Amazon "ultimately . . . will have to capitulate"

Amazon just announced that "ultimately . . . we will have to capitulate" to Macmillan on the subject of e-book pricing. Unfortunately, the news for authors is not as good as it should be.

For one thing, Amazon hasn't given up yet. As of this writing, it still refuses to allow customers to buy Macmillan books through its website, even such bestsellers as Atul Gawande's The Checklist Manifesto. Who knows how long "ultimately" will take.

For another thing, Amazon was snarky and disingenuous in its announcement. It ignored the fact that it is the online retailing monopoly, especially in e-books, where it dominates with 80% of all e-book sales. It acted as if it were a poor little store being pounded by huge, monopolistic publishers—as if Amazon, and not publishers, were being squeezed in today's marketplace. And it totally ignored authors, the ones who ultimately will suffer most from the pricing wars.

Its announcement attacked Macmillan "one of the 'big six' publishers" (cue horror-movie soundtrack), and condemned it for having "a monopoly over their own titles." How horrible, you must be thinking. Next thing you know, authors will have monopolies over their own books. Finally, it says that prices above $9.99 are "needlessly high for e-books."

In my previous post, I briefly sketched the economics that lead to decisions about pricing. Given two facts—that e-books cannibalize the book market, rather than expanding it, and that the cost of printing and distributing a physical book amounts to no more than 12% or so of the price—then cutting e-book prices to half or a third of the hardcover price necessarily deprives the author of income.

In the case of my book, $9.99 represents only 27% of the hardcover list price. Since royalties represent a percentage of the list price, cutting the list price of my book by 73% absolutely must result in a lower royalty payment. On top of that, the industry standard (at the moment) for royalties on e-books is actually lower than for hardcovers—and publishers are trying to cut it down still farther. Even the modest increase in e-book prices that Macmillan demands still represents a major cut from the hardcover price. So Amazon's claim that it will "ultimately" cave in offers no comfort to us authors. We lose either way—and our incomes from writing are already past the breaking point.

For readers, the question is, how much do you value books? Is guaranteeing Amazon's market domination more important to you than guaranteeing a steady and varied supply of good books? The short-term gain of being able to buy an e-book for only $10 or $15 will come at the long-term cost of driving authors out of the business of writing books.

Should all e-books be only $9.99 each?

Amazon, the online retailing behemoth, has just declared war on authors. In a dispute with the publisher Macmillan over the pricing of e-books, it now refuses to sell any books produced by that company. You can read about it here, though by far the best discussion is by Michael Cader in his newsletter "Publishers Lunch." (You can subscribe to that for free.)

I'll explain why this upsets me so—but first I'd like to stress that I am not anti-Amazon. It offers pretty decent customer service and makes available a host of books that are hard to get otherwise. Its convenience and low prices give it enormous momentum in the marketplace.

Nor am I against e-books (despite what Motoko Rich might have written in the New York Times). True, I believe the traditional book (the "codex") is a fantastic technology that simply won't go away. The power source never fails, the operating system never crashes, and the hardware never goes obsolete. But e-books can be incredibly useful, especially for travelers. I think the e-book will prove to be one more format that will coexist with the others, just as audio books and paperbacks coexist with hardcovers.

But there's one thing that e-books won't do: Significantly increase the market for books. That's the key thing to remember in the pricing wars. Currently, Amazon is taking a loss on the e-books it prices at $9.99 (it continues to pay publishers 50% of the list price). Why does it do so? I can only guess. I'd say that it is trying to quickly create a market for its reading device, the Kindle, and also to establish a monopoly on the e-book market. And it's succeeding. According to press reports, Amazon currently controls about 80% of e-book sales.

But publishers are worried about this—and authors should be too. As seen in user comments in forums and "reviews" on the Amazon website, the $9.99 price has convinced Amazon's customers that anything over this amount represents publisher greed and outright robbery—that there is a natural price for all books, and it is $9.99.

