On Smashwords’s blog, Mark Coker writes about his predictions for the ebook industry in 2017. The predictions do touch on independent ebooks taking off, but largely seem to revolve around Amazon making everything worse.
I do have a great deal of respect for Mark Coker, as he’s done a number of great things for the ebook publishing industry—for example, when he faced down PayPal over the payment company’s attempt to become a de facto censor by setting restrictions on what sort of content PayPal-using companies could sell. But I can’t help thinking that, like many folks in the publishing industry, he’s very quick to blame Amazon for all its woes.
For example, he starts out by noting that the Kindle debuted and Smashwords were founded at about the same time—then he talks about the meteoric rise of ebooks over the last ten years, how they’ve broken through the publishers’ gatekeeping, et cetera, et cetera.
Ten years ago trade publishers were releasing about 300,000 new titles per year. Even back then, for readers and publishers alike it felt like there were too many great books and not enough time to read them.
Brick and mortar book retailers of yesteryear applied further constraint on writer opportunities, but it was not out of malice or disrespect for authors. Retailers faced their own challenges. They couldn’t stock every book given the high cost of operating physical stores. Shelf space is expensive.
Successful retailers managed their inventory with an iron fist. Small indie retailers could only stock maybe a couple thousand titles, while the large box retailers could stock maybe 50,000 to 80,000.
Distribution to booksellers has always mattered. If your book isn’t in stores, readers won’t find it.
The funny thing is, in the entire lengthy section, there’s not one word about the Kindle. If you came to his article without any other context, you could be forgiven for assuming that the publisher chokehold on bookstores was busted up and people wanted to read more ebooks now entirely because of Smashwords. Rather than, say, an ebook store who made the first e-ink reader the general public actually wanted to use, and was willing to tick off said publishers by selling ebooks near cost or at a slight loss to build the market.
Who wanted ebooks before the Kindle? Approximately one fifth of a percent of the entire global book market. They had held steady at that rate for about ten years, right up until Amazon released the Kindle. Now ebooks are about 25% of the book market. That’s opened new vistas for professionally and independently published authors and publishers alike. And Coker celebrates that fact while leaving out its biggest cause.
Subsequently, Coker holds that books are vulnerable to commoditization. Though Coker never actually comes out and defines commoditization, Wikipedia defines it as “the process by which goods that have economic value and are distinguishable in terms of attributes (uniqueness or brand) end up becoming simple commodities in the eyes of the market or consumers.” For Coker’s purposes, commoditization of books seems to equate to Amazon forcing the prices lower.
Coker notes that books aren’t identical and uniform the way corn or soybeans are, but because they all “strive to provide pleasure to the reader,” readers will find they can get the same amount of pleasure from a cheaper book as from a more costly one. Hence, Amazon forcing the prices lower means ebooks are becoming commoditized.
The odd thing to me is that, during the agency pricing furor, many independent publishers and self-publishing writers were happy about Amazon caving in to publishers’ agency pricing demands to force those publishers’ ebook prices higher, because that meant the indies could sell more books than the publishers—something that Author Earnings’s reports seem to have borne out. So perhaps not all independent publishers would find this commoditization to be such a bad thing?
(It’s also amusing that Coker insists books aren’t like corn or soybeans—but when it comes to complaining Amazon is a monopoly later in the piece, he resorts to a railroad analogy that directly compares books to corn. Perhaps Amazon isn’t the only one “commoditizing” books, eh?)
Coker also complains about Amazon’s expansion of Kindle Unlimited to places like India where incomes are lower bringing lower pay rates to authors because customers in India can’t afford as much.
In 2016 Amazon announced that because some markets outside the US, such as India, can’t afford KU’s $9.99/month subscription fee, that Amazon would lower authors’ already-paltry ½ cent per page royalty. So whereas a book read in the US might earn ½ cent per page (USD $.005), the same book read within KU in India might earn about 1/3 that, or about two-tenths of a cent per page. By way of example, at two-tenths of a cent per page, a reader would have to read about five pages for the author to earn one penny. A 200-page-book regularly priced at $3.99 might normally earn the author about $2.75 for a single copy sale. The same book might earn only about 40 cents in India. A 100-page novella normally priced at $2.99 would earn 20 cents in India. Woohoo, 20 cents!
This is what happens when you hand a commodity retailer sole control over the price of your book and your royalty rate. And there’s nothing stopping Amazon from tightening the screws further. In fact, you can count upon such further downward pressures because it’s the only way Amazon can stay in business.
And yet, Amazon isn’t exactly alone when it comes to varying pricing to meet the local standard of living. Indeed, publishers of physical books and movies have long practiced this very same form of market segmentation. That’s why we got region protection on DVDs—to try to prevent people from buying discs from countries that sold them cheaper. And that’s why the Kirtsaeng v. Wiley case was such an important matter to the publishing industry—establishing the right of US consumers to import and resell cheaper editions of physical books from overseas. (And why publishers have cut back on selling those cheap books overseas in the wake of the Supreme Court okaying Kirtsaeng’s reverse importation and resale.)
