Authors Can Be Stupid: Price War Motives

It has been suggested that the battle between publishers and Amazon over ebook pricing actually had two motives. The first was to prevent Amazon from establishing a “monopoly” over ebook sales. The second was to create a “sustainable price model.”

I’ve suggested a third motive: greed.

Monopoly: Amazon never had a monopoly, wasn’t going to have a monopoly, and no one with enough neurons to form a synapse believed they were going to have a monopoly. Amazon never demanded exclusivity from any publishers in the United States, small or large. Amazon allowed files to be sent to a Kindle outside their store structure. Amazon did not support epub, which is the format that all the other ereaders support, leaving wide open a whole market vector over which they had no control. Amazon understood that to establish a monopoly—were they somehow able to do so—would invite Department of Justice investigations and anti-trust litigation.

Moreover, if publishers were truly worried about Amazon having a monopoly, they would have pushed matters before Apple offered the agency model for pricing. They would have sued for restraint of trade or otherwise have used lawyers to force Amazon to negotiate better deals. Amazon does have a lock on sales for the Kindle, and used their clout there to demand better pricing from suppliers. That is exactly what every retail outlet and chain in the world does when they have the opportunity.

In a last-ditch attempt to justify this idea, people have pointed to Amazon saying they would give in to Macmillan because the publisher has “a monopoly” over the content they produce. Evanescent persiflage. Every manufacturer has a monopoly over what they produce. No single publisher has a monopoly over all books produced. The monopoly comment was a statement of fact and to construe it as something more significant or sinister is just silly.

Sustainable Pricing Model: Nice business terminology that roughly translates into “I get what I want.” What the agency model does is allow publishers to charge as much as they want for books, which may not be what the market will bear. They will charge exactly what they believe they need to make for profitability—the return on investment they need to keep their current business model afloat. I’ve addressed before the question of bloated overhead that stems just from locating operations in New York that don’t need to be there. The model is broken, and inefficiency will be subsidized through higher prices—prices which, for years and years, were justified to the public as being caused by higher paper prices.

This model is built specifically to allow prices to rise, which is a ridiculous proposition in the face of downward pricing pressure when things move into the digital realm. Artificially high prices create a market for pirated versions of things. Premium prices charged for a premium product (hardbacks versus paperbacks) can be justified in the minds of the consumer. Charging a premium for the first look at a book will seem as nothing to fanatical devotees of certain authors; but will seem like a gross ripoff to many other folks.

The shift in sales figures and sales modalities in the music business should be pointing to a probable future. The problem with most publishers is that they’re part of larger entertainment conglomerates who had their music divisions clobbered by digital; and now they’re vowing “Never again.” Those who forget the past are doomed to repeat it, and this is a disaster in the offing.

Greed: I really like greed as a motive here. The publishers take from Amazon by reducing Amazon’s discount. They take from authors by reducing our share of the electronic take. They refuse to make changes to their business which would eliminate waste and run things more efficiently, and they fail to capitalize the resources they already have (ebooks which are under the higher author cut) in favor of all the new things coming out where they make more.

I should also note here that publishers have suggested that the higher prices will allow them to pay authors. However, in the 22 years that I’ve been a published author, the average advance for a first novel has not risen at all. Authors who are not superstars—Stephen King, J. K. Rowling, Stephanie Meyer—are constantly under pressure to hit it big with every book. Big, in this case, is a constantly shifting target that results in such authors, like me, being squeezed badly. The contract for my current fantasy trilogy offered me an advance that was 70% less than my previous contract, and I am not alone in facing this sort of down-sizing of pay. And I’m a writer who earns out his advances and has his books being reprinted all the time.

I can discuss the technical reasons for this sort of pressure another time, but in short strokes it comes down to this: instead of offering a journeyman author $30,000 for a novel that will be profitable but not a blockbuster, a publisher can purchase a dozen first novels and hope just one of them will explode. It’s gambling on the longshots, which is fine for a wasted weekend in Las Vegas, but isn’t a way to run a business. And it is a business model that persists for two reasons. First, that’s the way it’s been done forever and, second, virtually every editor, no matter their genre or division, hopes they discover the next James Joyce, so they can be immortalized through their discovery.

People can rationalize all sorts of noble motives for the deal reached with Amazon, but from where I sit, there’s only one winner that comes out of it: the publishers. They’ve evidenced a willingness to squeeze both sides of the chain and I see no reason to suppose they won’t continue to do so in the future. They’re in the driver’s seat, so they have the right to call what’s going to be on the radio.

But given how badly they’ve bungled things in the past, and how they seem to be quite happy to hit the gas while driving on black ice now, I think everyone should buckle up and hope they’re not hurt too badly in the crash, or find a way to mitigate the damage that’s coming down the line.

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2 Responses to “Authors Can Be Stupid: Price War Motives”

  1. Greed and major corporate entities will be forever in lockstep with each other, so I completely agree that this deal was fueled more by greed than noble intent. What do you do when your business model is failing? Fix it using the wealth of technologies available? No, you blame everyone else and grab as much money as you can in the process.

  2. Mike, I’m sure it’s just a coincidence that right underneath this post is “A Gathering Evil Limited Time Offer.” But so apropos.

    The truly sad part is that if publishers would experiment with lower pricing, they might find they’d make even more money because sales might more than offset the lower prices. But unless you test this out, you’ll never know.

    Swinging for the fences with every product… hmm, that strategy sounds exactly like what large software publishers have been trying, and look how much profit EA and Activision are making these days… oh, wait…