Why Do Consumers Think Book Prices Are Too High?

As Publishers and Bookstore chains fight for their lives and even just their relevancy, there seems to be some frustration with the public’s apparent desire for lower prices on books—especially ebooks. Ebook readers have protested the raising of prices, occasionally and erroneously targeting authors as being “greedy,” when authors have no control over the prices at which their books sell. In a recent New York Times article, the sentiment was summed up thusly by one author:

“The sense of entitlement of the American consumer is absolutely astonishing,” said Douglas Preston, whose novel “Impact” reached as high as No. 4 on The New York Times’s hardcover fiction best-seller list earlier this month. “It’s the Wal-Mart mentality, which in my view is very unhealthy for our country. It’s this notion of not wanting to pay the real price of something.”

Mr. Preston had recently been subject to reader protest because the digital publication of his most recent book had been “windowed” by his publisher to avoid undercutting hardcover sales. Windowing is the practice of delaying the release of a lower-priced version of the book. Mass market paperbacks are often windowed to appear a year after the hardcover edition of a book, for example.

But is his suggestion of “sense of entitlement” accurate? I was thinking about this and came up with a number of legitimate reasons why consumers believe ebook prices are too high:

1) “Books cost so much because of the price of paper!” For many years book buyers have been told, over and over again, that paper prices keep rising. I recall being told that the booming economy during the Clinton years meant that paper prices skyrocketed because so much wood pulp was being turned into cardboard for shipping containers. Most readers, upon hearing this news, shrugged and accepted it. After all, prices rise on everything.

But now, with paper being eliminated, and our being told that the printing costs were only ever 10% of the price of a book, we wonder what’s been going on. In fact, with that 10% number being bandied about, the fact is that paper prices cannot have been the reason book prices rose so sharply—not entirely, anyway. It would be logical to assume, then, that without paper, prices should be lower (at least by 10%).

2) Discounting Trained Us On The True Value of Books. This is one of turds that no amount of gold-leaf can gild. Bookstores have, over the last twenty years, used discount prices to eliminate competition and attract buyers. I’m old enough to remember when bestselling books actually sold for their retail price. It may be a trick of memory, but I don’t recall books being on sale, save for remaindered books—hardbacks left over after the paperback came out. Now, however, the question is not one of if a book will be on sale, but how big the discount will be. Heck, if I pick the right day and go into a bookstore, flash an AARP card, I get a discount. If I buy a card, I get a discount. If I open an email I get a discount. Discounts are everywhere.

The big problem is that when you spend two decades telling consumers that books are worth less than the cover price, consumers begin to believe you. Consumers are bargain-hunters because they’ve been trained to be bargain-hunters. In these economic times, they don’t have the money to be paying top dollar. And the problem with discounting—as the chains have seen over the last eighteen months—is that when you’re running on a slender margin, and if your product is not a necessity—yes, kids, contrary to public opinion, you will not actually die if you don’t have a book—you suffer when the economy tightens up.

Discounts have recalibrated the value of books down toward paperback price levels. It’s no surprise, then, that this lower price is what the consumers are comfortable paying.

3) Rotten Books Spoil It For The Rest Of Us. Every publisher puts out books that some consumers think are stinkers. Let’s be charitable and assume that the book actually isn’t bad, it was just not the right book for that consumer at that time. In his perception the book sucked. In that reader’s mind, he got cheated. The book didn’t deliver, so he’s not going to be so eager to plunk down the hardback price for another novel by a writer he doesn’t know.

Granted, if the reader had actually read a bit of the book in the store, or sampled it online, he’d have known what he was getting into and would have avoided the problem. Still, in his mind, books are not as valuable because he got nothing for something. Even if it is his fault, no one will be able to convince him otherwise, so he become very price-sensitive.

4) iTunes. With iTunes and songs going for 99 cents, we learned that the previous model for music sales could be broken. Lower prices benefited consumers and artists. Because of that new model, we have an expectation of the same fair pricing for fiction. And, curiously enough, the publishers are squawking much as the music companies did. We all know how that turned out.

