Direct Sales: Publishing’s Last Stand
Amazon’s recent threat to coerce small presses into using its print on demand subsidiary BookSurge left the publishing community quaking. A coalition of Ingram, LightningSource, and publishers large and small - all escorted by mosquito squadrons of furious bloggers (like Angela Hoy) – has for the moment driven the beast back into its cage.
Lest you congratulate yourself, I have some bad news for you: BookSurge was merely a skirmish. There are war clouds on the horizon, and a decisive showdown between publishers and booksellers is shaping up. At stake: the revenue generated by retail sales of books to consumers. Publishers outsourced retail a long time ago, but now they want it back. In fact, they must have it back; it’s a matter of survival.
There are two ways to sell books today: one is through independent bookshops or bookstore chains, the other by mail order.
Bookstores
However quaint ye olde booke shoppes may once have been, modern bookstore retailing is dominated by behemoth Barnes & Noble. By aggressively building mall outlets and superstores to drive out competition, promoting frontlist blockbusters and superstar authors, and by maneuvering publishers into total financial dependency, B&N has aggrandized itself at the expense the publishing industry. It has also taken cruel advantage of the fact that books are returnable for full credit, placing the full burden of risk on the shoulders of publishers and contributing to a soaring return rate for trade books of 50% or even higher. To make things worse, B&N owns a publishing company, putting it in direct competition with its own purveyors and undercutting them with its own store-brand titles.
Mail Order
As for mail order sales, only a few decades ago these were a significant contributor to publisher revenues. The rise of book clubs largely took that function out of publishers’ hands, and Amazon.com finished the job - finished it with a vengeance. Capitalizing on the coming of age of the Internet, Amazon became not just the leading purveyor of mail order books; it became in effect the only one. Buying books from publishers at a discount of roughly 50% and reselling them at about a 20% markup gives Amazon its profit margin. Super-efficient service, brilliant marketing, first-rate catalogue information and ingenious bells and whistles like Behind-the-Book, peer reviews, bestseller rankings, free shipping on certain sales, and yes, even its used-book marketplace, have given Amazon a near monopoly over online sale of books.
Publishers have awoken to the horrible realization that by allowing themselves to be taken hostage by Barnes & Noble and Amazon, they made bargains with the Devil. As their profit margins wear down to transparent thinness, they understand they must recapture the advantage or risk being marginalized even more than they are now. The Amazon/BookSurge scare has made them realize that the slippery slope to total surrender is to let Amazon print their books for them. For, if Amazon becomes both printer and distributor, it will leave publishers with little to do besides acquire and edit, thus becoming glorified book packagers for the Amazon Publishing Company.
There is only one way for publishers to recover the initiative, and that is to sell books directly to the consumer. Which is precisely what they have started to do. Go to the websites of most publishers and you’ll see that you can indeed purchase their titles without having to go to a bookstore or logging on to Amazon.com. When you look at the prices, however, you realize there’s something wrong: most of their titles are sold at full list price or close to it. Wouldn’t they be more competitive if they gave their customers a discount?
Of course they would. But they can’t, for the simple reason that discounting their books puts them into direct competition with their retailers. As long as they depend on Amazon, Barnes & Noble, and other third-party retailers, they cannot cut prices.
Obviously, retailers hold the high ground and their position would seem to be all but unassailable, except for one critical factor: as big as they are, retailers are intermediaries in a world that is rapidly disintermediating. And, as we have seen in every major business from movies to music to banking to newspapers, no retailer is invulnerable to market forces bent on eliminating middlemen in favor of a one-on-one relationship between supplier and consumer.
Enter direct marketing. Today publishers are sticking a cautious toe in the water. But it will not stop there. Desperate times call for desperate measures, and if the only source of profit (to say nothing of independence and dignity) left to publishers is consumer retailing, they will step up their activities in this area until in time they are in a position to challenge the Barnes & Nobles and Amazons. Though the only weapon they have is their content, that may be more than enough to vanquish these Goliaths.
Aux barricades!
- Richard Curtis
Pictured above: "Kong Versus Carnosaur," copyright 2004 by Joe Devito Artwork, LLC. All rights reserved. My heartfelt thanks to Joe for personally granting permission for this beautiful painting from his excellent book, Kong: King of Skull Island.
