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The American Booksellers Association Has Asked The DOJ To Investigate Bestseller Price Wars
VIA OVERNIGHT MAIL AND E-MAIL
October 22, 2009
The Honorable Christine Varney
Assistant Attorney General
Antitrust Division
U.S. Department of Justice
950 Pennsylvania Avenue, NW, Suite 3109
Washington, DC 20530
Molly Boast, Esquire
Deputy Assistant Attorney General for Civil Matters
Antitrust Division
U.S. Department of Justice
950 Pennsylvania Avenue, NW, Room 3210
Washington, DC 20530
Dear Ms. Varney and Ms. Boast,
We are writing on behalf of the American Booksellers Association, a 109-year-old trade organization representing the nation's locally owned, independent booksellers. A core part of our mission is devoted to making books as widely available to American consumers as possible. We ask that the Department of Justice investigate practices by Amazon.com, Wal-Mart, and Target that we believe constitute illegal predatory pricing that is damaging to the book industry and harmful to consumers. We are requesting a meeting with you to discuss this urgent issue at your earliest possible opportunity.
As reported in the consumer and trade press this past week, Amazon.com, WalMart.com, and Target.com have engaged in a price war in the pre-sale of new hardcover bestsellers, including books from John Grisham, Stephen King, Barbara Kingsolver, Sarah Palin, and James Patterson. These books typically retail for between $25 and $35. As of writing of this letter, all three competitors are selling these and other titles for between $8.98 and $9.00.
Publishers sell these books to retailers at 45% - 50% off the suggested list price. For example, a $35 book, such as Mr. King's Under the Dome, costs a retailer $17.50 or more. News reports suggest that publishers are not offering special terms to these big box retailers, and that the retailers are, in fact, taking orders for these books at prices far below cost. (In the case of Mr. King's book, these retailers are losing as much as $8.50 on each unit sold.) We believe that Amazon.com, Wal-Mart, and Target are using these predatory pricing practices to attempt to win control of the market for hardcover bestsellers.
It's important to note that the book industry is unlike other retail sectors. Clothing, jewelry, appliances, and other commercial goods are typically sold at a net price, leaving the seller free to determine the retail price and the margin these products will earn. Because publishers print list prices indelibly on jacket covers, and because books are sold at a discount off that retail price, there is a ceiling on the amount of margin a book retailer can earn.
The suggested list price set by the publisher reflects manufacturing costs -- acquisition, editing, marketing, printing, binding, shipping, etc. -- which vary significantly from book to book. By selling each of these titles below the cost these retailers pay to the publishers, and at the same price as each other, and at the same price as all other titles in these pricing schemes, Amazon.com, Wal-Mart, and Target are devaluing the very concept of the book. Authors and publishers, and ultimately consumers, stand to lose a great deal if this practice continues and/or grows.
What's so troubling in the current situation is that none of the companies involved are engaged primarily in the sale of books. They're using our most important products -- mega bestsellers, which, ironically, are the most expensive books for publishers to bring to market -- as a loss leader to attract customers to buy other, more profitable merchandise. The entire book industry is in danger of becoming collateral damage in this war.
It's also important to note that this episode was precipitated by below-cost pricing of digital editions of new hardcover books by Amazon.com, many of those titles retailing for $9.99, and released simultaneously with the much higher-priced print editions. We believe the loss-leader pricing of digital content also bears scrutiny.
While on the surface it may seem that these lower prices will encourage more reading and a greater sharing of ideas in the culture, the reality is quite the opposite. Consider this quote from Mr. Grisham's agent, David Gernert, that appeared in the New York Times:
"If readers come to believe that the value of a new book is $10, publishing as we know it is over. 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 best sellers take the consumer's attention away from emerging writers."
For our members -- locally owned, independent bookstores -- the effect will be devastating. There is simply no way for ABA members to compete. The net result will be the closing of many independent bookstores, and a concentration of power in the book industry in very few hands. Bill Petrocelli, owner of Book Passage in Corte Madera, California, an ABA member, was also quoted in the New York Times:
"You have a choke point where millions of writers are trying to reach millions of readers. But if it all has to go through a narrow funnel where there are only four or five buyers deciding what's going to get published, the business is in trouble."
