Tag Archives: book distributors in the electronic age

Should Books Be Discounted?

Should Books Be Discounted? Image from businessblog.winweb.com.

I had a call the other day from David Streitfeld, who often covers the publishing business for the New York Times. He wanted to know if Amazon was discounting the books that IPG distributes at a lesser rate than they used to. There has been widespread concern in the publishing community that Amazons’ game plan is to steeply discount everything until the competition is wiped out, at which point they could put prices way up and start coining money.

It is true that Amazon has discounted very aggressively, and has been content to accept a very low profit margin if this would mean a rapid increase in market share—which it has. If titles are now being discounted less, this might signal that Amazon is turning to Part Two of its strategy, the part where the prices start to go up. In the article that Streitfeld published in the NYT on the 4th of July, one of his sources expressed the view that the discounts were in fact decreasing, especially on independent press and scholarly titles, which would be disastrous for sales.

My take on this issue is quite different. I have no inside information whatsoever about Amazon’s game plan, but I know what I would be doing if I were in their position: I would be experimenting with discounts and mining the sales data to see what effect different levels of discounting would have on the sales of various kinds of books at each stage in their life cycles. Streitfeld quotes me as saying:

“‘They [Amazon] are wondering, “If we knock off only 10 percent as opposed to 35 percent, where do we come out ahead?”‘ Mr. Matthews said. ‘They don’t care how many books they sell. They want to know how many dollars they get.'”

My grammar is regrettable, but the idea is from Business 101: Find the place where the price and volume lines cross on the graph, the balance that yields the most dollars.

Many people are offended by the very idea of discounting books.  After all, books have a list price printed right on the jacket flap or back cover.  Almost no other products have the price printed on them during manufacture. Doesn’t this mean that, for books, the list price is somehow the right price? And aren’t discounted products usually cheap knockoffs of better things? Perhaps Amazon has done a disservice to the special stature of the book as a cultural icon; perhaps all this discounting has convinced many consumers that paying list price for a book means you are a bit of a chump, like the little old lady who pays full sticker price for a new car. Or, it may be that the book is not quite the cultural icon it used to be—for reasons that have little to do with discounting.

I will confess that I was a happier book buyer in the days before they were routinely discounted. The printed list price assured me that the title I wanted would cost the same in any bookstore, and that no one would get a better deal than I did. But perhaps a lower price justifies putting up with a little low-level anxiety of that kind.

Advertisements
Tagged , , , , , , , , , , , , , , , , , , , ,

3 Big Takeaways from Book Expo America 2013 for Independent Publishers

At the big book convention in New York, we saw old friends and made new ones against the backdrop of one of publishing’s biggest powwows. I also observed some very exciting things happening for the indie publishing community.

There were many more indie presses in attendance than has been the case for the last four years or so. At the IPG booth we had conversations with dozens of very promising publishers who have quite extensive and impressive publication lists. It is clear that an improving economy has brought forward a surge of entrepreneurial energy in the book business. The future is going to be a lot of fun.

The hall was alive with e-book and e-commerce solutions and propositions that are really beginning to make sense. The geeks now know enough about the actual business of books to go after some real problems and opportunities. For instance, a startup called Zola Books has developed a user-friendly way to deal with the issue of “showrooming”—the term we use to describe what happens when a customer at a bricks-and-mortar bookstore looks over the titles on display and then orders a print or e-book copy from a web retailer, often for a lower price. Zola Books gives a bookseller a well-earned piece of the action for its part in making such sales.

It is now clear that the e-book market will not be dominated by just a few huge web retailers. We were approached by 15 new ventures at the show, all offering very favorable terms for publishers and proposing innovative marketing strategies that could really work. By the end of this month, IPG’s e-books will be available through about 75 web retailers, and it’s great to see that many of the smaller ones are growing quickly. This means there will be plenty of healthy competition, no matter what the Department of Justice thinks have been the sins of the past.

