The Grand Illusion
Authors come in all flavors, interests, and abilities beyond their skills as wordsmiths and storytellers… and we tend to follow our own work in different ways. Because the closest “real” new bookstore is more than 50 miles away, I tend to watch how my books are sold and presented on B&N.com and Amazon… and it’s truly eye-opening at times.
Given the changes in the bookselling marketplace, I was particularly interested to discover just how my latest book – Imager’s Battalion – was selling, at least comparatively. So I’ve followed it daily, and I’ve discovered some very interesting things. First, the advertised price of the hardcover has varied almost daily on Amazon, from over $18.00 to $17.00 as I write this, although there was a time when it could have been pre-ordered or ordered for under $17.00. Barnes and Noble’s hardcover price seems to follow that of Amazon, if with a bit of delay. On the e-book side, from what I can tell, Amazon and B&N.com both originally listed the ebook version at $14.99, prior to sale, but for the past week Amazon has been selling the Kindle at $13.49, while the Nook remains at $14.99.
Recently, a number of news stories have suggested that on-line retailers are sending out targeted advertisements to existing customers based on their previous purchases and what they have bought or browsed on-line. And because I have browsed my own books online, I have gotten “recommendations” from Amazon as well, but I discounted reports that on-line retailers were offering differential prices to customers – until two weeks ago. That was when I received an email from a reader telling me that, much as he loved my work, there was no way he was about to pay $19.00 for the Kindle version of Imager’s Battalion. I couldn’t believe this and sent a return email politely pointing out that on the Amazon sites [U.S. and Canada] the price was nowhere near that high. In return, he sent me a copy of an Amazon solicitation sent to him, which did indeed offer the Kindle version at $19.00. In turn, I sent it to Tor, and was informed that it was a genuine Amazon communication and that they were looking into it. So far as I know, they still are, but it may be with the anti-trust lawsuit by the Department of Justice, they feel they can’t comment.
In the meantime, the reader informed me that he had gone directly to the main Amazon website and purchased the ebook for the far lower price there.
Now… it’s been acknowledged that users of search engines, especially of Google, get different results from the same inquiry, based on the browsing patterns of the user, and it’s now fairly apparent that Amazon has the power to offer different prices to different people – at least on their direct mail solicitations or “recommendations.” And exactly what is there now to prevent them from offering different prices to different customers seeking to buy the same item on the main website? Given that there’s no way to tell exactly what the “true” base price is, isn’t this essentially the practice of monopoly?
With the “agency model” proposed and still used by a few of the publishers, at least readers had some confidence of what the price might be. Now… it appears, Amazon is trying to get the highest price possible based on past purchasing patterns of individuals… rather than the lowest price that they’re claiming in support of their opposition to the “agency model.”
So… tell me again how supporting Amazon and DOJ against the publishers and their agency model is going to reduce monopoly pricing in bookselling and provide low prices to all consumers?
This looks like a duplicate post…
There were some problems with the server this morning. Duplicate removed.
I would have suggested that smaller outlets such as Fictionwise were aiding the fight again the monopolies, but as BN absorbed them recently, that point has become moot. That being said, I got Imager’s Battalion (loved it, by the way, can’t wait for the next one) from BN via my nook. Didn’t even compare the prices between the Kindle and the nook, despite apps for both on my Android tablet. I don’t care for the Kindle. Mostly out of principle. The fact that they refused to allow expansion, the kerfuffle over removing books, just to name a few past grievances, has led me to choose the nook over the Kindle. I only hope BN doesn’t disintegrate and that the platform stays alive to compete.
It seems like DOJ chose the wrong target with Apple. Now Amazon will duplicate the efforts of so many other monopolies in the past, wipe out the competition, by fair means or foul, and then set the price as high as they can. Welcome to the “new” economy. Same as the “old” economy.
I can’t recall having the experience that the reader above reported and I’ve regularly gotten recommendation emails from Amazon.ca for several years. I’ve let some sit unread in my In Box for a couple or more days before I finally get around to reading them. Sometimes an item interested me and when I finally looked it up on the site the price had dropped (and a few times it had gone up). That’s happened more than a time or two. What I’ve noticed over the years is that the price in the email and that listed on site will match up if the email is read and acted upon within a short time of being received. Recently, at the end of December, I pre-ordered a concert Blu-ray at a cost of $16.99. Three days later I got an email informing me that the price had dropped by $3.00 and due to Amazon’s price guarantee my payment would now be $13.99 instead. If an email had been sent to a customer an hour before this price change went into effect then I can see where there would be a price discrepancy. I’ve also received recommendations that included items I already bought. Sometimes I don’t think the ‘left hand knows what the right hand is doing’ at Amazon.ca.
Dealing with Amazon is like playing a waiting game. I once waited for over three years for a TV series box set to drop to a price that I was willing to pay. I regularly checked its page and when it went on sale at 75% off I snapped it up. I’ve procrastinated for months on whether to buy an item and noticed that the price would fluctuate. It was like watching a stock on the market sometimes.