5) There’s All This Free Stuff On The Web! There is no getting away from the fact that a lot of writers—many of them very good—are giving stuff away for free. This blog, for example, is one of many that folks can spend their time reading instead of burying their noses in books. And with the iPad and other devices like Sony’s recently announced dash device, accessing web content becomes even easier.

Free doesn’t mean good, nor does it necessarily mean bad. What it does mean, however, is that if someone doesn’t have the scratch to buy a book today, there is free content that will entertain him until such time that he can afford to buy a book. Urgency goes out of the equation.

Ultimately, however, price comparisons between zero and an ebook price does tend to favor lower prices.

6) We Can Do The Math. There are many analyses of book prices being published these days, and more will come. It doesn’t take a genius to figure out that there are some constants in the equation from the publishers’ side that aren’t shifting. The cogent question, if asked on an SAT test, would be phrased like this:

Chaos Group Publishing has a headquarters in Manhattan where they pay $45.00 a square foot per month. Flint, Michigan is full of empty buildings and warehouses that will go for $6.50 a square foot. Given that shipping companies operate nationally and internationally, that the cost of living is much less in Michigan, and that many of their workers (copy-editors, writers, artists) telecommute, how much per month could the publisher clear off overhead by moving?

With books being returnable—so half of the books printed are being destroyed—and unnecessary other expenses like expensive office space, the whole overhead portion of the equation can be lowered significantly—and not by firing employees. I think New York is a lot of fun, and moving there would place me closer to publishers as well as my parents in Vermont, but at the prices they want? I’d be bankrupt fast.

I love books. I love the feel of them. I love how they smell. I love how they look on my shelves. I even kind-of groove on the fact that the damned shelves bow beneath the weight. And I’ll gladly pay top dollar for a book I want to keep. But very few books rise to that level, in part because the price is too dear. Publishers are pricing themselves out of the market by hiking prices on consumers and lowering payouts to authors. The Internet is allowing authors to reach their audience directly and that is why the current business model is crumbling.

One other point that has to be addressed and really thought about when publishers complain about ebook prices. In all of the pricing scenarios, publishers make more off ebooks than they do off print books. Publishers complain, however, that since ebook sales are only 5%-10% of the market right now, that an immediate transition to ebooks would not allow them to sustain their business model. They are afraid that lower priced ebooks, which are more profitable, will undercut sales of the higher priced, less profitable hardbacks.

The argument is that ebook sales cannibalize print book sales.

But no one has produced a single study (to the best of my knowledge) that indicates cannibalization takes place. And yet, if it did, this would be to the benefit of publishers, since they could reduce warehouse space and would make more off each individual sale, as well as saving the cost of processing returned books.

The gaming industry has, for years, sold PDF versions of their books before, after and at the same time as very expensive print editions of their books. I’ve spoken with folks at the companies who do this. Every single one of them has told me the same thing: ebook sales do not cannibalize print book sales. And, mind you, the game industry is small enough that we don’t have the economies of scale that larger publishers do, so the price of the print books are very high.

In terms of fiction, I only have anecdotal evidence, but readers have told me many times that they like having the ebook version of stuff because “I can have my library with me wherever I go.” They still buy the print books, often to sit on their shelves in their collections, and use the ebook as the reading copy.

More importantly, however, no one is asking for an immediate shift from print to digital publishing. We know it will be a gradual process, but since digital is more profitable, instead of slowing the process, book publishers should accelerate it, to their own benefit, and that of the reading public.

Ultimately, I think readers have every reason in the world to be skeptical of the level of pricing on ebooks. We’ve been trained to accept discounts. In a parallel industry—music—we’ve been presented a very workable model that lets us get what we want for lower prices through iTunes. We’ve been fed half-truths for years, and there is a lot of competition out there with an industry that is intransigent in their willingness to address the need for change in their business model.

It’s going to be a buyers’ market. Anyone who thinks otherwise should get into another business. (And just a clue, though it might feel familiar, don’t start making buggy-whips… )

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23 Responses to “Why Do Consumers Think Book Prices Are Too High?”

