Reaction to ABA's Letter to Justice Department Abounds
October 29, 2009
Last week, the Board of Directors of the American Booksellers Association sent
a letter to the U.S. Department
of Justice requesting that it investigate practices by Amazon.com, Wal-Mart,
and Target that it believes constitute illegal predatorypricing. The
letter stated that the price wars on new hardcover bestsellers, including books
by John Grisham, Stephen King, Barbara Kingsolver, Sarah Palin, James Patterson,
and others, of between $8.98 and $9.00 was damaging to the book industry and
harmful to consumers.
The letter drew widespread media coverage, including the New York
Times, Time magazine, the Boston Globe, CNBC (see video below),
other news outlets, and bloggers. Many media outlets simply reported the facts
in a straightforward manner; however, in some coverage, authors, including Stephen
King, and some publishing executives spoke out against the practice. On the
other side are some columnists who argued that such loss leaders were a part
of standard business practices. Here, BTW provides a sampling of comments
in recent coverage.
The New York
Times
(October 17) quoted David Gernert, John Grisham's literary agent, who noted,"If you can buy Stephen King's new novel or John
Grisham's Ford County for $10, why would you buy a brilliant first novel
for $25? I think we underestimate the effect to which extremely discounted bestsellers
take the consumer's attention away from emerging writers."
Stephen King himself concurred in an interview with Entertainment
Weekly
(October 23): "It's time to give the smaller bookstores a little breathing
room (although not much chance of that, with Walmart offering Dome
for nine bucks)," he said.
In the New
York Times
(October 23), David Young, chief executive of Hachette Book Group, publisher
of James Patterson's I, Alex Cross, said that he would like the U.S.
to follow France's prohibition of selling books for less than the cover price.
"I do think this massive devaluation of the industry's crown jewels could
very quickly be extremely harmful," Young said. "And I would not be
alone in thinking that."
On
his blog, Michael Hyatt, CEO of Thomas Nelson, offered his opinion as to
why the price wars "will prove damaging to publishers, authors, booksellers,
mass retailers, and ultimately consumers." Because "Amazon, Walmart,
and Target are systematically conditioning consumers to expect these lower prices,"
Hyatt wrote, "eventually, these retailers will be in the position to force
publishers to lower their retail prices." About booksellers who don't rely
on sales of household goods and other items to boost sales, he asked, how can
they "compete with big box or online retailers who are willing to sell
books at below-cost prices?... Most [bookstores] are willing to discount the books
and accept lower margins, but few are in a position to actually lose money on
every sale. It is not a sustainable model." And, while Hyatt acknowledged
that such prices might be good for consumers in the short run, "they are
not good in the long run if authors and publishers are no longer willing to
assume the risk of creating and producing the kind of quality and selection
consumers currently enjoy."
Time
magazine (October 27) quoted Michael Norris, a
publishing-industry analyst for the research firm Simba Information, who said,
"The fear is that people get used to paying less for books than it costs
to make them, which puts downward price pressure on everything," including
wholesale prices for publishers and advances for authors. In the same article,
David Heupel, a senior equity portfolio manager at Thirvent Financial in Minneapolis,
observed, "I wouldn't want to be a mom-and-pop bookseller right now."
However, in a Boston
Globe
(October 28), Jeff Jacoby considered the price war "spirited competition"that spurred sales: "If 'the very concept
of the book' is being shredded by low prices, the message hasn't reached the
millions of Americans who buy books.... The rise of discount book chains and online
booksellers has certainly altered the industry, but it has only increased the
appetite for books." He added that "as in every other industry, innovation
and technology have changed the way books are bought and sold -- and in the
wake of change there are always winners and losers." Indies, he said, should
tout their advantages -- "attentive and knowledgeable service, eye-catching
displays, a reader- and author-friendly atmosphere, community involvement, the
serendipitous joys of browsing."
And in The Atlantic, business columnist Megan McArdle wrote: "The
American Bookseller's Association represents independent bookstores, whose members
cannot afford to sell top bestsellers as loss leaders. But the interest of antitrust
law does not lie in protecting small, inefficient sellers for the tiny minority
of Americans who prefer to shop there. They lie in making sure that there is
robust competition in the bookselling market. What they're trying to do here
is stop bigger, more diversified companies from competing with them, because
they'll lose." The recent price wars, she said, make it clear "the
big players are competing: with each other, and this "is where the market
is going to end up anyway."
In a column on the Huffington Post and reprinted in today's
BTW, Bill Petrocelli, co-owner of Book Passage in San Francisco and
Corte Madera, California, offers a thoughtful argument about why all this is
not a simple price war, but rather a fight over what consumers get to read.
"Some readers think that if their favorite store closes they can always
buy the book they want somewhere else. But that's a dangerous delusion,"
Petrocelli said. "The books they want may not be there at all. In fact,
these types of disruptions in how books are sold or distributed have a profound
effect on what publishers decide to publish in the first place." And, he
noted, "It's hard to exaggerate the consequences of this mass-merchandiser
dominance. These outlets carry, at most, a few hundred titles at any given time.
This means that a handful of books -- far less than one percent of all the books
published -- are probably accounting now for more than 30 percent of all sales
in America. Price wars in this segment of the market only make matters worse,
driving more customers to these merchandisers in search of quick bargains on
a handful of big-name books." (Read Petrocelli's column
in full.)
