Saturday, March 27, 2010

Insight and Oversight regarding Amazon & e-books

Over at techcrunch.com, blogger Paul Carr has some smart things and some not-so-smart things to say about e-books and Amazon.com. As readers of this blog know, both are a special concern of mine.

First, the smart thing from Carr: In this post, he criticizes Amazon for allowing customers to post 1-star reviews of books simply because a Kindle edition isn't available yet, or because it's priced at more than $9.99. These "reviews" make a book look lousy at first glance, but on closer inspection it turns out that "reviewers" pointedly refuse to even read the book in question. The latest high-profile victim of this campaign is Michael Lewis, for his new book The Big Short.

As Carr correctly points out, authors have no control over e-book pricing or the appearance of digital editions. Yet authors are the ones who suffer most from this sort of campaign. Even worse, these 1-star reviews violate Amazon's own stated policy that reviews cannot be about price or format. I myself suffered from this when my most recent book came out. Until Amazon decided to price the Kindle edition of my book at $9.99, a slew of 1-star reviews appeared on the hardcover page, all complaining about the Kindle price. Amazon refused to take these malicious non-reviews down, even after it lowered the Kindle price to $9.99!

The point: Amazon doesn't care about authors, or even about books. It wants its customers complaining about the prices or availability of Kindle editions, because it is trying to dominate the e-book market, and it wants leverage with publishers. In fact, it takes a loss currently on its $9.99 price—a price set by Amazon, not the publisher—because it is trying to monopolize the market.

Mr. Carr nails this issue on the head. Unfortunately, I must differ with him on another issue: whether it is a good idea to delay the release of e-book editions until after the hardcover publication. He addresses it, and e-book pricing, here. Mr. Carr focuses on publishers' desire to preserve the "cash cow," the hardcover, and complains of the inconvenience to those who have invested in expensive e-readers. He also makes much of the fact that e-book sales are growing rapidly.

Let's set the record straight: Publishers (and authors) make much more money from hardcovers, it's true. That is one reason why they have always delayed the release of cheaper paperbacks. But to refer to anything in publishing as a "cash cow" is to suggest a level of profitability that simply does not exist in this narrow-margin industry. "Life line" would be a better cliché. Did publishers cut that life line when the paperback was invented? No. Why should they now for the e-book?

The fact is, e-books are just another format. The millenarian talk about e-books destroying the traditional book is just nonsense—the expensive e-reader being one reason, the ephemeral nature of e-books being another. So to sacrifice all other formats to serve e-books is just idiotic. It's suicidal. Indeed, e-books may be growing rapidly, but mainly because they start from such a low base. Random House, the largest English-language publishing corporation, just reported that e-books represent just 2% of sales. That's one plus one percent. Two percent.

And where are those buyers coming from? Are e-books expanding the number of book buyers out there? No, they are cannibalizing hardcover sales. So the total number of books sold is not going up. Publishers cannot justify cutting the price dramatically, beyond the roughly 12-15% that represents printing and distribution costs for physical books, unless e-books are radically increasing the number sold (and, again, they're not). I'm sorry that Kindle owners invested so much in their machines, but that doesn't give them a divine right to a Kindle edition at the same time as a hardcover, any more than anyone has a right to a paperback on the day of hardcover publication.

But there's another critical factor that Mr. Carr overlooks: The survival of bookstores.

E-books are sold almost exclusively online. To give e-books, then, a decisive advantage over physical books (publishing them simultaneously and at a lower price than hardcovers) is to undercut bookstores. But why should any wholesaler deliberately destroy a critical distribution chain? And let's not kid ourselves: Bookstores are not simply a disposable part of the publishing ecosystem—a Dodo bird that no one will miss. Bookstores, especially independent bookstores, are where new authors get discovered, where obscure books break out, where authors and readers connect through personal appearances.

Online bookselling funnels customers toward a few bestselling and well-publicized books. And, since all online booksellers compete against all other online booksellers, only a tiny handful dominate the market: mainly Amazon, to a lesser extent Barnes & Noble, and then perhaps Powell's. With Apple jumping in, maybe it will come down to Amazon and Apple. Having a monopoly or a duopoly in bookselling is good for no one, neither customer nor publisher nor author alike.

Again, let me state clearly that I welcome the rise of e-books. Greater convenience in book buying and book reading is a great thing, and whatever continues to give life to books can only be good—in principle. But the ways in which e-book are being used to distort the marketplace, encouraging monopoly and hurting authors, must be recognized. Authors and, ultimately, readers cannot afford to let e-books, with their 2% of the market, destroy the entire ecosystem of the written word.

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