What I do when I get a recommendation email is not click the link of the item I’m interested in but rather log on to the site separately and then type the info in the search box. That way the most up-to-date information appears. As a consumer it is my responsibility to research, check and double check before buying. The retail outlet employs humans and we are all prone to entropy. And if the discrepancy was purposeful, then it is still up to me to check and double-check its accuracy.
There’s also books-a-million, which has both physical stores and online sales (although I see the hardcopy and audio, I don’t see the e-book there).
Actually, I am not sure I see the argument. Amazon may well have a dangerous influence on the bookseller’s market in North America due to their market share (does anybody know what it is?), and thus desrve extra scrutiny. But, having different pricing than B&N and other retailers is *precisely* of benefit to consumers who have the choice of buying from other sources. Varying the price offered based on coupons, discount cards, store location, volume purchased over the previous month, current inventory, or the phase of the moon for that matter is what retailers do all the time — it’s actually a (weak) argument against the existence monopolistic price power. Monopolies tend to have fixed prices.
No. Fixed prices are the traditional “symptom” of monopoly. Monopoly means that one seller/producer controls the market. Just because Amazon varies prices doesn’t mean it’s not a monopoly. By varying prices and targeting appeals to individual buyers Amazon gains control of the market and can then dictate the terms on which it will buy books from producers. This is already happening, and it is monopoly. It just doesn’t fit neatly into most people’s [including DOJ’s] preconceived notions of monopoly.
I agree that fixed prices are a symptom, not a necessary condition of a monopoly. Still, I am not clear about your argument. If you are saying Amazon is varying prices, etc. with the goal of increasing its market share, and ultimately becoming a monopoly, I agree with you. But I note that this is true of vast majority of businesses.
If you are claiming, on the other hand, that Amazon is *already* a monopoly, I just don’t see the evidence. The only number I could easily find was for attributed to Bowker Market Research and applies to Q2 2012; it claims Amazon had 27% of the e-book market, which in itself was 22% of book spending in that quarter. So, Amazon is the largest e-book retailer, but I wouldn’t consider 27% a monopoly. Especially since I bought IMAGER’S BATTALION from B&N 🙂
The Financial Times of London, usually a cautious and reliable source, notes that Amazon’s share of the ebook market in the US is 60% and its share in the UK is 90%. Other sources cite from 50%-60%, for US market share. I’m far from the only one writing on this subject to note that Amazon’s strategy is to gain enough market share to force publishers and independent authors to lower prices in order for Amazon to move from losing money on ebooks [which it is now doing]to making it. This is the Walmart strategy. Squeeze the producers and suppliers… and it’s a monopoly strategy, just applied to suppliers, as opposed to consumers.
Mr. Modesitt, I think I found the Ft.com article that mentions those numbers. I am at a loss to understand the discrepancy, but I would agree that 60%, if accurate, is pretty close to monopoly.
This article mentions that Amazon’s share dropped from 90% to 60%: (http://www.newyorker.com/reporting/2012/06/25/120625fa_fact_auletta) in 2012. Based on its date, it’s referring to early 2012, maybe Q1. Assuming all of this is correct, it looks like Amazon.com after subsidizing the e-book market into existence through the Kindle and $9.99 e-books, is getting a smaller and smaller piece of a growing pie: http://www.publishersweekly.com/pw/by-topic/digital/retailing/article/54609-e-books-market-share-at-22-amazon-has-27.html. If my interpretation is correct, this is actually a good outcome for the consumer.
I still don’t understand how Amazon’s variable pricing is an indication of anything except trying to increase revenue and profits, which is expected behavior of any commercial enterprise.
You’re missing one point. Prior to the publishers adopting the “agency model” Amazon’s market share was 90%. What Amazon did was use its tremendous revenue base to sell ebooks at a loss, which no other book chain could afford to do. Once the publishers insisted on the agency model, Amazon couldn’t use predatory pricing, and Amazon’s market share dropped. If the DOJ lawsuit is successful Amazon will be able to return to a more predatory pricing policy. Certainly in the short run, we’ll see lower prices, but after a long time of lower prices, Walmart is having to raise prices… and there’s little competition left there in many areas.
Also… most authors are struggling, as it is. For consumers to get lower prices under the Walmart/Amazon model means that publishers and authors will get paid less. Publishing firms are already dropping lines and titles. The result of this trend is most likely a narrower range of choices for consumers, and it could be that you won’t see some of your less popular favorite authors in the future. Publishing is already very low margin, and, frankly, good books aren’t like produce, where a honeycrisp apple is a honeycrisp apple. We’ll likely end up with the publishing industry much like the music industry, where every pop song sounds pretty much like every other pop song… but then, these days the volume is so high that most people can’t tell anyway.
Cheaper always has its costs.
I have a Question Mr Modesitt, what stops the major book publishers along with their top Authors from forming a union?
If the major publishers formed any sort of group along those lines, they’d be prosecuted for restraint of trade. In essence, that is what the Department of Justice is alleging in their current case against Macmillan and Apple [the other publishers originally charged have settled with DOJ]. Authors could certainly form a union of sorts, and there are already several organizations that try to fulfill that function, including the Science Fiction Writers of America [SFWA], but given the number of authors, such organizations have been most successful in disseminating information and providing budding authors with guidelines on how not to be taken advantage of by publishers.