We would find these practices questionable were they taking place in the market for widgets. That they are taking place in the market for books is catastrophic. If left unchecked, these predatory pricing policies will devastate not only the book industry, but our collective ability to maintain a society where the widest range of ideas are always made available to the public, and will allow the few remaining mega booksellers to raise prices to consumers unchecked.
We urge that the DOJ investigate and request an opportunity to come to Washington to discuss this at your earliest convenience.
Sincerely,
ABA Board of Directors:
Michael Tucker, President (Books Inc.--San Francisco, CA)
Becky Anderson, Vice President (Anderson's Bookshops--Naperville, IL)
Steve Bercu (BookPeople--Austin, TX)
Betsy Burton (The King's English Bookshop--Salt Lake City, UT)
Tom Campbell (The Regulator Bookshop--Durham, NC)
Dan Chartrand (Water Street Bookstore--Exeter, NH)
Cathy Langer (Tattered Cover Book Store--Denver, CO)
Beth Puffer (Bank Street Bookstore--New York, NY)
Ken White (SFSU Bookstore--San Francisco, CA)CC: Oren Teicher, CEO, American Booksellers Association
Len Vlahos, COO, American Booksellers Association
Owen M. Kendler, Esquire, Antitrust Division, U.S. Department of Justice
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Wait Apple starts selling books on itunes for 1.99 they will really be pissed.
ding ding ding!
Dear Government,
Please keep our prices artificially high.
Signed,
[Insert industry here.]
How about, "Uh, seriously dude, we want our bubble reinflated, too."
Can someone send a letter to the AG about GS's predatory trading practices so vividly captured by Robot Trader?
The ABA? Do they still play with a red, white and blue basketball?
Someone show me a bricks-and-mortar bookstore with a wider selection than Amazon. Game, set, match.
The problem isn't Amazon, the problem is Wal-Mart trying to put Amazon out of business.
Give me a break. Ok, so now we have to pay the good authors less than 1, 2 or 3 million dollars to write a book. When will the excess ever stop.
Is the author of a book worth 3 million, and to carry it further, am I the only one that thinks it is absurd to pay a football player, baseball, tennis, etc. millions of dollars to hit or carry a ball.
Most of middle America cannot even afford to buy tickets to a game.
Oh, I forgot, all the Wall street execs and traders, yup, they get to go.
When will the people speak with their wallets.
Our system is so broken, and we do not even have the parts to fix it.
Just amazing,
Love the site guys.
Just posted but forgot to sign in.
Sorry.
Yet another trade group that wants Uncle Sam to smack down consumers so that they can continue to make ARTIFICIALLY HIGH profits. This consumer is going to boycott every organization and company that went on and on about free markets while profits were high and is now bitching and moaning because profits are low. Did you idiots bother to look at numbers? They're not good. You could shoot a cannon through Borders and not hit a soul. The used guys are doing okay. Take a hint. Deflation is here. Deal with it, book boys.
I can't blame them for trying. Everyone is suckling at the governments' teat. No one is being turned away and bad behavior is being rewarded. I'm not saying this is right. Far from it. It's obscene.
Now let me ask a hard question of ourselves, not to create a guilt trip, but simply to make a point. Did anyone who received a Bush stimulus rebate check send it back?
The answer in 99% of the cases is a resounding no. The Treasury, Fed and the Obama Administration (as well as the former Bush admin) are appealing to that base human emotion of greed and self interest. Most everyone wants in and no one is responsible.
“A democracy cannot exist as a permanent form of government. It can only exist until a majority of voters discover that they can vote themselves largess out of the public treasury.” - Alexander Tytler
Yes, I know we are a representative republic and not a democracy but you get the point.
[Now let me ask a hard question of ourselves, not to create a guilt trip, but simply to make a point. Did anyone who received a Bush stimulus rebate check send it back?]
So if a small (trifling, really) percentage of the money that is regularly stolen from me is refunded, how, exactly, is my getting back some pocket change tantamount to my being "on the government teat?"
I understand where you're coming from, but conflating Joe Taxpayer getting a piffling amount of his looted money back with, say, multi-billion-dollar companies claiming that they are TBTF and, therefore, ought to receive taxpayer funds so they can go right on making silly-ass decisions is an incongruous comparison at best. I don't think Joe Taxpayer cashing a stimulus check is quite the same as BoA demanding (and getting) taxpayer money to offset the consequences of their own shitty decision-making. That is, BoA (and companies like BoA) are seeking to extract far more from the system than they themselves *ever* put in.