  1. Wow, just this morning on Twitter I was saying that I see a lot of talk about the publishing costs that need to be recouped but I don’t here people questioning the cost of midtown Manhattan rent in that equation. Lo and behold an hour later I see Mike do it! Manna from heaven!

    This is pure Clayton Christensen “Innovator’s Dilemma” stuff, so the publishers (especially Harper Collins that put the damn book out) have no excuse for not reading up and getting ready for this future. A business that even has the concept that a higher profit/higher margin product can “cannibalize” the sales for the lower margin products has already effed it all up.

  2. One more point on eBooks and the consumer’s desire for lower prices. eBooks are less valuable, and should cost less. Period.

    A paper-book has proven longevity, can easily be lent, and can be resold. None of those things apply to eBooks, making them less valuable than paper-books.

    If I pay $15 for a discounted hard-cover book, I can read it, loan it to a few friends, and get then a $5 (or so) credit for it at my local used book store. The cost per read is significantly lower than that same eBook for the same $15 that only I read.

  3. you will not actually die if you don’t have a book

    not true! not true! *clings to overloaded bookshelf*

  4. I like digital content for work, where I usually have to look something up or need to copy some text. Wikis, blogs, forums are much more useful than books.

    But for novels I prefer the real thing. I don’t like to read on an electronical device. Because of this, a real book has a higher value for me.

    Of course, that might change with better readers. That Sony dash you mentioned certainly looks interesting. For me, personally, I doubt it. I’d rather have that thing: http://www.brother.com/en/news/2009/rid/index.htm (With a better resolution, of course 😉 )

    But for the moment, an ebook is worth less to me. And because its worth less, I don’t want to spend more.

    And of course, that feeling is emphasized by the fact that an ebook has practically zero cost for production(physical!), storage, delivery, sales personal, …

  5. There are I think, a number of conflated issues here and a good deal of obfuscation and hand waving. I think a lot of this is deliberate.

    To put it bluntly readers want to primarily reward the author. Oh sure we appreciate the middlemen to some extent but the person we really want to encourage is the author. Unfortunately we have no idea how much of our money goes to the author although we have a feeling that the answer is “not a lot”. I suspect some people wouldn’t mind paying more for an ebook than a paperback if they knew that the extra went to the author and not to Amazon/publisher/DRM provider ….

    Secondly we readers can smell the BS when we see it. No matter how often publishers claim that they can’t possibly publish ebooks profitably for $9.99 or that ebooks cannibalize print sales we note that there are a number of examples that totally disprove this claim.

    Baen books is probably the poster child but there are others that seem to be doing OK. Baen sells DRM-free ebooks at $4-$6 each (or $15 if bought as an eARC BEFORE paper release) and has been doing this for over a decade now. They don’t release the numbers but my understanding is that they sell a few thousand electronic copies of every title and that number is larger for bestsellers.

    Baen is interesting in other ways. They also seem to be one of the few publishers not suffering too much in the recent downturn and they generate intense loyalty as a brand.

    I think that loyalty is another key point. Most imprints are so big and sprawling, and so corporately controlled, that it is hard for a reader to be loyal to the publisher because the publisher produces so many differing titles. We are however loyal to authors (or Star Wars like shared universes) but not, as a general rule to publishers. There are a few exceptions in addition to Baen – romance brands such as Harlequin and its various imprints (who also I note sell ebooks more cheaply and very successfully) for example – but for the most part we readers neither know nor care who the publisher is, which corporate conglomerate it belongs to or how many starving editors it employs in New York City.

    The publishers are desperately trying to justify their existence and their income and really we don’t care whether they survive or not. What we care about is that our favorite authors are productive and keep on entertaining us, hence we care that they get enough money to keep on doing this. The rest of the chain is just an apparently necessary evil and perhaps some chunks of them are actually an unnecessary evil.

