Bookselling in Crisis

Dear all 5 or so loyal readers:

I'm going to repost here a post I wrote for the Odyssey store blog. It's about the state of crisis the bookselling industry is finding itself in - more-so than usual, I should say, since the industry as a whole is perpetually in a state of growth and change. This time, they've really done it. Who's "they"? Read on:

I am not generally an alarmist. Yet there have been some happenings as of late that have given me great concern.

Amazon.com, Wal-Mart (online), Target (online), and Sears (online) have entered into a price war that could shake the very foundation of the book industry, and subsequently, our independent bookstore, The Odyssey Bookshop. These big, primarily non-book retailers have begun offering new hardcover books by popular authors such as John Grisham, Stephen King, Sarah Palin, Barbara Kingsolver and the like, at enormous discounts. It began a few weeks ago with the new Dan Brown book, offered at up to 60% off online.

Let me explain very briefly that a book sold at a 60% discount, especially a new hardcover, is actually being sold at a loss for whatever establishment is selling it as such. In other words, not only did they not make any money on the book, they lost money on the book. Now, as much as the Odyssey loves connecting people with great books, we would not be able to do so if we did not turn some sort of profit. As a result, the Odyssey sold the book at a 20% discount, to thank our loyal customers who bought it from us, but which also allowed us to stay in business.

Back to the big corporates - as if the 60% off nonsense wasn't enough, they have entered into a price war with each other to see who can sell these new hardcovers for less. While you may think a book priced at $25-$30 being sold for $8.98 is a great deal for you, let me tell you why it is NOT:

Remember last winter when the Odyssey, and subsequently you, had the pleasure of being the only store in the country to host Stephen King and Richard Russo for their new novels? Well, say you bought the Stephen King or Richard Russo online. Do you think the publishers would send us these great authors if we had no book sales? Think again. The answer is NO.

That is just ONE of the MANY examples I could give you in concrete terms about how buying a new hardcover book online could affect us.

Now let me explain a more dire possible result - if a new author has slaved away on a magnum opus for years, and it finally gets published as a paperback original for $15.99 - but you bought an established author's new hardcover book for $8.98 last month, so why would you spend $15.99 on a paperback for some new person you've never heard of - everyone's work is devalued AND you may never discover a great new author.

Books are set at a standard industry price. What goes into that price? Besides the years of work an author has put into it, the years of work an editor has put into it, are also the manufacturing costs, the art costs, the printing costs, the shipping costs, the publicity costs, and then of course, the small margin of profit (really not as much as you'd think) so we can all make this capitalist society we live in go 'round.

If major corporations, who, BTW, are not even directly involved in the book selling business - and by this I mean they have no author events, they don't agonize over the quantity and quality of the books on their shelves, they don't recommend books to their customers, they don't give money to local charities, they don't partner with local schools, etc. - if these corporations are allowed to devalue books in this way, then soon the Odyssey Bookshop and other local independent bookstores will cease to exist.

Here is what we (the independent bookselling industry) is trying to do about it:

The Board of Directors of the American Booksellers Association today sent the following letter to the U.S. Department of Justice requesting that it investigate practices by Amazon.com, Wal-Mart, and Target that it believes constitute illegal predatory pricing that is damaging to the book industry and harmful to consumers.

VIA OVERNIGHT MAIL AND E-MAIL

October 22, 2009
The Honorable Christine Varney
Assistant Attorney General
Antitrust Division
U.S. Department of Justice
950 Pennsylvania Avenue, NW, Suite 3109
Washington, DC 20530

Molly Boast, Esquire
Deputy Assistant Attorney General for Civil Matters
Antitrust Division
U.S. Department of Justice
950 Pennsylvania Avenue, NW, Room 3210
Washington, DC 20530

Dear Ms. Varney and Ms. Boast,
We are writing on behalf of the American Booksellers Association, a 109-year-old trade organization representing the nation's locally owned, independent booksellers. A core part of our mission is devoted to making books as widely available to American consumers as possible. We ask that the Department of Justice investigate practices by Amazon.com, Wal-Mart, and Target that we believe constitute illegal predatory pricing that is damaging to the book industry and harmful to consumers. We are requesting a meeting with you to discuss this urgent issue at your earliest possible opportunity.

As reported in the consumer and trade press this past week, Amazon.com, WalMart.com, and Target.com have engaged in a price war in the pre-sale of new hardcover bestsellers, including books from John Grisham, Stephen King, Barbara Kingsolver, Sarah Palin, and James Patterson. These books typically retail for between $25 and $35. As of writing of this letter, all three competitors are selling these and other titles for between $8.98 and $9.00.