Don't read this wrong: I understand the whole "stimulus" racket, and why it is such a joke (and why Joe Taxpayer, God Bless Him, is actually lowering his standard of living by cashing that chump change check he's been given). That said, please let's compare apples to apples here, okay?
I do agree with you entirely that government is all about appealing to what is base in all of us. The state is, after all, "the great fictitious entity by which everyone seeks to live at the expense of everyone else." But Joe Taxpayer cashing his stimulus check and lowering his *own* standard of living by doing so is not the same as the Feds propping up corporations that should have gone under long ago by giving them Joe Taxpayer's money.
Sorry to sound like such a strident a-hole, but c'mon man.
I'm not conflating or comparing Joe Taxpayer to multi-billion-dollar companies receiving taxpayer funds. I was talking about base human emotions and declaring that this is understandable.
I was pointing out that everyone is tempted by free money and the masters of the universe are appealing to the base human emotions of greed and self interest. And that it's difficult to resist that temptation regardless of where you are on the pecking order.
We can all justify doing so. You call it getting back money stolen from you. I hope you understand that everyone convinces themselves that they deserve what they are taking, regardless of its validity, right? I promise you these huge thieivng corporations and banksters don't think they're doing anything wrong.
I said no one is being turned away and bad behavior is being rewarded. I'm not saying this is right. Far from it. It's obscene. But if the government sent you a check in the amount of all the taxes you paid for the past 5 years you would absolutely feel justified in cashing it. People will justify anything they want, regardless of the morality of it.
I've seen greed on many different social and economic levels and the response and rationalizations used are mostly the same. You call it protecting yourself from powerful forces who have stolen from you. The rich call it taking back what was stolen from them.
I can't tell you how many times my rich clients tell me they pay an unfair tax burden. I hear in their tone of voice and mental defensiveness the beginnings of the rationalization for stealing. It doesn't matter who is more right than the other person. My point is that it is a common human emotion and thus understandable. Simple human greed that is then justified in whatever way needed to feel better about it.
Corporations and banks are run by humans and they play the same game. I was commenting on what is going on being completely understandable when the cops join in on the looting.
Go watch who joins in on a neighborhood riot that turns into looting. Mom and Pop are there. What's going on in America is simply a higher level looting. In fact, when higher level looting happens and the average Joe's finally had enough and reacts violently, riots and looting are precisely what happens. Is that justified? Maybe it is, maybe it isn't. But it is understandable.
And then I quote Alexander Tytler about what will kill a democracy. And he wasn't talking about average Joe Blow either. He was talking about vested and powerful interests.
[I'm not conflating or comparing Joe Taxpayer to multi-billion-dollar companies receiving taxpayer funds. ]
Sorry, but that's exactly what you were doing, sir. You made a claim that we were all on the government teat, then tried to justify that assertion. Fair enough, but please, let's not call it anything else.
[But if the government sent you a check in the amount of all the taxes you paid for the past 5 years you would absolutely feel justified in cashing it. People will justify anything they want, regardless of the morality of it.]
As I've attempted to point out, there's a difference between seeking to get back what you were forced to give in the first place vs. actively seeking to rip other people off wholesale.
[I've seen greed on many different social and economic levels and the response and rationalizations used are mostly the same. ]
::sigh::
Seeking to take back what was taken from me is different from seeking to take what belongs to other people. It seems as though, according to your way of thinking, I am "cheating" the government if I seek to reduce my tax bill.
If you'll pardon my saying so, sir, I think you've got some pretty interesting rationalizations there yourself.
Maybe it's just me, but I hardly hold some poor slob cashing a so-called stimulus check to be as morally abhorrent as BAC seeking to make a living off the back of the taxpayers, despite BAC's own ineptitude. And I'm sorry, but I fail to see how the latter is "understandable" by even the most tortured attempts at rationalization..
BAC and companies like them knew full well that they deserved to go under: it is, after all, what happens (or rather, is supposed to happen, at least) to inept companies. On the other hand, I'm not convinced you can reasonably expect Joe Sixpack to understand the ramifications of his cashing that stimulus check and essentially screwing himself by doing so.