Mr. Modesitt, I recall having the discussion about Amazon’s predatory pricing leading to disappearance of competition, and subsequent ability of Amazon to raise prices for consumers and lower them for producers of e-books. I believe you agreed at the time that the alleged collusion of the publishers, along with Apple, to fix prices, is illegal regardless of Amazon’s guilt.
I am dubious about Amazon’s ability to do so, as I believe the barriers to entry to e-book sales are very low (e.g. look at relatively small players like Smashwords’ ability to sell e-books), and many enormous players able to sell things online (e.g. Apple, and even Walmart). And, by your argument that consumers are price sensitive and flock to Amazon as long as it has the lowest prices (I agree with your argument), they would quickly move to another vendor if Amazon starts to raise prices. One point that contributes to consumer choice is the whole e-reading infrastructure. When Amazon started pumping the Kindle, it had the vast majority of a tiny market. Except for a few early adopters, most people were not used to reading on a screen. Now, there is a huge number of people used to reading, not just books but daily magazines and newspapers, on their iPads and other tablets. I don’t have numbers, but my personal observation shows about twice as many tablets used for reading as dedicated readers. That makes me think the US a-book consumers are *very* mobile, at least potentially.
Finally, whether Amazon is indeed guilty of predatory pricing, now or in the past, I still don’t understand why you believe that their variation of prices, based on some discount/promotion/targeted advertisement formula, proves anything except normal retailing behavior. Unless you think that they are consistently selling below their cost–which doesn’t appear to be the case with BATTALION.
I agreed that collusion was illegal. I also said that there was no evidence of collusion. The publishers met on occasion about an entirely different subject.
Your argument about tablets is largely valid, except for one aspect. While tablets are becoming far more popular as e-reading devices, initial studies show that tablet readers are far more likely to read short fiction, magazines, and newspapers, while those who use e-readers such as Kindle and Nook read more books.
At present, given the DOJ settlements and Apple and Macmillan’s insistence on using the agency model, Amazon CAN’T sell below cost, not for the next two years.
You’re also absolutely right that Amazon is following “traditional” retail pricing policies… and those policies are designed to gain/hold as much market share as possible. If unrestrained by law, however, their eventual outcome is monopoly when there is a limited number of sellers, as is becoming the case in the book retailing industry. There is a very good reason why there are anti-trust laws. The problem right now is that you, others like you, and DOJ persist in only looking at the price levels at present, not at what they represent, what happened before, and where they lead.
Mr. Modesitt, I think we are largely in agreement that more competition in the retail space is beneficial; that Amazon (and B&N, and Walmart, and Apple) would prefer to have *less* competition. I also see no problem with Macmillan or any other publisher insisting on agency model–so long as they do it individually and not a part of a cartel. I don’t know how strong the evidence of collusion DOJ has found, so I will not pursue this further.
I think the main difference between us is you believe that Amazon *could* achieve a monopoly using normal business practices such as price competition. On the other hand, I don’t believe that’s achievable. The latter may be because I see so many different technical and sales platforms for reading books, and because of my own experience buying from many different vendors: from individual authors peddling their e-books, to publishers such as Baen, to small electronic retailers, to the giants like Amazon, B&N and Apple. Perhaps I am too optimistic, but I do believe that with so many alternatives it would be hard for any retailer, no matter how large, to control this market.
Speaking as a consumer, Amazon provide probably the best service I have experienced. I have the Kindle app on my iPad. When I order an ebook, once I have placed the order, I can read it within 30 seconds. If I place the same order with another supplier, I usually have to select the format and on many occasions have had problems getting it to the iPad. If I order a physical book it can take 5 days to come, but only Amazon seem to have the ability to quickly sort any delivery problems.
What this post is saying however, is that over time I will have less and less choice.
It is a hard decision to sacrifice such an excellent customer service for the longer term.
Again, it comes down to awareness. If I am told where new authors are active and aligned to my reading preferences, then I more likely to try them. I am still trying options like Librarything and similar facilities, but guess where they point you to purchase? Amazon.
It may be too late
PS. After the recent Apple ipad IOS upgrade, I am unable to use the iPAD to send messages to this post as the drag-and-drop of the icon no longer works. I had to resort to my PC using Windows.
I paid $25.00 for the print edition at Barnes and Nobel I have to hold the book in my hand and read it.
What puzzles me is it why some ebooks cost more than the paperback edition of the same book? I like ebooks because they are easier for me to read and some publishers, like Baen, are a bit better about pricing but it seems wrong that lower production costs are not passed along to the consumer. BTW – I have just discovered your blogs and I love them. I am fairly liberal and used to seeing SF authors have opinions that are either to the right of Genghis Kahn or so far left they are in La La land. Yours are truly a breath of fresh air. It would be great if we liberals had an opposition that as intelligent and reasonable then it would truly be a “loyal opposition”.