These developments add up to a lot of promising opportunities for independent publishers.

IPG at BEA 2013

IPG at BEA 2013

Tagged , , , , , , , , , , , , , , , , , , ,

An Update on Amazon and a New Direction for Gone Publishing

IPG and Amazon have agreed on terms. As of Friday, May 25th, the 5,000 IPG Kindle titles that were taken down in late February have been put back up on the Amazon site, plus an additional 500 new Kindle titles prepared by IPG over the last three months have been added. To help make up for the lost eBook revenue suffered by its client publishers, IPG will distribute Kindle editions at no charge to publishers for the period from June 1st to August 31st, 2012. As for the overall health of IPG and its client publishers, year-to-date sales are up 26% over last year.

These are complicated times in the book business. While IPG certainly does not seek conflict with its customers, it may be that a certain amount of pushing and pulling is inevitable in our industry until settled terms of trade for the new electronic book formats can be agreed upon by all participants. We hope that our dispute and subsequent agreement with Amazon have helped to advance this difficult but necessary adjustment.

The recent news accounts of the way the “Big Six” publishers operate have made it perfectly clear that independent publishers inhabit an essentially different world. This blog will now return to its original purpose, which is to promote a well-informed discussion of that world. Knowledgeable guest bloggers will be invited to express opinions that challenge received wisdom, and IPG will not shy away from posting well-argued comments even if they rock a few boats.

Curt Matthews
CEO, IPG/Chicago Review Press, Incorporated

Curt Matthews is the founder and CEO of Chicago Review Press, Incorporated, which is the parent company of Chicago Review Press and of Independent Publishers Group (IPG), the first independent press distributor and now the second largest. Curt has served on the Independent Book Publishers Association (IBPA) board and has also served as its president.

Tagged , , , , , , , , , , , , , , , , , , , , , , , , , , ,

The Trouble with eBooks: A Recap

Most of the blog posts put up in this space over the last two months have circled around three very major issues in regard to eBooks. Here they are, together with an account of what if any progress has been made in resolving each of them.

eBook Distribution: What’s the Deal?:
No one who is really privy to hard information about what is going on is able or willing to speak out.

Non-disclosure and Confidentiality Agreements, Most Favored Nation Clauses in distribution contracts, and then out of nowhere, the Department of Justice restraint of trade litigation against most of the biggest houses—all these things conspire to silence any informed debate about the issues. And to be blunt about it, most independent publishers feel abject terror at even the thought of confronting Amazon’s enormous market power. This part of the problem has not improved at all.

Market Share: You’d Be Surprised What the Big 6 Controls:
“The Big Six publishers, who control about half of the entire market for trade books, have been able to drive a better bargain with Amazon than the independent publishers could.”

A structural difference of that magnitude (roughly 20 points of discount) would put the independents out of business in short order (See also At What Discount Should Publishers Sell Ebooks to Resellers). This part of the problem may have eased a bit. The Department of Justice’s litigation could have the effect of largely taking away the discount advantage briefly enjoyed by the Big Six which would level the playing field. We will see.

The Oxymoronic Notion of Digital Content: Part II:
“The 50% plus take that Amazon insists on for distributing eBooks from independent publishers bears no relation at all to the cost of delivering that service.”

A free market and real competition would squeeze out excessive margins wherever they might be found in the supply chain from author to book consumer. So far we have not had anything like a free and competitive market for eBooks. On this issue, however, there is some very good news on the horizon. Microsoft’s investment in Barnes & Noble’s eBook programs is very welcome. Two other eBook programs, which look to be robust and publisher friendly, are well in the works. Of course for the reasons explained in point one above, I can’t tell you a thing about them.

Curt Matthews
CEO, IPG/Chicago Review Press, Incorporated

Curt Matthews is the founder and CEO of Chicago Review Press, Incorporated, which is the parent company of Chicago Review Press and of Independent Publishers Group (IPG), the first independent press distributor and now the second largest. Curt has served on the Independent Book Publishers Association (IBPA) board and has also served as its president.