The idiocy of this line of thinking should be immediately apparent. If printing and distribution represented most of the cost of a book, why are hardcovers of similar size and length often given radically different prices? The answer is that the vast majority of a book's cost is not in physical printing and distribution; those things represent perhaps 12% of the cost. Eliminating printing and distribution saves hardly enough to slash the price of, say, my most recent book from $37.50 to $9.99. Even a book that exists only in digital form still must be edited, copy-edited, proofread, designed, and promoted. The author still must be paid—in advance, if the book is anything other than a vanity project or an academic monograph. This overlooked fact is what I was referring to in my acceptance remarks for the National Book Award.

In addition to allowing for a modest profit margin, the publisher must recover all these costs—the efforts of all these people, from author to editor to page designer. Of course, if these costs can be distributed among a larger number of units, then the price per unit can be reduced. But slashing the price of a book from $37.50 to $9.99 (to take the example of my book) would require a vast increase in the number of units sold.

So, is the advent of e-books dramatically increasing the number of books sold? Far from it. E-books, it is commonly estimated, represent about 3% of all books sold in the last year, when they really took off. And guess what: Physical book sales dropped in the last year by about 3%. In other words, e-books are not turning people into readers. They are cannibalizing the physical book market. So reducing the price of a book by anything more than 12% (the printing and distribution cost) means a loss of profit, or perhaps even a loss to the publisher.

That's why the battle with Amazon is so important for authors. If Amazon succeeds in forcing publishers to cut book prices, then authors will suffer. Publishers are already squeezing advances; soon they will be slashed. Before long, books will only be written by hobbyists and academics. Professional writers like myself will be unable to make a living from writing; only authors of blockbusters will survive. And readers will suffer.

If Amazon sees reason, and allows publishers to set book prices as they always have, then I will have no beef with "Earth's biggest store." (Though I will still support independent bookstores.) As I said, I'm not anti-Amazon; I'm anti-monopoly. Amazon's monopolistic practices are fooling readers, hurting publishers, and ultimately will crush authors.

Biographers International Organization

On May 15, I'm taking part in the first annual conference of the Biographers International Organization, at the University of Massachusetts, Boston.

It should be interesting. Independent writers and scholars, such as myself, need more support, since we lack the research and benefits infrastructure available to academics. And it's always healthy to share insights, ideas, and problems with colleagues. I'll be on a panel on how to edit yourself, an issue every biographer surely struggles with on every book. I will speak as a fellow sufferer.

You can find a link to the new organization here

I'm Out: A Good Sign for Biographies

Recently the National Book Critics Circle announced the finalists for its 2009 prizes, which include one in biography. You will not find my book, The First Tycoon, on the list. Am I upset? Not at all. In fact, this is a very good sign for biography in general.

Don't get me wrong: Being nominated, let alone winning, a book prize is an incredible experience, and I hope it happens to me again some day. If I was shortlisted for the NBCC prize, I'd be pretty thrilled. But the very fact that the NBCC could find five deserving biographies to name as finalists, apart from mine, speaks to the strength of the field. Is digital culture hurting the book? You wouldn't know it from this list.

As a biographer, I will thrive if the culture of books thrives. I will do better personally if the category of biographies continues to overflow with really good books. It's good for me, and good for biography, and good for people who love books, that there are so many excellent biographies out there that the NBCC can justifiably pass over the winner of the National Book Award. This list highlights literary biographies, which were particularly strong in 2009: Blake Bailey's Cheever and Brad Gooch's Flannery, to name just two examples. They were all well worthy of this recognition.

I am now forbidden by good taste to complain about being overlooked for any prizes. But I have no desire to complain. As a writer, I try to write at a level that would make my books eligible for major prizes, but I also know that it's a stroke of extraordinary good fortune when I do get shortlisted for one. It's good fortune, rather than simple justice, because the pool of excellent biographies is a big one. And that's good for everyone.

I'm Back in Black and White

I'm back in San Francisco, after being away for two weeks. And one of the things I was happy to see was an interview with Laurie Hertzel of the Minneapolis Star-Tribune, published on the "Nieman Storyboard" website, from the Nieman Project for Journalism at Harvard University. You can read it here.

