In January, Barnes & Noble made the decision to no longer carry Amazon-published titles in their brick-and-mortar stores “based on Amazon’s continued push for exclusivity with publishers, agents and the authors they represent ... [which] have prohibited us from offering certain ebooks to our customers.” In Barnes & Noble’s view, “Amazon has proven they would not be a good publishing partner ... as they continue to pull content off the market for their own self interest.” This decision applied to all 705 stores. Since this initial skirmish, Canada’s Indigo Books and Music “congratulated Barnes & Noble for taking a leadership stance on the matter,” Indigo VP Janet Eger explained. “In our view Amazon’s actions are not in the long-term interests of the reading public or the publishing and book retailing industry, globally.”
Books-A-Million, the second-largest brick-and-mortar bookseller in the U.S., followed quickly confirming to Publishers Weekly that it had “joined with Barnes & Noble and will not carry Amazon Publishing titles, including those published under Houghton Mifflin Harcourt’s New Harvest imprint.” The dust had yet to settle when IndieCommerce, American Booksellers Association’s “ecommerce product for independent bookstores” began to remove all Amazon titles from its database. Director Matt Supko noted in an email to member independents that “only publishers’ titles that are made available to retailers for sale in all available formats will be included in the IndieCommerce inventory database.”
“While Amazon is seeking to distribute its print catalog through conventional means,” Supko continued, “it seems that they are simultaneously pursuing a strategy of locking in ebook exclusives which other retailers are not allowed to sell. IndieCommerce believes that this is wrong.”
This follows tensions last holiday season when Amazon offered potential customers a discount if they went into bricks-and-mortar bookstores on Saturday, Dec.10, 2011, using the Amazon price check app on books they wanted to purchase, and then purchased them from Amazon instead for a discount of up to $15. Called “showrooming” by the industry, Publishers Weekly noted “that a growing number of customers come into their stores, browse the titles, and then buy a print book or an e-book online,” citing statistics that an increasing number of customers were already doing just that. American Booksellers Association’s CEO Oren Teicher published an open letter to Bezos, at the time, in which he questioned Amazon’s motives and intent. Calling the program, which would deny local booksellers from collecting sales taxes used to support their communities “a cheesy marketing move,” Teicher says this is “the latest in a series of steps to expand your market at the expense of cities and towns nationwide, stripping them of their unique character and the financial wherewithal to pay for essential needs like schools, fire and police departments, and libraries.”
IPG Versus Amazon
In December 2011, Publishers Weekly reported that “Amazon has been asking for a steeper wholesale discount on books,” noting that “although e-books are sold on the agency model, print books continue to be sold on the wholesale model, in which retailers purchase titles at a certain percentage off the list price.” On Feb. 21, 2012 Independent Publishers Group (IPG)—the country’s second-largest independent book distributor—alerted its 400-plus publishing clients that “Amazon.com has failed to renew its agreement with IPG to sell Kindle titles.” President Mark Suchomel noted that, “Amazon.com is putting pressure on publishers and distributors to change their terms for electronic and print books to be more favorable toward Amazon. Our electronic book agreement recently came up for renewal, and Amazon took the opportunity to propose new terms for electronic and print purchases that would have substantially changed your revenue from the sale of both. It’s obvious that publishers can’t continue to agree to terms that increasingly reduce already narrow margins. I have spoken directly with many of our clients and every one of them agrees that we need to hold firm with the terms we now offer. I’m not sure what has changed at Amazon over the last few months that they now find it unacceptable to buy from IPG at terms that are acceptable to our other customers.”
Of IPG’s client publishers, most are small—only nine publishers have more than 100 titles with IPG and 71 offer only a single title—and they cover all aspects of fiction and nonfiction with particular strengths in autobiography, biography, business, history, juvenile, social science, sports, photography, and travel. For most of these publishers, having a partner who can provide sales, marketing, and distribution is essential to their operations, making this a bit of a David and Goliath battle.
Countering claims that ebooks should be much cheaper than print books to align with apps, music, or other media, IPG’s Curt Matthews notes that “an e-book still needs all of the expensive editorial services noted above; and if it is going to sell, it has to be marketed, distributed, and publicized, just as a print edition must be. And the author royalty on an ebook sale is usually about the same as it is for a print book, even though the list price of the e edition is lower. We have noted that for our $14.95 paperback the printing amounts to about $1.50. Warehousing and shipping will add another $1.50 to the real cost of selling a printed book. A web retailer should be able to work on a narrower margin than a bricks and mortar bookstore, which could lower the price of an e-edition perhaps another $2.00. Deduct these specifically print related costs from the price of a printed book and the minimum price for a straightforward ebook comes to about $10.00—less than the price of the print version but not some small fraction of the print price. Certainly not 99 cents, and not $5.00 either.”