Tagged , , , , , , , , , , , , , , , , , , , , , , , , , ,

Book Distributors in the Age of Electronic Publishing

Will there be a need for book distributors in the age of electronic publishing?

This post will cover what distributors do now at a time when printed books still dominate book sales overall. The next post will describe the role of distributors as the industry transitions to eBooks.

For most of the forty years that book distributors have been around, our major function has been to gather together many independent publishers, thereby creating an entity that booksellers can deal with just as easily and profitably as they deal with the major publishing houses.

IPG, for instance, now actively markets about 50,000 different titles, and another 10,000 eBook titles, to consumers, wholesalers, and resellers down every viable sales channel for books. This marketing effort involves a combination of in-house and commissioned reps that adds up to a sales force of over 200 people, a plethora of sales materials, and a state of the art warehouse that turns out most orders in under 24 hours.

There is never any haggling with our customers over discount or returns because our terms of trade are clearly stated and consistently applied. Our accounts are clean and complete. Our service to our customers is as good (sometimes better) as the largest players in the book marketplace provide.

Many participants in the book business understand the important functions of distributors which I have just described. There are, however, other less obvious yet crucial benefits that distributors bring to the table. Here are three of them:

  1. Independent publishers are independent in more than just one sense. They are independent thinkers down to the soles of their feet, and they do not suffer received wisdom, or fools, gladly. They certainly are not in this game just for the money. The cross-grained mind set of most indie publishers is exactly why they are indispensable to our culture, and why they are often extremely interesting people. No middle of the road for them; they beat the bushes. But working with these interesting people one-on-one takes time and can therefore be expensive. Distributors cheerfully undertake this work because it is an essential part of our job. The other players in the book business are happy to leave this to us.
  2. In addition, there is a very large educational component to what distributors do. Good distributors offer their client publishers solid advice, all of it free, on titles, covers, print runs, publicity, business strategies, and much more. Even the most accomplished authors need editors; even the most sophisticated independent presses can benefit from informed feedback.
  3. And finally, the major distributors have made major investments in the technology that increasingly drives success in the book business. EDI, ASN, and ONIX metadata feeds weekly to hundreds of customers; data mining, POS information gathering and analysis; reorders generated by algorithms trolling through huge databases—these are just a few of the competencies distributors have had to master in order stay competitive with the big publishers. It is certainly no longer just the shoeshine and the smile that brings in the orders. IPG, for instance, now has an IT staff of thirteen highly-trained people working feverishly on new ways of storing, sharing, and interpreting data; and an IT budget of almost a million dollars a year. Very few independent publishers could afford anything like this level of expense, and very few would want to master a technology which is, after all, not what brought them into the book business in the first place. Yet without this sort of technical support at their backs, independent publishers are unlikely to thrive in this changing environment.

For all of these reasons distributors no longer think of themselves just as a conglomeration of publishing companies. Many of the difficult and expensive services we offer our client publishers greatly benefit our customers because these services improve the quality of the books we sell to them, and because our IT expertise makes us a profitable trading partner for them.

Distributors will continue to have an important role to play in the print book business. But will this role disappear as the book business shifts from “tree” books to eBooks? I should say not.

Photo: Curt Matthews, CEO, IPG/Chicago Review Press, Incorporated. Courtesy of The Chicago TribuneCurt Matthews
CEO, IPG/Chicago Review Press, Incorporated

Curt Matthews is the founder and CEO of Chicago Review Press, Incorporated, which is the parent company of Chicago Review Press and of Independent Publishers Group (IPG), the first independent press distributor and now the second largest. Curt has served on the Independent Book Publishers Association (IBPA) board and has also served as its president.

Tagged , , , , , , , , , , ,
%d bloggers like this: