Monopolies – the great money suck


So Amazon has removed the Kindle titles of books who are distributed by IPG because Amazon wants to negotiate a more favorable contract – for Amazon. IPG demurred, so they are feeling the Amazon Backlash.

Mark Suchomel, head kahuna of IPG said, “Amazon.com is putting pressure on publishers and distributors to change their terms for electronic and print books to be more favorable toward Amazon.”

In other words, if you don’t pay, you don’t play. And the result is that you’re slammed out of the largest selling marketplace. And this is why I worry about Amazon’s overreaching power. They can dictate terms to distributors and publishers that are more and more onerous to our ever-shrinking profit margin. They’re reaching the point where it doesn’t matter whether they squeeze us out or not because they have their own publishing company.

Frankly this scares the stuffin’ out of me because I’m powerless to call any shots. If they’re slamming IPG, is my wonderful distributor, Consortium, next, and we’ll have to swallow untenable terms? Publishers have long bemoaned the “it’s the price of doing business” because it’s true.

For instance, if a publisher doesn’t accept returns on their books from bookstores, they’re slammed out of getting their books stocked. These books invariably come back in such poor shape that they can’t be used again. That means if we sent out 500 units and 150 came back, then goodbye 150 units…and we still had to pay for the print runs. That’s why publishers have to be mindful about what goes out and make sure it doesn’t come back.

Returns were a horrible little thing created to entice bookstores to buy a publisher’s books. Like taxes, it grew and expanded into an ugly behemoth that sucks money faster than the government. I’ve seen countless publishers go out of business due to massive returns.

Discounting is another hoop publishers have to jump through. Like returns, publishers started this to entice bookstores to order their books. And like returns, this turned into a huge money suck because publishers were competing against each other to see how large the discounting would go. So in that example, bookstores are the monopoly that keeps publishers paying the piper. It’s the price of doing business. And it’s an interesting piece of irony that both returns and discounts were started by publishers. Oh the tangled web we weave.

This is especially egregious because distributors like IPG, Consortium, PGW, Perseus, represent thousands of smaller independent commercial presses who don’t have their own sales staff. That means in order for our distributors to stay in business and do the fabulous job they do, they get a cut of our sales. If Amazon cuts more deeply into those margins, at what point will these smaller presses throw in the towel because they are no longer financially viable?

IPG’s publisher clients are holding their breath to see how this will end – and frankly, so is every other small commercial presse. And so are thousands of authors.

When you’re the biggest game in town, you can call the shots, and I only hope and pray that their monopoly doesn’t destroy all that’s good about publishing.

7 Responses to Monopolies – the great money suck

  1. Voidwalker says:

    I was under the impression that the publisher had to take back returns, but not for the full value of the original book price (to the bookstore that is)?

    So if PublisherX sells 500 units to BookstoreZ at $5/unit, but returns 200 of them, don’t they return it for less than $5 to help curb the cost eating involved on the publisher?

  2. It seems to me that Amazon is playing hardball. Publishing has been a hard ball player through the years, but maybe they need to bone up on the rules and tighten up their skillset. If Amazon can threaten and coerce because they can operate their own publishing outfits, why can’t publishers toss out a curve by working together to create competing retail operations? Small retail booksellers have always been squeezed between distributors and publishers with little margin left to trickle out, so they will suffer no matter which way the wind blows; but Amazon acquired their power by being the only player willing to stretch the envelope when everyone laughed at what they were trying to do. The Industry needs to don their battle gear and begin taking the offense instead of reacting and complaining. It is possible to level the playing field, but boulders will have to be moved. IMHO

  3. “Bone up on the ‘rules’ and tighten their skillset”? Could you please be more specific? I’d posit that successful publishers have pretty good skills, but this is an entirely different story. Here, you have a giant monolith growing so large that it can attempt to call the shots because they can, and it’s putting hundreds of good, solid independent commercial presses at risk – meaning thousands of authors. Are you ok with this?

    why can’t publishers toss out a curve by working together to create competing retail operations?
    Because we aren’t retailers. Your suggestion is untenable due to the sheer enormity of the publishing world. You can’t can bring thousands of commercial publishers together – big and small – and expect to attain any kind of cohesion. We leave the retail business to experts. letting them do what they do best so we can do what we do best.

    As nice as the idea is, you haven’t made any case for how the playing field can be leveled, so it’s hard to entertain your arguments as valid.