If Amazon was hoping for a white flag of surrender, they found indications of strong support for IPG and their members. Educational Development Corporation (EDC) pulled its Usborne titles from Amazon. Science Fiction & Fantasy Writers of America decided to remove Amazon links for books on its website, unless no other source is available, noting that “our authors depend on people buying their books and a significant percentage of them have books distributed through IPG.”
Distributor Copia expressed its own concern about “a very big bookseller [that] has stopped selling ebooks from the Independent Publishers Group. Why? Allegedly because the scrappy, innovative IPG refused the bookseller’s ‘laws of the jungle’ pricing demands. Copia salutes IPG for protecting their authors” and offered special pricing for IPG bestsellers from its webpage.
IPG’s Suchomel tells NewsBreaks that, “the industry response has been incredible. Accounts are contacting us asking how they can help. Others in the industry are offering support and are helping to spread the word to consumers. Our publishers have been wonderfully supportive.”
Others wonder how long IPG can hold out against Amazon. Amazon has signed coop agreements with two other distributors of independent presses recently—Perseus Books Group and National Book Network. The Shelf Awareness blog noted that, from what they've learned, Amazon is asking “for publishers to begin paying co-op on ebooks (3% in at least one case) in addition to print books, and change allocation of all co-op so that less of it goes to specific merchandising programs and more to what might politely be called Amazon overhead. In some cases, the e-tailer is also boosting its fee for converting PDFs or print books to Kindle files. We assume that such terms are at the core of the dispute between Amazon and Independent Publishers Group.”
Do We Need Limits?
In its December article, Publishers Weekly noted that “publishers and distributors have called the latest negotiations with Amazon the most adversarial to date, and many have noted that, for the first time, the retailer is outlining co-op costs for digital, as well as print. Amazon has, as some sources explained, long been pressuring publishers to provide ancillary content on the pages where their books are sold, from videos and Q&As to links to similar books.”
Former publisher and, now, respected consultant Joe Esposito tells NewsBreaks that “Amazon controls about 60% of the ebook marketplace and, depending on the publisher, anywhere from 15-40% of print book market, with a combined market share of 25 to 50-60% of the total book market today.” This level of control of the market is a growing concern to regulators, publishers, distributors, and others.
“It gets to the point where you say, look I’m a neo-liberal, I don't like to have restrictions or regulations. I’m an advocate of an open market, but in some areas and in some markets,” Esposito continues,” maybe we have to draw a line here. When you’re dealing with any sort of information-based industry, like publishing, at some point those free-market sentiments fail to resonant with our moral center.”
“In my opinion,” Esposito believes, “Amazon is now at a point where their economic influence is such that they’ve gone from simply being the best—and they are the best, they innovate, they invest, they think long-term, they've gotten where they are because they are smart, and anybody who doesn't agree with this is lying—but at some point to have to ask if there isn’t a social policy issue here? Can we really allow Amazon to have such a major position in terms of the free-flow of information? In my opinion, Amazon has now begun to tiptoe across that line, for the first time, and it really bothers me because they don’t have to do this.”
“Although I admire Amazon for its culture of innovation and superb customer service,” agrees Dosdoce founder Javier Celaya on the Publishing Perspectives blog, “I do not consider it beneficial either for society (readers) or any of the entities involved in the book industry (publishers, bookstores, libraries, etc.) to allow one company to take on such a leading position in the cultural world and be able to determine its future at its own whim.”
Can independents like IPG hold out for long given this pressure? “It would be very, very hard for major publishing houses and university presses to be heroic because a large percentage of their profits comes from Amazon today,” Esposito believes. How will the IPG-Amazon problem be resolved? “It's difficult to predict,” Esposito concludes, “we don’t know the particulars of the disagreement, of what Amazon is requesting and what the company refuses to do.”
Asked about the stalemate, Suchomel would only tell NewsBreaks that, “there always has been and always will be pressure on publishers from accounts for more margin. As a representative of many publishers we can help protect the margin of our clients and level the playing field somewhat, but we need to continually keep our publishers healthy and give them the best environment possible for success.”
Watch for an in-depth article on this issue in a forthcoming issue of Searcher.
See also the NewsWatch column by Paula J. Hane in the February 2012 issue of Information Today, “Amazon’s Ever-Expanding Empire.”
Editor’s Note: Ebook titles from CyberAge Books from Information Today, Inc. (ITI), and the Medford Press imprint of Plexus Publishing, Inc., ITI’s sister company, are distributed by IPG, and therefore are no longer available for sale on Amazon’s Kindle. Print book availability is not affected.