This interview is a fuller version of one that ran in the STrib. I mention it here because it offers some of my reflections on writing. For example, she thoughtfully noted my use of the word "investigate" or "investigation," rather than simply "research." In the course of discussing the distinction, I explained, "Investigation is research, plus creatively analyzing and thinking about the meaning of what you've researched."

On Vacation

I'm on vacation for several more days, visiting my parents, so I won't be posting until next week.

So, to both my readers I say: Brian, can I stay at your house next month? and Mom, I'm upstairs at the moment.

How Does It End?

The biographer is stuck with a problem that the novelist rarely faces: We know how the story ends. Well, not with every life—some are more obscure than others—and not with every episode within a life. But, as a big-picture general rule, surprises are rare. That's why it's such a special treat for a biographer when research turns up a story no one has heard of before. For readers, too: I found it a real pleasure to read in David Nasaw's Andrew Carnegie of how Carnegie dealt with a previously unknown work stoppage before the infamous Homestead strike.

This poses a problem because a certain amount of suspense can be crucial to the pleasure of a narrative. By suspense, I don't mean only the pumped-up tension of thrillers, but the dramatic tension inherent to any story. As E.M. Forster wrote in Aspects of the Novel, the most elemental aspect of reading is to find out what happens next—to answer the question, "And then? And then?" You can imagine how hard it is for a biographer of John F. Kennedy to keep readers asking that question.

The miracle is that a good writer can indeed make an oft-told tale seem fresh again. How? A complete answer to that question would require a three-year MFA course. But the key, I think, as in so much writing, is to create a fully realized world. Characters—the main subject and secondary characters—must be developed into rich and believable people; their outlooks and agendas should be clearly drawn, so we can see conflicts emerging, gaining strength. The role of accident (or contingency, as historians like to call it) and the possibility of outcomes other than the historical ones must appear vividly.

Written well, a biography of even well-known historical figures can lead a reader to suspend not disbelief, but prior knowledge—out of the deepest belief in the world painted by the writer.

Fair Enough

I've blogged before about how wrong-headed some criticism of my book has been. Not that I've really got anything to complain about: I've been very fortunate in getting positive reviews, and in being reviewed at all (something almost no writer can take for granted).

So it's only fair to acknowledge a criticism that has some merit. In a review of my book for eh.net, economic historian Robert Whaples of Wake Forest University has many good things to say about The First Tycoon. But he does find a flaw: that "Stiles occasionally interjects a bit too much hyperbole—the deep-pocketed Vanderbilt is portrayed as teetering on the brink of disaster much too often."

Hardly a devastating indictment, so perhaps I have the emotional luxury of accepting it as a fair point. The problem here is that there is little hard evidence for exactly how deep Vanderbilt's pockets were. In the case of the Erie War of 1868, I relied on the general perception that he had pushed himself to the edge, as expressed explicitly in some sources. In the case of the Panic of 1873, I saw the risk of a systemic failure that would open an abyss under his empire. I also relied, in a general sense, on the testimony of his longtime clerk, Lambert Wardell, who described Vanderbilt as a "speculator" who was willing to take great risks.

But Professor Whaples makes a fair point. I definitely felt the desire to emphasize the drama of these and other crises. Perhaps I should have stressed the unknowability of Vanderbilt's resources. I might also have described him as being less on the brink of disaster than on the brink of significant losses, which are not at all the same thing.

For the biographer, this criticism points to a common problem. Each of these moments was indeed a crisis. I wished to emphasize to the reader the stress that Vanderbilt faced, to underscore the grave consequences. Did I make too much of too little evidence, and overemphasize the risks? Professor Whaples suggests I did "a bit" too much, a modest and fair assessment that acknowledges that it's also impossible to prove that Vanderbilt was not on the brink of disaster. This is a matter of interpretation, rather than solid proof.

It's difficult, in spanning the gulf of decades and centuries, to recreate the tensions of the moment. Those tensions comprise an important part of the historical and personal reality, and are not mere storytelling gimmicks. But giving the evidence its proper weight is also essential in any honest account. Professor Whaples's comments highlight the difficulty of striking the right balance.