Lest you congratulate yourself, I have some bad news for you: BookSurge was merely a skirmish. There are war clouds on the horizon, and a decisive showdown between publishers and booksellers is shaping up. At stake: the revenue generated by retail sales of books to consumers. Publishers outsourced retail a long time ago, but now they want it back. In fact, they must have it back; it’s a matter of survival.
There are two ways to sell books today: one is through independent bookshops or bookstore chains, the other by mail order.
Bookstores
However quaint ye olde booke shoppes may once have been, modern bookstore retailing is dominated by behemoth Barnes & Noble. By aggressively building mall outlets and superstores to drive out competition, promoting frontlist blockbusters and superstar authors, and by maneuvering publishers into total financial dependency, B&N has aggrandized itself at the expense the publishing industry. It has also taken cruel advantage of the fact that books are returnable for full credit, placing the full burden of risk on the shoulders of publishers and contributing to a soaring return rate for trade books of 50% or even higher. To make things worse, B&N owns a publishing company, putting it in direct competition with its own purveyors and undercutting them with its own store-brand titles.
Mail Order
As for mail order sales, only a few decades ago these were a significant contributor to publisher revenues. The rise of book clubs largely took that function out of publishers’ hands, and Amazon.com finished the job - finished it with a vengeance. Capitalizing on the coming of age of the Internet, Amazon became not just the leading purveyor of mail order books; it became in effect the only one. Buying books from publishers at a discount of roughly 50% and reselling them at about a 20% markup gives Amazon its profit margin. Super-efficient service, brilliant marketing, first-rate catalogue information and ingenious bells and whistles like Behind-the-Book, peer reviews, bestseller rankings, free shipping on certain sales, and yes, even its used-book marketplace, have given Amazon a near monopoly over online sale of books.
Publishers have awoken to the horrible realization that by allowing themselves to be taken hostage by Barnes & Noble and Amazon, they made bargains with the Devil. As their profit margins wear down to transparent thinness, they understand they must recapture the advantage or risk being marginalized even more than they are now. The Amazon/BookSurge scare has made them realize that the slippery slope to total surrender is to let Amazon print their books for them. For, if Amazon becomes both printer and distributor, it will leave publishers with little to do besides acquire and edit, thus becoming glorified book packagers for the Amazon Publishing Company.
There is only one way for publishers to recover the initiative, and that is to sell books directly to the consumer. Which is precisely what they have started to do. Go to the websites of most publishers and you’ll see that you can indeed purchase their titles without having to go to a bookstore or logging on to Amazon.com. When you look at the prices, however, you realize there’s something wrong: most of their titles are sold at full list price or close to it. Wouldn’t they be more competitive if they gave their customers a discount?
Of course they would. But they can’t, for the simple reason that discounting their books puts them into direct competition with their retailers. As long as they depend on Amazon, Barnes & Noble, and other third-party retailers, they cannot cut prices.
Obviously, retailers hold the high ground and their position would seem to be all but unassailable, except for one critical factor: as big as they are, retailers are intermediaries in a world that is rapidly disintermediating. And, as we have seen in every major business from movies to music to banking to newspapers, no retailer is invulnerable to market forces bent on eliminating middlemen in favor of a one-on-one relationship between supplier and consumer.
Enter direct marketing. Today publishers are sticking a cautious toe in the water. But it will not stop there. Desperate times call for desperate measures, and if the only source of profit (to say nothing of independence and dignity) left to publishers is consumer retailing, they will step up their activities in this area until in time they are in a position to challenge the Barnes & Nobles and Amazons. Though the only weapon they have is their content, that may be more than enough to vanquish these Goliaths.
Aux barricades!
- Richard Curtis
Pictured above: "Kong Versus Carnosaur," copyright 2004 by Joe Devito Artwork, LLC. All rights reserved. My heartfelt thanks to Joe for personally granting permission for this beautiful painting from his excellent book, Kong: King of Skull Island.
Labels: Amazon, Op Ed, publishing news, Richard Curtis
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Friday, April 04, 2008 Permalink
