Cover Story - Outlook 2010: The Future of the Industry
"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," the letter states. "We believe the loss-leader pricing of digital content also bears scrutiny."
While Amazon is notoriously close-lipped about its strategic plans, company executives have stated that it focuses on overall margins, not specific product margins. (Many have speculated that Amazon's goal in pricing digital editions below cost is to sell more Kindle e-readers, bigger-ticket items with larger profit margins.)
The upshot of this, according to many in the book trade, is a book business in the hands of those whose businesses are not built on books—retailers looking to draw consumers in to purchase clothes, toys and electronics, forcing an unsustainable model on an industry still reliant on high-cost acquisition and production processes. It leads to scenarios like that of a writer/publisher described by Chambliss, whose book on walking tours of Seattle was picked up by Costco. Thrilled, the woman printed a huge order, only to see massive, damaged returns a year later. Costco had moved on, but she couldn't—and she was driven out of business.
"I think what we are seeing is that publishers have … done a bad job controlling their content and how much it costs [to sell]," says Michael Norris, senior analyst in the book trade group at Simba Information. "A book should not be priced a certain way because of a marketing decision made at an electronic commerce giant."
Not everyone agrees that the biggest retailers are to blame for the industry's current problems. "A handful of steeply discounted best-sellers won't devalue books across the board," says Tanya Hall, business development manager at Greenleaf Book Group LLC. "There are other practices in our business that have taken us further down that road—namely the tendency for publishers to print in excessive quantities and sell off remainders/overstock for pennies on the dollar, or retailers buying bargain-priced reprint rights for product destined straight for their front-of-store discount shelves."