Publishers sell these books to retailers at 45% - 50% off the suggested list price. For example, a $35 book, such as Mr. King's Under the Dome, costs a retailer $17.50 or more. News reports suggest that publishers are not offering special terms to these big box retailers, and that the retailers are, in fact, taking orders for these books at prices far below cost. (In the case of Mr. King's book, these retailers are losing as much as $8.50 on each unit sold.) We believe that Amazon.com, Wal-Mart, and Target are using these predatory pricing practices to attempt to win control of the market for hardcover bestsellers.

It's important to note that the book industry is unlike other retail sectors. Clothing, jewelry, appliances, and other commercial goods are typically sold at a net price, leaving the seller free to determine the retail price and the margin these products will earn. Because publishers print list prices indelibly on jacket covers, and because books are sold at a discount off that retail price, there is a ceiling on the amount of margin a book retailer can earn.

The suggested list price set by the publisher reflects manufacturing costs -- acquisition, editing, marketing, printing, binding, shipping, etc. -- which vary significantly from book to book. By selling each of these titles below the cost these retailers pay to the publishers, and at the same price as each other, and at the same price as all other titles in these pricing schemes, Amazon.com, Wal-Mart, and Target are devaluing the very concept of the book. Authors and publishers, and ultimately consumers, stand to lose a great deal if this practice continues and/or grows.

What's so troubling in the current situation is that none of the companies involved are engaged primarily in the sale of books. They're using our most important products -- mega bestsellers, which, ironically, are the most expensive books for publishers to bring to market -- as a loss leader to attract customers to buy other, more profitable merchandise. The entire book industry is in danger of becoming collateral damage in this war.
It's also important to note that this episode was precipitated by below-cost pricing of digital editions of new hardcover books by Amazon.com, many of those titles retailing for $9.99, and released simultaneously with the much higher-priced print editions. We believe the loss-leader pricing of digital content also bears scrutiny.

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."

For our members -- locally owned, independent bookstores -- the effect will be devastating. There is simply no way for ABA members to compete. The net result will be the closing of many independent bookstores, and a concentration of power in the book industry in very few hands. Bill Petrocelli, owner of Book Passage in Corte Madera, California, an ABA member, was also quoted in the New York Times:

"You have a choke point where millions of writers are trying to reach millions of readers. But if it all has to go through a narrow funnel where there are only four or five buyers deciding what's going to get published, the business is in trouble."

We would find these practices questionable were they taking place in the market for widgets. That they are taking place in the market for books is catastrophic. If left unchecked, these predatory pricing policies will devastate not only the book industry, but our collective ability to maintain a society where the widest range of ideas are always made available to the public, and will allow the few remaining mega booksellers to raise prices to consumers unchecked.
We urge that the DOJ investigate and request an opportunity to come to Washington to discuss this at your earliest convenience.

Sincerely,
ABA Board of Directors:
Michael Tucker, President (Books Inc.--San Francisco, CA)
Becky Anderson, Vice President (Anderson's Bookshops--Naperville, IL)
Steve Bercu (BookPeople--Austin, TX)
Betsy Burton (The King's English Bookshop--Salt Lake City, UT)
Tom Campbell (The Regulator Bookshop--Durham, NC)
Dan Chartrand (Water Street Bookstore--Exeter, NH)
Cathy Langer (Tattered Cover Book Store--Denver, CO)
Beth Puffer (Bank Street Bookstore--New York, NY)
Ken White (SFSU Bookstore--San Francisco, CA)

CC: Oren Teicher, CEO, American Booksellers Association
Len Vlahos, COO, American Booksellers Association
Owen M. Kendler, Esquire, Antitrust Division, U.S. Department of Justice

If this price war outrages you as much as it does us, you have several options.

First, and foremost, please PLEASE PLEASE continue to support us and your other local independent bookstores by purchasing your books, hardcover, softcover, new and old, at our humble establishments.

Next, please be advocates for us and inform others in your life that buying their books at our businesses will help everyone.

For the holidays, please encourage everyone in your life that if they would like to honor you with a gift certificate, please do so from our store (or another local independent bookstore).

Politically, use this website to find out who your representative is in the House of Representatives and WRITE to THEM. Please tell this how you feel about this illegal and unjust price war conducted by these giants who do little to give back to their communities but do everything to take from them.

Read more about this by looking up related articles in the New York Times (US) and the Guardian (UK).

Thank you for your time, for your attention, and for shopping locally!