[I can't tell you how many times my rich clients tell me they pay an unfair tax burden. ]
Well, what, exactly, constitutes a "fair" tax burden?
Perhaps we can agree that people should be expected to pay for the goods and services that they use. And that they should *not* be expected to pay for goods and services that they do *not* use.
And, sadly, that's what taxation is all about: extracting wealth from people *regardless* of the goods and services they happen to use. This is fair how?
[I hear in their tone of voice and mental defensiveness the beginnings of the rationalization for stealing.]
So if they seek to protect themselves from the Feds stealing from them that automatically makes *them* Bad People Who Steal?
As I say, rich people may not have a monopoly on those
rationalizations for stealing you seem to hold in such disdain. And as near as I can make out, my seeking to protect myself from the predations of others (like, say, the Feds) is not tantamount to my seeking to deprive other folks of their own wealth.
D'you see the difference here? The former is seeking to hang on to what I have vs. enriching myself by depriving other folks of what *they* have through the mechanism of the state. I'm unclear as to why someone would *ever* need to rationalize to another human being why they deserve to hang on to what they have (assuming what they have was not gained via fraud or other criminal means).
"It's important to note that the book industry is unlike other retail sectors. Clothing, jewelry, appliances, and other commercial goods are typically sold at a net price, leaving the seller free to determine the retail price and the margin these products will earn. Because publishers print list prices indelibly on jacket covers, and because books are sold at a discount off that retail price, there is a ceiling on the amount of margin a book retailer can earn."
I never understood this.
The book in paper form is probably dead soon anyway. The internet has made bookstores obsolete. It won't matter what the government does.
The power of the internet to transform the world is overwhelming so many industries, newspapers, broadcast media, music, and retail (and therefore commercial real estate). It's fun to watch.
In clothing there is a 300% markup. In other words, the $100 outfit cost the store $30-ish. With most manufactured items there is a 200% markup: The $100 item costs the store $50. In books there is a 40% markup. Why books are the shabby second cousins of the retail trade I do not know.
Here is the story of the $10.00 book. A genuine $10 book.
The $10.00 book cost the bookstore $6, which means the store got a 40% markup. There is a 40% markup from the publisher to the wholesaler, which means wholesaler pays $4, sells to the retailer for $6, who sells it to the public for $10. For the publisher to make any money, he has to sell for twice what he paid the printer, which means his unit cost is $2.00. From this he pays royalties to the author, which is typically 5% of retail, which would be 50 cents. The printer, of course, is figuring his own percentages, which means his actual cost to produce a book would be $1.00. A lot of printers can't get anywhere close to that number, which is why there's so few printers left in America. (Vanity press excluded.) This is why books are printed in China. And why there's no such thing as a $10.00 book.
Remember this is physical paper, ink, card stock & glue. Raw material has to be sourced, and the eventual weight has to be shipped from paper mill to printer to publisher to wholesaler to retailer. Transit costs are not minor.
A real price for a real book is exactly what the bookseller agency says: Over $25.00 - and that's still a mass-market book produced in China. You want something specialized - such as trendy computer books for geeks, or a decent, up to date dictionary, expect to pay $50 & up. Textbooks are even more expensive.
You want Amazon to sell you your books, and you want them cheap cheap cheap, then expect them to be cheap & lurid. You get what you pay for.
But I don't expect to impress any of you. Posters take delight, no, make that pride, in their ignorance.
"The $10.00 book cost the bookstore $6, which means the store got a 40% markup."
The markup was $4. The cost to the bookstore was $6. The markup is $4/$6 = 66%
well, maybe those newer unknown authors struggling to get known need to start publishing their own stuff on the internet on their own webpage instead. As with most things on the internet - get rid of the inefficient useless middleman that just makes the end cost higher than it should be. or at least make that middleman fee very very small ie. google getting paid a teensy bit per ad, but they have a gajillion of them
well, maybe those newer unknown authors struggling to get known need to start publishing their own stuff on the internet on their own webpage instead. As with most things on the internet - get rid of the inefficient useless middleman that just makes the end cost higher than it should be. or at least make that middleman fee very very small ie. google getting paid a teensy bit per ad, but they have a gajillion of them
well, maybe those newer unknown authors struggling to get known need to start publishing their own stuff on the internet on their own webpage instead. As with most things on the internet - get rid of the inefficient useless middleman that just makes the end cost higher than it should be. or at least make that middleman fee very very small ie. google getting paid a teensy bit per ad, but they have a gajillion of them
this is ignorant nonsense.....who wants to read
a 400 page book on a computer screen?
getting rid of middlemen gets rid of jobs and
distribution efficiencies....
your conception of economics is as minimal and
defective as your iq....
retailers require a 200% markup to make a going
concern....sorry if it hurts your walmart
sensibilities but it is a fact of retailing....
huge retailers can survive on economies of
scale with smaller margins but the ordinary
retailer cannot...
and then lower margins mean lower wages and
lower standards of living...
all of you morons who want to race to the bottom
of the sewer are one reason why this country is
headed there and why jobs have evaporated
here....
Good, maybe then King and Grisham will stop polluting.
But seriously, this is RIAA nonsense all over again. This is akin to a typewriter company complaining about MS Office.
Are these clowns for real. I assume they would also request that you close all of the Home Depot and Lowes stores because they are putting Mom and Pop hardware stores out of biz.
Any industry that needs a subsidy in one form or another (tax break, direct handout, restricted competition etc) has a broken business model and needs to either change, adapt or die.
It's either capitalism or it's not.
Why is it that the workers must always retrain, renegotiate or fucking retire but the companies get supported with constant hand jobs and hand outs?
Less money for books = more money for gas!!!! So we already know the outcome here.
-u4yeah4
If Amazon.com, Wal-mart or Target where replaced by "China" we'd call it dumping. Doubt they'll win but good for them for trying. At least somebody out there realizes that in order for their company to be worth more they have to make money on the things they sell.
For less than a few grand, an author can self-publish and have their book on Amazon. If you can format it yourself, the cost is under a grand. First time authors CAN and WILL find ways to publish new material, and Amazon provides a fantastic venue for doing so. With digital editions, a first time author doesn't have to become a JK Rowling to have some success. They can have some success NOW and not have to be at the mercy of the publishing industry, the distributors AND the bookstores.
Tough toenails, ABA.
We need a book price czar! Mr. Obama? Mr. Obama?
Bookstores are dinosaurs. They are going the way of brick and mortar travel agencies,insurance agents and video stores. Realtors are next on the endangered species list.
How many trees does it take to put a book on the internet?
I have always enjoyed hard copy books. Have a thousand or so in the garage attic. Better than e-books anyday. BUT I have no sympathy for the publishers. How long does copyright last now? 60 years? Try getting an older book. They are available used on Abe books. No publishing profit here. New editions are in the library. No publisher profit here either. Publishing has turned into another RIAA blood sucking organization. Let it all go E-book. Then a couple of months later I can download it for free. Some geek will figure out how to strip the DMR from it. And if I want hard copy I can print it for free at work on the weekends. My pension may be gone. Health insurance going. Big big 1.5% raise. But I know where they keep the paper. And if they want, stop printing the suggested retail on the cover. Problem??
"If readers come to believe that the value of a new book is $10, publishing as we know it is over."
I'm an author who has done the math. I can self-publish a trade paperback through Print on Demand (POD), sell it for $10 at Amazon, and still make 7+ times the profit per sale I would make by having it published by a "real" publisher...who will retail it for $15 and won't bother to promote it anyway.
The book industry wants to maintain a Hollywood level of management, useless functionaries, cocktail parties, and hangers-on...but without Hollywood's revenue stream. Not to mention the antiquated three-layer distribution structure. If Amazon can take orders and ship books directly to millions of end users, why can't a publisher take orders and ship books directly to bookstores?
I've seen other industries die from the exact same squeeze: too many middlemen and too much organizational overhead. All you need to publish books today is a computer, an Internet connection, and a few hundred bucks. Selling them is harder, but at least with POD you're never stuck with inventory.
I agree with the "deflation is here, deal with it book boys" sentiment but isn't there a danger that the big retailers like Amazon are running losses in the short term to put small rivals out of business, and once they're gone the prices will go sky high thanks to oligopoly?