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If you heard the earth shake at the end of last month, it was probably the tens of thousands of self-, subsidy, and small publishers having a mass heart attack at Amazon's announcement that it intended to turn off its "buy" buttons for all titles produced by small and self-publishers unless they use the Amazon BookSurge printing unit to produce books for direct Amazon sales.
For the publishing marketplace, this was the equivalent of Adobe putting a FedEx Kinko's print button in its Acrobat software, but looks to be permanent. It's not just a matter of publishers and authors feeling strong-armed into working with Amazon's book printing unit. It has a major impact on their business models, as well.
Direct sales through Amazon mean that book orders are ganged and shipped by the printer or publisher to Amazon's distribution centers transparent to the client. Amazon offers other non-direct programs (Advantage and Marketplace), but the cost structures are not as favorable. For some authors and small publishers, it is Amazon's direct selling "zero shipping" and ability to set short discounts (as low as 20 percent) that makes its POD publishing arrangements profitable in the first place.
Authors and publishers can continue a direct sales relationships with Amazon by setting up files with the company's BookSurge unit (which is Amazon's intention through this announcement), but there are concerns. It doubles the paperwork, sets the discount to 55 percent—no exceptions—and raises concern about quality, since prior to the Amazon purchase, BookSurge had a less-than-stellar reputation for its production quagmires, inflated costs, and print and binding quality.
(Amazon made dramatic changes in the BookSurge staffing, production, and business model after the purchase to improve quality and service, but due to its public secrecy on the subject, these changes remain widely unknown in the self-, subsidy, and small publishing community.)
Amazon has not yet fully enforced its new policy, but the "buy" buttons from at least some subsidy publishers have already been removed.
Is Amazon a Monopoly?
When Amazon's announcement first hit, the first question racing through the list serves and blogosphere was whether Amazon should be treated as a monopoly. Authors and publishers were urged to contact the Federal Trade Commission and their elected representatives, complaining that Amazon is (or is treading perilously close to) restraint of trade and other monopolistic practices.
This cry has now extended to trade associates serving authors and independent publishers, including The American Society of Journalists and Authors (ASJA), PMA, the Independent Book Publishers Association, and Small Publishers Association of North America (SPAN), which are pushing for an anti-trust suit against Amazon.
Some industry watchers argue that this is ridiculous. Amazon isn't pushing for exclusive rights to retail books, only controlling its source of supply. If publishers and authors can't offer Amazon's standard 55 percent discount (which is less than a traditional distributor's discount of 70 percent), they shouldn't be in the publishing business.
Others say yes, Amazon is restraining trade because this move specifically targets subsidy and POD publishers, and is discriminating against certain types of suppliers. They also point out that Amazon's monolithic business model has effectively forced out so many retail options, publishers and authors have few other options. By creating an avenue for nearly everyone to sell through Amazon, and then advertising that it carries every book in print, Amazon has created an environment that first fostered the growth of self-, small press, and subsidy publishing, then made these publishing sectors dependant upon it.
Now Amazon is changing the rules. By enforcing a 55 percent discount, it is large and powerful enough that, through this one decision, Amazon could potentially force thousands of authors and publishers out of business.
Are There Other Options?
If authors and publishers don't wish to move to BookSurge, what are their other options? Beyond Amazon and Barnes & Noble, publishers and self-published authors can look to niche retailers, but the options are few. Most niche retailers carry only best-selling titles, and a carefully selected inventory of books that appeal to their individual readerships. Or, like Christian Book Distributors in the Christian marketplace, they handle only high-volume books.
While many in the industry cry "foul"—that Amazon is tilting the playing field unfairly—Amazon disagrees. It argues that, if authors and publishers choose not to participate in BookSurge, they can still sell through Amazon by participating in its Marketplace or Associates programs. By doing so, the book will show up in the Amazon search engines and can be ordered just like direct sales books.
The concern for authors and publishers, however, is that the cost and profit structure for the four models—direct sales, Associates, Marketplace, and BookSurge—are very different. The Associates and Marketplace programs require authors and publishers to pre-print books, pack, and ship them either to Amazon or directly to customers. This adds a layer of administration and cost. Associates also requires a 55 percent discount, which can be prohibitive for subsidy or POD publishers since the per-book costs are higher. Marketplace allows sellers to set their own pricing, but this requires authors and publishers to do their own fulfillment, which can be burdensome and costly, especially since orders must be fulfilled on a one-off basis. Many readers have also had bad experiences with third-party sellers and won't purchase from them.
