Friday, November 13, 2009

Price Wars: Why Cheaper Books May Not Be A Good Thing

To begin, a joke:

Q: What do Stephen King and Sarah Palin have in common?
A: They're both responsible for bringing nightmares to thousands of Americans! Ha ha ha!

Come on. That's at least as funny as anything that Jay Leno's ever done.

I jest, of course. (Though a political controversy might boost our readership). The correct answer to the question is that they both have high profile books coming out in November. King, after a series of clunkers following the completion of his Dark Tower series, is returning to his roots with an epic novel about a small town. Released on Tuesday, Under the Dome is 1,088 pages long. King has been working on the story in one form or another since the 1980s, and it's supposed to represent a return to his glory days, hearkening back to The Stand and It.

Sarah Palin, meanwhile, has her memoir Going Rogue coming out on November 17 (ghostwritten in classic political memoir tradition, of course). Backed by a tour through red state America and a high-profile Oprah appearance, Going Rogue is the must-read book for both Palin detractors and apologists. That everyone has already made up her mind about the woman one way or another doesn't matter - this is going to sell a ton of copies.

In October, Walmart made the bold move of offering these titles as preorders for ten dollars each, along with some other big-name holiday releases. (The cover price on Under the Dome is $35, and Going Rogue is $28.99). This is a ridiculous mark down. Not to be outdone, immediately made these books available for preorder for nine dollars. Walmart fought back, instituting another price drop, to $8.99. Target then entered the fray, promising to match Walmart's price. Walmart, not to be outdone, reduced the price by another penny to $8.98. At some point, Sears jumped in, promising vouchers for their store to whomever purchased the book from them. This is how prices currently stand, but who knows what will fluctuate in the future?

Meanwhile, every brick-and-mortar bookstore in the country has taken up heavy drinking and crying themselves to sleep.

To understand what's going on, we need to look at how book pricing works. Of course, no bookstore purchases a book from the publisher at cover price. Publishers provide hefty discounts to bookstores who buy in bulk - usually around 40% for independent bookstores, and up to 50% for the larger chains. Independent bookstores, who have a smaller amount of total revenue, tend to sell these books at cover price. Large chain booksellers have a little more leeway - they often sell books to the consumer at a 20 to 40% discount off the cover price. Their profit margin is lower, but this is supposedly made up for by their larger number of sales, and the fact that, by drawing you into their store with the lure of lower prices, you also pick up some older trade paperbacks with a higher profit margin. Amazon, who doesn't have to worry about property upkeep or paying cashiers, can offer an even higher discount.

At a certain point, however, discounts become downright unprofitable. By offering $26.02 off King's new book, Walmart is not going to be making any money. Why the big discount, then? Their motivations are two-fold. For one, they want to show the world that they can sell books. When you think of buying a book, now, they want you to consider Walmart as a viable possibility. The move reeks of publicity. Secondly, they are hoping that you pick up a few more products while you're book shopping at Walmart. They might not make any money selling you Going Rogue, but if you pick up a few American flag T-shirts and a sixpack at the same time, they've already recouped their losses.

Amazon's motivations are similar. They want to retain the #1 bookseller status in your mind, and are willing to prove their title by matching Walmart's massive price reductions. Because they also sell a large number of other titles and products, they can afford to do it. Barnes and Noble or Borders, with their measly 40% discounts, can't afford it. Since a large part of their revenue comes from selling these high-profile titles, they can't afford to cut their profit margins. And your local independent bookseller sure as hell can't afford to do it either.

So, is this a bad thing for the consumer? After all, I just ordered Under the Dome off Amazon for less than what it costs for me to go to the movies. For a thousand page book, that's a pretty good price-per-page ratio. Similarly, I never would have even considered spending money to read Sarah Palin's book. But, at nine dollars, I might just make an impulse purchase the next time I'm at Walmart to learn what she has to say. The booksellers win and I win. What's so wrong?

First of all, there is the large blow dealt to retail bookstores. Independent booksellers are already in a dire enough situation. Yes, these sort of bookstores do still exist in the U.S., the kind with free coffee in the back and a friendly, well-read staff who can provide knowledgeable recommendations. Corporate retailers, on the other hand, have a bunch of employees who look like they've never read a book in their lives, but at least they have a large selection. Barnes and Noble is a sterile, corporate hellhole, but the sheer quantity of titles they have available to browse through can keep me occupied for hours at a time. Amazon is convenient, and Walmart is cheap, but the former is online and the latter only stocks a handful of titles. Is it worth the discount if we lose actual bookstores, and the opportunity to find hidden gems while browsing?

But the fears of brick-and-mortar stores aren't new. More worrisome is what this means for the publishing industry as a whole. As author James Patterson has already pointed out, it might not be a good thing to condition the populace to expect to pay nine dollars for a hardcover book. If the average consumer gets used to this price reduction, he or she is going to be less inclined to buy higher-priced releases. This means the industry will turn into a series of self-fulfilling prophecies: expected bestsellers will be given a huge discount and sell large numbers of titles. Books not expected to do well will not be given the discount, and languish, unsold, on the shelves. In short, the book industry will be making the decisions as to what does and does not sell based on the prices they set. Sure, maybe Joe Biden's book sounds more appealing to me. But if I'm a poor grad student and Amazon is offering Going Rogue at half the price, they have, in short, already selected my vice-presidential candidate memoir for me.

Finally, this strikes me as the publishing industry's last ditch effort to combat the rise of e-books. The electronic version of most of these titles has been delayed for several weeks following their print release. By simultaneously dropping the print copies to something equivalent to or below their electronic-release price, this is Walmart and Amazon's (and Target and Sears') way of reminding you that print releases are just as good.

Is there a solution to the mess? Not an easy one. Many European countries do not allow cover price discounts. This means that smaller releases get a larger distribution, but it also means that most bestsellers and hardcover releases are much more expensive. It ensures very large profits for booksellers, and that all booksellers are on equal footing. It also means that consumers would be paying the full $35 dollars for King's new book. I'm all for paying full cover price for books to support independent bookstores, but discounts do allow me to buy more books than I normally would. I'm also happy that I can get discounted textbooks on Amazon, for instance, as these are books which often have an exorbitant cover price. The European model has its own problems.

And I am certainly happy for the discount. I can't deny that it's convenient for me, a student with a limited income, to be able to read new hardcover releases for cheap. I wish I had the money (or the strength of will) to buy all my books at independent bookstores. But I don't.

I guess, in the end, the convenience is not entirely a bad thing. The price drops are unlikely to last past the Christmas season. However, I think it's good to remember what, exactly, we're sacrificing for a few dollars off. I'm not pretending that we can all afford to pay cover price for new releases at some utopian ideal of your Friendly Neighborhood Bookstore. But I think we should remember that these added savings are not free, and there is a hidden cost. I like the ability to browse through brick-and-mortar stores for hours on end. I like the ability to talk with other consumers and employees about their favorites. I like the ability to peruse a large stock beyond a few best-sellers. I like the ability to enter a bookstore with no specific title in mind, and find a lot of books that are perfect Christmas gifts. As much as Amazon tries to replicate the experience of browsing a bookstore, there are some things they just can't do.

I also like the fact that I'm getting Stephen King's new book delivered to my front doorstep for nine dollars. But I don't have to feel good about it.