Tuesday, July 20, 2010

The Trouble with Amazon

Last night I read Tyler Cowen's 2006 article in Slate, "What are Independent Bookstores Really Good For?", which may be familiar to some of you already.  In it he made an argument against indie critiques of Barnes & Noble, Amazon, Borders, and similar larger booksellers.  In defense of the chains, Cowen pointed out the increased accessibility of books for customers, and argued that allegiance to independent stores wasn't much more than a matter of sentimentality--
Our attachment to independent bookshops is, in part, affectation—a self-conscious desire to belong a particular community (or to seem to). Patronizing indies helps us think we are more literary or more offbeat than is often the case. There are similar phenomena in the world of indie music fans ("Top 40 has to be bad") and indie cinema, which rebels against stars and big-budget special effects. In each case the indie label is a deliberate marketing ploy to segregate, often artificially, one part of the market from the rest.
 There were some strong critiques of Cowen's article when it came out, and it's probably no surprise that I'm also unimpressed by his argument.  The article is valuable insofar as it points out that we can't simply have a knee-jerk reaction against large sellers and ignore the good things that they provide: greater access and visibility, algorithms that track buying in order to provide a bibliography of similar resources, and cheaper prices.  This isn't nothing.  But the gaping holes in Cowen's rosy picture also need to be addressed.

This morning, as if by providence, Dennis Johnson of MelvilleHouse offers a bleak sort of response to the story written four years ago by Cowen.  In the publisher's blog Moby Lives (which you should all add to your RSS feed if you haven't already), Johnson points out some news on Amazon.com, including dropping stock, optimistic announcements from Bezos about e-book sales, and... most importantly... a devastating new essay from Colin Robinson in The Nation. 

In "The Trouble with Amazon", Robinson discusses Amazon's relationship with publishers at length.  Anecdotal accounts of strong-arming tactics reveal the extent to which Amazon has created trouble for the sustainability of the book industry.  Included is the story of Dennis Johnson himself:
Dennis Loy Johnson, co-publisher of the Brooklyn-based independent Melville House, is one of the few publishers who have dared to speak openly about Amazon's bullying. His story is far from atypical. In 2004 a representative of the retailer contacted Melville's distributor demanding an additional discount. Such payments are illegal under antitrust law, which precludes selling at different prices to different customers. Large retailers circumvent this restriction by disguising the extra discount under the rubric of "co-op," money paid to the bookseller for promotional services, often notional. In this case the distributor did not bother with such niceties, describing what Amazon was after as "kickback."

Johnson resisted Amazon's pressure and complained to Publishers Weekly about what he saw as the retailer's capo-like tactics. What happened next evidently still rankles. "I was at the Book Expo in New York and two guys from Amazon came to see me. They said that the company was watching what we were doing and that they strongly advised us to get in line. I was shocked at how blatant the pressure was." Within a couple of days Johnson noticed that the buy buttons for his books had been taken off Amazon's site, making Melville's titles unavailable.

In the end Johnson, faced with an offer it was nigh impossible to refuse, agreed to the co-op. His books' buy buttons were reinstated. Today Amazon is Melville House's biggest customer, and though Johnson still regularly flays the company on his popular publishing blog Moby Lives, he also concedes that it is highly effective at bookselling: "They make buying so easy. It's impossible to resist."
There is also some interesting commentary about the extent to which broad access has actually decreased the diversity of reading among customers.  This problem is something that I think academics often fail to be aware of, because of the extent to which we are often the long end of the tail referenced below:
Though the overall number of titles published each year has risen sharply, the under-resourcing of mid-list books is producing a pattern that joins an enormously attenuated tail (a tiny number of customers buying from a huge range of titles) to a Brobdingnagian head (an increasing number of purchasers buying the same few lead titles), with less and less in between.
 Few would argue with the fact that giants like Amazon provide a lot for the customer.  The question is, at what systemic cost?   If publishers cannot afford to stay in business or have to charge exorbitant prices for items with lower sales (in turn creating a mess for library budgets), what will the prospects for book trade look like years from now?

Halden has brought up Amazon before, and I've also mentioned the problem of predatory pricing.  I have for some time, and will continue to always link books I mention to their publisher rather than to the Amazon page.  At the same time, a number of bloggers have recently mentioned the deal that Amazon is offering for students, and I confess that I signed up for it and plan on using it.  One has to balance what is feasible, and in any case I don't think there's too much sense in making Amazon out to be the devil.  There are good reasons, many of them financial, for buying from a large distributor (your library does, in any case, and usually at significant institutional discounts).  What is most important is to be aware of the wider issues in play for those who write, publish, sell, and acquire books, and to pursue practices that are balanced and supportive of a sustainable situation for the future.