What about reader-direct sales? Can't authors and publishers still sell their books through their Web sites? Some argue that, if readers can't find a book on Amazon, this pushes them to author and publisher Web sites, where margins are higher.
The counter is that Amazon claims to carry every book in print. If a title is not available on Amazon, readers may not look further. Plus, most self-published and subsidy published authors don't have marketing budgets to drive sales from multiple channels, so the Amazon interface is their primary—or only—marketing vehicle. Offering direct credit card sales is also not within the reach of many of these small businesses. Since not every reader wants to use a check or PayPal, if a site doesn't take credit cards, the seller can lose the sale. The question is, since it can be argued that Amazon holds some responsibility for the creation of these dependent relationships (whether in small or large part), does it become somewhat responsible for them?
Where's the Kickback?
While there is outrage among publishers and authors, the question is what to do about it. There is a lot of talk, but as yet, there is no mass move to fight back. There is also frustration that industry trade associations such as ASJA, PMA, and SPAN are doing little but sending out releases, polling members, and publicly calling on Amazon to reconsider.
As of this writing, however, Amazon was not aggressively pushing its decision to move customers to BookSurge. It seems to be taken more of a "carrot" approach instead.
Why? There is a backstory here that few are discussing. Amazon also offers a free publishing option, CreateSpace, that offers a different cost model than BookSurge. It offers zero printing charges, and a "revenue sharing" payment model based on selling price. Because CreateSpace is owned by Amazon, it would not be affected by the change.
While CreateSpace sounds like "publishing lite," the production and service offerings are identical to BookSurge. Competing directly with Lightning Source's relationship with Ingram Distribution, it also offers full distribution services through Baker & Taylor.
The only difference in production and service offerings between BookSurge and CreateSpace is that BookSurge pricing offers each customer a dedicated account rep. With CreateSpace, customers are offered an Internet interface only.
Until recently, CreateSpace was not palatable to publishers because of its subsidy-publisher-like print costs. On March 28, however—nearly concurrent with its BookSurge announcement—Amazon announced the creation of CreateSpace Pro, which lowers the per-book costs to standard POD rates. Initial set-up costs are also lower than for some large POD printers. For many books, the profit margins will be higher, especially for books sold through Amazon.
Where Is Lightning Source?
Where is Lighting Source in all of this? With thousands of customers and more than one million books printed monthly, its Amazon volume—which is an unknown percentage of its total volume—is certainly not one it wants to lose. Although the industry buzz is that Lightning Source is fighting Amazon's decision, the company itself has made no official statement except to release a bland statement to customers on April 1 that said, like other industry players, it is "looking into it." Writes one author on an industry list serve, "If Lightning Source is 'fighting' Amazon, it's the most covert operation in history."
The reason for LSI's silence may be in an overlooked Amazon press release from 2007. At that time, Amazon announced it had won the POD business of many of the industry's top publishers. In a statement released May 31, 2007, Amazon publicly announced that HarperCollins, John Wiley & Sons, McGraw-Hill, Pearson, Springer, Gale, Oxford University Press, Cambridge University Press, Princeton University Press, SAGE Publications, Kensington, Hal Leonard, LexisNexis, and the International Step by Step Association had signed with BookSurge to print their current, backlist, out-of-print, and large print books. Amazon has not publicized the names of publishers who may have signed on since then.
If major publishers have already defected from the LSI model to BookSurge, LSI may have lost much of its bargaining power.
Time To Get Over It?
So is it time for the self- and subsidy publishing industries to get over their offense and get on the bandwagon or go home?
One of Amazon's primary motivations is to increase its internal efficiencies. A model that worked at the beginning of the self- and subsidy publishing explosion has now become very expensive to administer. Amazon offers the same exposure for titles selling two copies a year as it does for those selling 200,000 per year. Plus, its growing emphasis on two-day shipping, product packaging, and other fulfillment-centric services demand more efficiency than third-party POD suppliers can offer. The ability to print in-house not only provides print-based revenues, but it facilitates the fast-turn customer relationships for which it has become known.
For many authors, Amazon has been subsidizing their lack of marketing plans and poor cost structures for a long time. Some wonder if it is time that they simply accept that, if they can't make money on Amazon's terms, they either find other outlets or develop a better cost structure.
Heidi Tolliver-Nigro, industry analyst and long-time contributor to Printing News, is also a niche publisher (Strong Tower Publishing) offering eight titles through Lightning Source Inc. and its Ingram Distribution services and is therefore directly impacted by this controversy. She welcomes your comments. You can reach her at htollvr@aol.com.
author: By Heidi Tolliver-Nigro