  6. ‘But no one has produced a single study (to the best of my knowledge) that indicates cannibalization takes place.’

    As you know, Mike, doing studies in the Publishing industry has two issues. One, readers are so dispersed and disparate of action and motivation they are hard to survey. Two Publishers (by that I mean the Big Three) hate to use logic when ‘when in danger, when in doubt, run in circles, scream and shout.’

    Every anecdotal response has been the opposite of cannibalization. John Birmingham recently blogged about a sudden, unexpected, increase in one period of sales. He noted that it was ‘interesting’ that it matched when one of his novels had been released as a free ebook. Which is exactly why Baen has the Free Library and gives away CDs. Ebooks remain ‘self paying’ marketing tool. The more you give away, the more ebooks and deadtree people buy.

    Quote from a discussion with Jim Baen.

    ‘Johnny, this CD thing (his idea) was genius. It is like watching sheep fleece themselves. We give books away free. They buy more ebooks. They buy real books. I wish I could get a CD into the hands of every reader in the country.’

    ‘There’s always the AOL route, Jim.’

    Pause.

    ‘Do not tempt me to the dark side young padwan.’
    🙂

    Misty Lackey decided to ‘test’ the Free Library concept. She posted three of her oldest works. She’s the sort of person who aggressively tracks every dime in royalties. The next royalty cycle, four DIFFERENT older works, all of which had had steadly low sales, tripled in sales.

    Ebooks, mixed with some ‘free’ content along with low price-point NON-DRM of newer content (price point going up as the ‘newness’ increases, I make more off eARCs than any other ‘type’ of format) are a self-licking ice-cream cone.

    I got in alot of hot water with S&S because I pointed out publicly at BEA that S&S was leaving up to a billion dollars on the table by fighting what works with eBooks.

    And you’re never going to get publishers to move to Detroit. They’d have to give up their houses in the Hamptons.

    Last my standard quote on eBooks.

    ‘I grew up mostly in Florida and at New Smyrna beach at the age of five I learned an important lesson about waves. There are three ways to deal with a big wave. You can fight it. And it will pick you up, smash you into the hard sand and drag you to your death. You can let it go by and be left out at sea. Or you can try to ride it. You may get left behind, you may get smashed to the hard cold sand, but if you catch it just right it will carry you safe to shore.

    ‘Me? I’m gonna try to ride the wave. So far, so good.’

    John

  7. Douglas Preston is one of my favorite authors. But I think he woefully misses the point. The “real” price is what people are willing to pay. Preston has been on the New York Times bestseller list multiple times and I imagine that he can make a decent living with his writing. The vast majority of fiction writers with traditional publishers cannot. Is he suggesting $40 (without a discount) hardbacks and $15+ mass market pb’s would be real prices? Or is he suggesting that only people approaching bestseller status are worth what he considers “real prices”?

    When you start looking at it this way, you see how ridiculous the idea of some mythical “real” price is. Economics involves supply AND demand, but in all the angst about ebooks, those on the supply side are conveniently ignoring the demand. Personally I find arguing over how much a publisher has to charge to be mostly pointless. For purposes of argument, I’ll even stipulate that a publisher has to charge $12-$15 to make money – it doesn’t change the reality one bit. Plenty of authors will put their work out there for less and no matter how much you argue readers as a whole will never perceive ebooks to need to be $15 when new hardcovers are $17 on Amazon.

    The “real” price is in fact being determined as we speak by the market. It’s a nascent and imperfect market, and it contains more threats for traditional publishing. Pontificating about the American consumer is among the dumbest responses I have seen.

    Traditional publishers have two possible roles to play going forward that might justify charging more than $3-$5: producing higher quality books than most authors can/will on their own, and really selling consumers on the fact that a book from means quality. Unfortunately for them, the reduction in editing staff and the willingness to put out mediocre books to help the bottom line both undermine these two possible roles. Readers will still buy traditionally published books for a long time to come, but publishers are going to continue to get squeezed because while they offer value, they offer LESS value than the difference between a $3 ebook and a $15 one. At least, I’d wager a lot that over time many readers will come to this conclusion. It’s hard to see how they survive without some major changes that go to the core of the extra value they offer. Head-in-the-sand comments like Preston’s represent the opposite of how how they need to be looking at things.

  8. Edward Milewski 04. Mar, 2010 at 4:36 pm

    In a year I buy a lot of books for my wife and I.Some new and some used.But there is only so much money for books and at times none.I’m always looking for the cheapest I can find of what I want.( not only in books. IN everything ) I’m also looking for value. To me there is none in e-books.
    I won’t pay out money for a machine to read books that I know for sure will fail in a few years at best and then my library would be lost.MY paper book library will outlive me. I’ve got books that are over 100 years old. No e-book will last anything like that.
    Sometimes you discover an author you like. Then you discover they have a tremendous backlist and you want it.Now-a-days you can get it all rather easily and very cheaply.So you buy a whole bunch for pennies on the dollar because you can.(Old books are a dime a dozen at charity events.)Then I can read them at my leisure.Even if it takes years.They’ll still be there on my shelf. Not necessarily so with e-books.Mind you because I can do this I wouldn’t necessarily fork out big money for paper books either.
    Another point is I can personally read perhaps a couple dozen books a year. I’m not current in most of my reading. If there is a new book out that I know I want, I know that by the time I get through my current reading list the new one I wanted will now be “old” and avaiable in paper very cheap. A case in point. Robert Holdstock recently published a book called Avilion. I read recently some reviews and it sounded good. Thought I might get a copy in a year or so. Got one brand new last week in a grocery store for $4.99. Regular retail in Canada. More than $20.00 for the trade paperback which this was.
    So it goes. Sorry if this was kind of disjointed.

  9. Mike,
    I couldn’t find where else I could drop you a line, but I really like your new web page. MUCH nicer. You deserve it.

    Robert

  10. I agree on the premise and points here, but wondered about one statement. Is it really cheaper to get an album through ITunes? It’s been a while since I’ve bought music, but seems most CDs at a store run around 8-12 dollars. Don’t most albums have 8-12 songs on it or more? If so, it would be a wash at $0.99/song.

    What it does do is allow you to download only the songs you like off an album, which makes it cheaper to get that one song instead of buying a whole album to get it.

    And while ebooks wouldn’t work on the ITune model (who’s going to pay for a book by downloading individual chapters? And which ones could they leave out because they didn’t like them?), I think your overall point still stands: ITunes forced the music industry into a new business model kicking and screaming, and it appears the same thing will be happening to publishers.

    But I’m not sure that if one bought an album’s songs from ITunes, that it would be much cheaper, if at all, than hopping down to the store and buying the CD. Plus, most of us are going to burn those songs onto a CD so we can listen to them in the car or other old fashion playing device, so we have added expense of buying a blank CD at a store and the time spent burning it.

    So I’m not sure if we’re talking comparing the cost of getting an album from ITunes to buying a CD at a store that it actually shows a similar situation to what we want to see happen with ebooks, which is, you have far lower cost to make them, store them, deliver them, and sell them: they should be default be cheaper than a paperback book.

  11. I second R.L. Copple’s comments about the cost of an ITunes song vs. the cost of an eBook. As much as people might want cheaper eBooks (compared to paper books), expecting them to be $0.99 is unrealistic, but certainly cheaper than they are now is not an unrealistic expectation.

    Additionally, and as I believe FrancisT was somewhat alluding to, I wonder if maybe the big publishing houses fear a world with substantial eBook sales. In the current system (paper books), it is not a cheap thing to mass market publish a book (what with all the costs associated with printing and delivering a book). But if eBooks became the medium of choice for readers, then any individual would be able to “publish” and sell his/her book just by uploading it to an online eBook seller. Sure, big publishing houses would still have the money to advertise and therefore sell more titles and attract the “big name”, and therefore best selling, authors, but it would level the playing field somewhat. And, as time goes by, as more and more authors who have a “hit” via self-publishing (or through a smaller publisher), the incentive to move to one of the big publishers would be reduced because the difference in the bottom line for the author would be less.

    Large companies, while often intractable, have self-preservation on their mind just as much as profits. The big publishers could start a massive push towards eBooks tomorrow if they wanted to, but clearly they don’t. If it was as simple as some say it could be, the big publishers could cut their expenses considerably, lower prices, increase sales and make more profit overnight. So why aren’t they? There must be an element of fear and not just the normal fear of change.

  12. I remember buying mass market paperbacks when they were $2.95 brand new, & miss those days now that they are $7.99 a shot. But that’s the way of the world, & I’m never going to stop reading, & I want authors to be compensated.

    That being said, I despise hardbacks. Double to triple the price for the same story, but in a format that is heavy, doesn’t fit in my purse, & doesn’t fit as well on my book shelf. I only indulge for about 4 authors, the ones that I absolutely cannot wait another 6 months to a year for the paperback to come out. It has always been my assumption that the higher price has to do with the added dustjacket, the heavier binding, and the heavier, bigger paper.

    I want to go the ereader route, but what I’m waiting for are the following:
    — A standardized format that every ereader can display & that every catalog sells. I don’t want to be limited to just Amazon’s catalog, or just Barnes & Noble’s, etc.
    — Prices for ebooks need to be consistent with mass market paperbacks. See my notes above. In an ebook, it’s truly the STORY that I should be paying for, not the BOOK. Indeed, I am one of the consumers who’s been told for years that the bulk of the cost of the book is wrapped up in the physical book … the cost of paper, the cost of warehousing inventory, the cost of printing, the cost of distribution. I have a hard time even justifying paying a paperback price for an ebook when the majority of the physical book costs ought to go away.

    Resolve those issues, and I will likely go 100% ebook.

    The only thing I will really regret is the number of people who will lose their jobs … the warehouse workers, the papermill workers, the printers, & the distributors. I don’t know how to resolve that issue.

  13. The whole E-book thing reminds me of when the DMV changed from paper smog certificates for smog testing your car. They charged about $7 for the paper certificate that was then sent to the DMV. When htey went digital and transmitted teh certification straight from the testing facility to the DMV across the internet, they charged a $7 digital transmission fee. I think it is now up to about $11, to send it for free across the internet. Or the places that charge you a “convenience fee” for paying online instantly, or ticketmaster charging you to get tickets via email, opposed to free mail delivery. Any way greedy companies can squeeze another penny out of you they will.

  14. I’ve said most of this before, but I really hate what is happening now because the only ones winning are the Publishers. I’ve heard nothing anywhere noting that Authors have been receiving any more and yet some of the people yelling the loudest to the public have been some Authors. Also a rise in ebook sales just means less sales. I’ve bought more books and taken risks on more new books than I ever did with print books since I’ve had my Kindle because of the lower price. As mentioned I feel it isn’t as worth the risk when a new print book cost so much. I at least will be buying less and to me that is sad for everyone involved.

    I half wonder if all of the fighting now is the fear on the horizon of obsolescence. If more people start to want to buy ebooks more, companies like Amazon are will to list directly from the Author with more money to the Author, and the ease of advertising now with the Internet that in the future a Publisher could become obsolete. We are not talking tomorrow, but it is a future possibility. This becomes doubly more so as the print on demand technologies become better and cheaper so that individuals wanting print books could still have that fulfilled at still a lower cost than publishers.

  15. That business about paper prices tracking consumer-packaging demand is legit, according to back-office colleagues I talked to at Bantam Doubleday Dell during the period in question. More competition for paper [even cardboard] equals higher prices for everybody, even the makers of Charmin. It’s a cyclical business. But you are *so right* that paper supply is only a small fraction of a book’s cost. And right again that e-books have *nothing to do with this*.

  16. Hi,

    Thanks for the post. This is a good read and explains much of what I was wondering about the ebook vs. paper book process.

    Any chance you are thinking of updating your post with current info?

    Thanks,
    Phil

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