But how to do this?  What are some particular problems that present themselves in academic publishing?  What are some issues peculiar to the religious publishing niche that we should be aware of?

I am hesitant to make this post too long by discussing some possible answers and suggestions for these questions, so I'll continue with some of my ideas in a future post, either later today or tomorrow.  In the meantime, do make sure to read Robinson's article in The Nation, subscribe to Moby Lives, and share some of your thoughts on what is happening and what can be done by individual readers, writers, publishers, and sellers.


  1. I think the advent of the electronic book has rendered the issue of scarcity a moot point. Publishers have good reason to hate companies like Amazon. Amazon is making the industry more efficient and is now able to even act as a retailer and publisher in one. Barnes & Noble is following the same model, and many authors are taking to self-publishing. Decreasing the number of steps and hurdles between an author and his market can only be a good thing, in my opinion.

  2. I'm not sure the "issue of scarcity" was ever a major point here. Are you thinking of some other article or commentary, perhaps?

  3. I'm sure you know the pains of being a student with a working income; how would you address this issue? In other words, on a tight budget how do you recommend getting quality work at a reasonable price?

    Obviously cheap prices do not get global companies off the hook for bullying, monopolizing, etc. When it comes to something that affects livelihood, it is hard to ask someone to buy the New Oxford Annotated Bible straight from OUP.

  4. It's a good question, Alejandro, and this is why I neither fault people for buying from Amazon nor maintain some sort of boycott against them myself.

    In terms of books for coursework, I'd say don't ever feel guilty about borrowing books whenever possible- even books that may be quite important for your personal library. You can always keep a bibliography of course readings to purchase later when you have more resources. This is a bit easy for me, of course, as I am employed at one library and a patron of another one... so getting a hold of what I need to get a hold of is more of an option for me than for most students.

    I don't think everyone shares an equal burden in changing what is really a massive system, though. You've got to do what you can.

    Areas where students can most easily change seem to be-- 1)disabusing themselves of the idea that they simply must own the hottest new work that is coming out. I would recommend focusing much more on slowly building a library of primary sources, and 2)using Amazon for the necessities, like course readings, but trying to purchase from publishers or smaller sellers for books that aren't so urgent... books for which your purchase is something of an "extra" to begin with. Under such circumstances, you're already making the decision to part with your money out of some level of extravagance, right? It's these situations where spending a few more bucks elsewhere than Amazon is more reasonable.

    That is, focus initially on independent stores and small publishers as a specialty- a treat. Even this sort of occasional indulgence is a shift away from always buying from Amazon, and it is more manageable than trying to be a martyr for the indies when you've got enough to deal with yourself.

  5. ...also, eating rice and beans frees up the book budget a bit, and it has the added bonus of being better for the environment and your health!

  6. I was referring to the "under-resourcing of mid-list books" and your point that "if publishers cannot afford to stay in business or have to charge exorbitant prices for items with lower sales (in turn creating a mess for library budgets), what will the prospects for book trade look like years from now?"

    With electronic books, the fixed publishing costs are extremely low and the marginal cost is almost nothing. Thus, there would be no need for more obscure or less widely read books to cost more than the current bestseller. This is largely the pricing model that ebooks have already adopted. In fact, ebooks have made a lot of material that is out of copyright much, much cheaper. Take, for example, the complete works of Shakespeare. It's available for the Kindle for $0.99, and can be purchased anywhere instantaneously. The Kindle platform also allows authors to self-publish their work, and there are ebook reader formats that an author could simply put his or her work in and sell through an infinite number of outlets online.

    This destroys the traditional role of publishers, while empowering both consumers and authors. I think it's great.

  7. Okay, I can see the connection here. I took Robinson's point regarding mid-list books to be saying that the literature being sold exhibits a stratification of attention with a very large gap between the bestsellers and the unknowns. I'm not sure whether this implies a problem of scarcity for the unknown books... Print-on-demand would be another technology that fulfills the same purpose as the e-books you mention, and indeed, we see Amazon flooded with out-of-copyright reprints as well. The problem, though, seems to be more with the health of the book-reading culture rather than with the material success of sellers. The problem Robinson notes here is a lack of diversity, and the argument seems to be that this lack of diversity has less to do with cost and more to do with the way Amazon directs its customers in its search algorithms. This doesn't mean that Amazon is evil or in the wrong for doing this, it just means that it's a possible weakness of the system that should be noted and addressed by people who care about diversity in the reading public.

