June 16, 2013
Book publishers, book sellers face being WalMarted to death

If there is one thing you can say about the Web it is that it is responsible for the disruption of more businesses than just about any recession. We hear daily about the newspaper industry facing annihilation, the music industry trying to suck out the last dollar it can, and the movie industry trying to constantly stuff the genie back in the bottle.

What we don't necessarily hear a lot about is the book industry whether it be from the point of view of the authors, or book sellers, or book publishers. Every once in awhile stuff will bubble to the surface but on the whole much of the discussion around books get quickly overshadowed by its more loud mouth industry cousins.

That doesn't change the fact thought that the book industry is facing a full frontal assault that will have as much an impact on the industry as the ones facing our other entertainment related industries.

Michael Hyatt, CEO of Thomas Nelson Publishing, gives a great overview of this assault in a post yesterday. In the post he outlines how companies like Amazon, WalMart, and Target are cutting the prices of books well below that of the publisher price, to the tune of 40-50%, in an effort to shore up their book sales. This is creating a multitude of problems for everyone in the business as this kind of subsidizing isn't sustainable.

At some point something has to give. Publishers will be forced by retailers right across the board to cut their prices.

Publishers. For right now, publishers are getting paid an amount equal to the customary discount for hardcover books. But no one in the industry I have spoken with expects this to last for long. Amazon, Walmart, and Target are systematically conditioning consumers to expect these lower prices. Eventually, these retailers will be in the position to force publishers to lower their retail prices.
Book retailers, especially the small mom and pop shops, might be willing to discount some of the bestsellers but that is used to bring in consumers who the hope will buy additional books while there. By putting them in a position where they have to cut already slim margins in order to keep those customers hopefully returning this cheapening of their stock will make keeping the doors open even harder.

When it comes to authors Michael Hyatt has this to say

Authors. If retail prices collapse, it will mean that royalties and advances will also fall. You don’t have to be a mathematician to figure out that 10–15% of $9.00 is dramatically less than the same percentage of $25–35. Most authors have a difficult enough time making a living now. This will lower the income of all authors and force many to get out of the business altogether.
Now of course the freetards out there will suggest that this is actually beneficial for the authors in that it could allow them to deal directly with the consumer given the ease of creating ebooks and the availability of self-publishing services. There are also those that suggest that like bloggers, musicians, and newspapers book authors need to find different ways to market their books and provide auxiliary tangible goods to make up for what they might lose by giving away their books.

I don't profess to know all the ins and outs of the book publishing business and I am sure that someone like Michael Hyatt would be able to provide more accurate numbers but the fact is that the large portion of authors out there aren't making the big bucks. Not all authors are Steven King or Dan Brown and as much as we might think that all authors are racking in the cash nothing could be farther from the truth.

So when companies like Amazon and WalMart turn around and start slashing book prices to the bone because they are big enough to absorb the losses - for now - in the end this house of cards is going to come crashing down. While we might like to think that this will only affect the already rich book publishers the fact is that the ripple effect is going to me much larger and much deeper than we might think.

Free isn't the answer for everything regardless of what the self professed experts might have us believe. Sometime paying for something tangible at a fair market price with actual real money is the right thing to do as that money spent often has a far wider effect that just clicking on a purchase button.