  4. Well, one thing that might help — and believe me, I’m not OK with any one entity controlling how books find readers — is for publishers to begin to implement some of the technology of distribution that has given Amazon such a clean lead. Another idea might be to stop saying, “We’re not retailers.” and find ways that you can be. eBooks seem to be holding the sign pointing the way forward. Paper will eventually (sad to readers like me that can only read paper and re-coil at screen reading), become a luxury.

    Your booksellers are as devastated by Amazon as you are, so maybe closer partnerships, such as by passing on new tech distribution savings to retail booksellers will help strengthen your market position with readers. So will more consumer-targeted marketing that will benefit your retailers. It should be all about the readers. It’s their perception that counts and that can be cultivated. Nothing will change for the better through casting moral aspersions at megaliths such as Amazon. They are just doing what they can, legally, to corner the market. They have displayed an amazing ability to attract customers. Especially in this economy. Low prices and fast shipping rule. The idea I’ve read lately, of industry groups attempting to boycott Amazon through withdrawing titles outright, seems like desperation. If you eliminate the largest retailer of your products, how does that serve you?

    The idea of direct marketing to consumers may fly in the face of how things used to work, but “used to” ain’t gonna cut it any more, in my humble opinion. Amazon and Costco are not going to walk away. Small presses, like yours, are lighter on their feet and will have an easier time re-tooling for additional distribution channels and newer ways to reach readers. Your industry distributors will have to re-consider their traditional roles and margins, as well.

    I have a great deal of faith in the ingenuity of the industry. Its prosperity directly affects all writers. We want the outcome to bring the greatest diversity of books to an eagerly waiting readership at prices that make owning broad libraries attractive. I’m rooting for a long, prosperous season for everyone. It’s going to be a struggle, but out of struggle grows ingenuity.

  5. publishers to begin to implement some of the technology of distribution that has given Amazon such a clean lead
    Um…we already have that…it’s called distribution partners like IPG, Consortium, PGW, Perseus, etc.

    Another idea might be to stop saying, “We’re not retailers.” and find ways that you can be.
    Richard, with all due respect, you aren’t a publisher, and you have no idea how untenable this is. What sounds like a simple matter to you is actually an impossibility. Might as well ask for pink unicorns as well.

    There are cases where a bookstore spawned a publisher, like Poisoned Pen Press. Their bookstore specializes in mystery/thriller, and they’re know far and wide as one of the premier genre bookstores. From that came Poisoned Pen Press. That said, they still maintain the services of distribution outlets because they don’t have the staff, time, or expertise to be a retailer.

    There is also the financial return. You have to drive people to your store, and you’re competing against every other publisher out there who is their own retailer. It’s unwieldy and lacks logic.

    It is about the readers – and that’s why we have bookstores…for ease of perusal and purchase. If every publisher was also a retailer, readers would implode at having to go to so many stores just to find something they like.

    It’s not a matter of snobbery and fear of change, but rather utilizing business practices that make sense and make life easier for readers.

  6. You’re right. I’m not a publisher, but I have been a small retail owner for more years than I am happy admitting. I understand that there are constraints within your business relationships that shouldn’t be lost in any transition, but again, in my opinion, eBooks are a brand new product that hasn’t really settled into any specific channels of distribution, yet. That sounds like an opportunity for publishers to confront Amazon and the box stores head-on. Readers will always enjoy a trip to the bookstore, but the bookstore will always be primarily a place to shop paper print books. eBook’s distribution will always be online, and the costs are much lower there. I hope that small presses will be able to find a way to weave a blend of the two forms that keeps them profitable and keeps books flowing. Anyway, my intent through these comments has been to serve as a cheering squad, not a lineman. I’ll say it again: I have faith that ingenuity will prevail. Besides, trust laws were tossed on the garbage heap years ago, for better or worse. There’s gotta be another way out of the bag.

  7. eBooks are a brand new product that hasn’t really settled into any specific channels of distribution, yet.
    Oh gosh yes…they absolutely have! There are a jillion places that our distributor sends our ebooks. That isn’t the problem. The problem is that Amazon has accumulated the lion’s share of the pie, so it’s a David and Goliath thing (ugh, there I go again mixing metaphors).

    When people think about buying an e-book, most people think of Amazon. They have already established their foothold by appealing to people’s desire for good selection and pricing. Few can compete on that level because they lack the kind of financial solvency needed to knock Amazon off its rocker.

    These bumps in the road are being watched by a breathless publishing industry, and we’re cheering for IPG to break some new ground.

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