    When I referred to publishers charging exorbitant prices, I had in mind primarily scholarly works. Probably the problem for academic publishers is that they may only have an audience of hundreds rather than thousands or tens of thousands, and I can't imagine this would change very much if the books were cheaper. Selling an e-book for less profit would then leave the publisher with no support for its continued services, and while you think that's great, I still maintain enough hope that (at least some) academic publishers offer an important gatekeeping/review service for research. While I welcome diversity in publishing and think that self-publication isn't bad in itself, it also doesn't receive the outside scrutiny that a publisher would offer.

    In this, though, I realize that I can be more conservative than others who support very cheap or completely open electronic access and a more democratized process of publishing.

  8. That brings me to another point I'd like to make about the figures in these articles. They say that there are two phenomena at work here:

    1) People are reading more books
    2) People who read are reading more of the same books, as anyone familiar with Harry Potter and Twilight should know.

    The conclusion drawn is that we are losing diversity in our reading material. That certainly is not the only possible explanation for the two observations. An equally plausible explanation is some combination of the following:

    1) More people are reading books
    2) People who read books have increased their consumption of a certain subset of books (the already-popular ones), but have not cut back on their consumption of other types of books.

    I don't see these as bad things, and we would need more data to really know what is going on here. One other point I'd like to bring up is that the widely celebrated Core, which all University of Chicago undergraduates participate in, draws readings from a very small pool of books. This certainly leads to a lack of diversification in the reading of the undergraduate population, but since Twilight hasn't made it to the Core reading list yet, I doubt there's too much reason for worry.

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  10. Belated thanks for your generous comments about me and MobyLives and Melville House. And nice to see you've inspired some engagement in the issues here. A couple of clarifications in the interest of moving the conversation forward:

    1. The main reason books are inflated the way they are now is Amazon.com's predatory discounting. They demand a base discount of 52-55% percent from publishers. On top of that, they require an additional bribe (they call it a "co-op" promotional fee, I call it a "kickback" since it's a percentage of sales and you don't necessarily get anything for it) of an additional 2-4%. So you're talking about a total discount pushing 60%. God knows why this isn't the subject of an FTC investigation, as according to the Robinson-Patman anti-trust act, anything over 50% is illegal for a retailer (as opposed to a distributor), but until they do Amazon is everyone's biggest account and we have to do what they say. So there you have it. That's why books are more expensive than they should be.

    And this means all kinds of books if you hold by my belief that academic books are priced in relation to the overwhelming trade market (as a starting point, anyway -- there's no question text books are inflated beyond that).

    2. The statement "With electronic books, the fixed publishing costs are extremely low and the marginal cost is almost nothing" is a statement of significant ignorance about how books are made and brought to market in America, but unfortunately represents widespread belief.

    For one thing, the phrased "fixed publishing costs" is a meaningless statement, as there is no such thing; expenses vary from book to book, and different books can even make differing demands on overhead, making it an inconsistent number as well. We're not making widgets -- each work is different.

    Likewise, it's unclear what the phrase "marginal costs" may signify, as it's actually a nugatory statement: "margins" refer to profit not cost. But I'll hazard a guess the speaker is referring to production costs -- that it refers to what everyone seems to think, which is that ebooks somehow pretty much make themselves and are subject to none of the creation costs of regular old books.

    In response to which I can only say that it's a question of simple math: As I've indicated, it's a hard number to pin down precisely, but as best I can calculate, it costs Melville House on average about $30,000 - 40,000 to get a book into a bookstore. That's total start-to-finish costs on, say, a novel or work of nonfiction with a print run of 3,000 - 5,000 (about the lowest number you can print and have any margin at all). Let's say that book is about 250 pages, no artwork; so printing costs should be around $1.25-$1.50 per book. So you're talking about total printing costs of maybe $4,000 - $6,000. Printing costs, though, are the only part of the original total expense that is reduced -- note: not eradicate, but reduce -- in making an ebook. You still have to pay the writer, edit it, lay it out, design it, convert it, market it to vendors, promote it, and so on and so on.

    True, you now spread your costs out over a third format -- helping in the battle to overcome the margin you've lost to Amazon's discounting demands -- but you haven't gained much: depending on who you believe, ebook sales are still only somewhere around 3-5% of your total sales.

    That's enough to make me fairly joyous about the advent of ebooks. (That, in addition to the many new readers I believe they'll foster, and the artistic developments they should inspire.) But I would hope those numbers would dispel widespread perceptions about the realities of modern publishing, which I believe are badly hurting intellectual and literary culture at a time when it should be thriving like never before.