together and hiring a lawyer or ten. For starters, the word monopoly comes to mind…
I’ve been following this story across the net and will write on it for Beneath the Cover, a publishing blog I contribute to. I also received a link to a petition that I was happy to sign. You may find it here. I hope you will all sign it: “Stop the BookSurge Monopoly”
http://www.ipetitions.com/petition/protectPOD?e
Today’s Publisher’s Lunch lifted a quote from an Amazon spokesperson in a ComputerWorld article. The reasons given by the spokesperson are similar to those I speculated upon – Amazon being able to fulfill the POD order at an Amazon DC, so that the POD book can be included in an order of other books and goods as part of the free shipping offer (of course, they could have offered LSI an opportunity to install its own equipment at Amazon DCs). Naturally, the free shipping offer is an incentive to bulk-up Amazon purchases, which is quite nice for Amazon’s bottom line. Further, the spokesperson noted that books could still be sold through “third-party marketplace seller programs.” This is consistent with the idea that Ingram/LSI could be one of those marketplace sellers. Of course, some of this is predictable spin. There certainly were no admissions that this would be more profitable for Amazon, but that’s to be expected.
It also seems likely that Amazon is aiming at “Aiming At Amazon.” Nothing like changing policies to invalidate an entire book. Aaron Shepard is even handcuffed at the moment on issuing a revision, since the dust hasn’t settled. As someone whose own titles are regularly affected by the acts of a mega-corporation (Disney), with some of those changes intended to undo advice that is circulating in guidebooks and elsewhere, I know what that’s like.
How many people who’ve commented here and elsewhere have contacted the small pub associations — SPAN, PMA, SPAWN et al — to see if they are developing plans to confront this issue? I did send an email to SPAN but have heard nothing back as yet (we are no longer PMA members, so I haven’t tried there).
I am amazed at the collective silence from those organizations, whose stated purposes all include some variety of “supporting independent publishers,” who more and more use digital printers (and, specifically, LSI) to gain the inherent advantages.
Unless those organizations band together as a single force to sit down and discuss the whys and wherefores with Amazon, I doubt much of anything will happen…at least not much to the benefit of the indies.
Walt Shiel
SlipdownMountain.com
FiveRainbows.com
I know that the associations are thinking things through. And that’s a good thing, I think.
I’m going to add another entry on this subject as soon as I get my thoughts in order.
I will say this, though: at least these times aren’t boring. Should be very interesting indeed, seeing how many publishers we can save from the dustbin of history as their margins are forced lower once again.
I read the release Amazon presented us and got a different take on the issue. I may have misread it, or misunderstood it, but what I thought I read was this: Amazon stated that in the future, they would REQUIRE authors of POD books to EITHER let them print the book when it is ordered, OR send them copies of the book ahead of time printed on the POD press of their choice so that they can have some in inventory at the time it is ordered. We are not a POD publisher and have little interest in this matter, but I would like to know if I am right or wrong on this.
That’s true, as far as it goes. But the catch is in the discounts. Given that POD printing is so very much more expensive than offset, many POD-original titles have been short discount. For that matter, many of them have been so niche that they’d be short discount regardless. They’re just not trade books.
Amazon is no longer accepting short discounts, but requires that small presses go through the Amazon Advantage program (55% off list) or through BookSurge or CreateSpace (40% or more). This means that many titles will simply no longer be published. Amazon was a very large chunk of the market for these specialized books, and the profit margins are no longer acceptable.
And then, of course, there are the vanity press titles, which Amazon is going after first. Those, too, are being adversely affected. I’m not going to be crying any rivers over the pain that some of the sleaziest are feeling, but I do feel sorry for those would-be authors who think they’ve found the golden shortcut and instead lose their best chance to really publish a manuscript (assuming that it’s any good) and lose a fair bit of money on top of that.
Thanks! That helps clear up alot for me.
As a deeply spiritual MBA and Ph.D., expert in leadership power, this is clearly a move backward for Amazon. They do not get that this kind of My way or the highway total Old Power grab will backfire. No longer accepted.
If they want to insist on Book Surge use for the books they do the fulfillment for, I understand the vertical integration advantage.
But to force those of us who do our own fulfilllment or outsource it to use Book Surge is insane. They have not notified us about this by email, and are still charging us $40/month to list my books and audiobooks but have removed our Buy button, so we cannot sell anything. Our market is corporate, they buy on Amazon. A business disaster.
They have handled this very unethically. I will fax their legal dept.
If anyone has a solution, Please Post It!
Thanks for giving us a place to tell what is really going on.
Dr. Linne