With Kindle Unlimited, the choice isn’t whether the author earns $2.75 or 40 cents for a given book. It’s whether he earns an additional 40 cents for that book from a read in a poor country, or whether he earns nothing at all from that person in a poor country not being able to read it. And the author doesn’t even have to worry about someone in the US pulling a Kirtsaeng and reselling a cheap India-bought book at the cost of a higher-priced US sale.
Coker believes that Kindle Unlimited is harming and will continue to harm single-copy book sales. I suppose that’s a possibility. Personally, I’ve never been interested in subscribing to any subscription service because they don’t offer books from major publishers. Why pay $10 a month and continue to buy major publisher books too? There are major-publisher authors and series I do want to keep reading, after all. But I’m certainly an atypical reader in a lot of respects.
And I do see that streaming video subscriptions and Redbox are harming home video sales, though no one seems to be especially worried about that yet. But then, books take a lot more time to read than a movie does to watch, so people can’t consume as many of them—so perhaps the lost sales from people who don’t care so much what they read as long as they have something to read will be more keenly felt. I suppose that the end results still remain to be seen.
Mark Coker concludes by predicting Amazon will face anti-trust scrutiny for its “unfair business practices.” I’ll believe it when I see it. We’ve been seeing a lot of people banging this same anti-Amazon drum for years now. The Justice Department looked into Amazon’s ebook pricing and found nothing wrong, all the way back when that pricing aggravated publishers so much that they conspired to break the law to try to change it. Author Earnings asked for an anti-trust investigation 18 months ago, making what anti-trust experts have called “highly unorthodox” arguments, but I haven’t seen any signs it’s actually going to happen. What’s changed that causes Coker to think we’ll get one next year?
Well, all right, the political administration has changed. And as much as Trump has sniped at Jeff Bezos, I could see a new Trump-appointed Justice Department taking another look to see what it can throw at Amazon and get to stick. It seems like a kind of petty thing for a Presidential administration to do, but Trump’s already proven himself nothing if not petty. But Trump can’t change the makeup of the judiciary that quickly, and we’ve already seen the publishers’ attempt to smack Amazon’s hand with a ruler lose in the courts at every level all the way up to SCOTUS.
And we’ve also seen a lack of any private parties stepping forward to try to sue Amazon for anti-trust issues—even the ABA, whose success suing the publishers and major bookstore chains in the ’90s seems like it should have been a template for this kind of thing. I’ll be very surprised if Amazon ever faces any sort of anti-trust scrutiny, at least in the near future. This “prediction” seems a lot closer to wishful thinking to me.
Coker closes by calling on his readers to fight for the publishing future they want to see:
Recognize that the collective actions of authors and publishers like you will determine the course of this industry. If you have strong feelings about a particular future you’d like to see realized, it’s incumbent upon you and everyone you know to take a stand, organize with fellow authors and put words to action.
Much as I disagree with certain points of Coker’s post, I certainly can’t disagree with that one. If you believe Amazon is harming the industry, by all means stand up and fight back. If you don’t, then keep right on buying from and publishing on the site. I’ll look forward to seeing how it all turns out.
(Found via The Passive Voice.)
teleread.org 
Quote: “Well, all right, the political administration has changed. And as much as Trump has sniped at Jeff Bezos, I could see a new Trump-appointed Justice Department taking another look to see what it can throw at Amazon and get to stick. It seems like a kind of petty thing for a Presidential administration to do, but Trump’s already proven himself nothing if not petty. ”
Chris, you really should do the most unjournalistic thing imaginable and actually think about what you’re writing. Yes, think. Don’t assume your political bigotries are brilliant insights. They’re not.
Going after Amazon is one of the least petty things the Trump administration could
do to achieve one of its primary goals—to return jobs to much of America. Indeed, Amazon’s impact on retail jobs and retail employment across the country makes the much malaligned Walmart look benign.
When Walmart moved into the community where I grew up, it picked the most affluent town in the entire county. That’s where the money was most readily available, so that made good business sense. But in doing so, it put out of business small stores in that town and in the other towns in the county, damaging their already poor economies. Bad? Yes, but at least WalMart offered local jobs and people from those other towns could drive there to work. It took a lot, but it gave something back.
Contrast that to Amazon. When I buy from Amazon in my state, I pay no sales tax, thus providing not one penny for our schools and public services. Why? That’s a reality even worse its tax avoidance. Amazon employees not a single person in my entire state. Not one.
Is that petty? Do your really believe that not just communities but entire states deprived of any revenue from a major slice of their retail sales is “petty?” I will say it again. No tax income. Nothing from wages. No money for any public services. That doesn’t sound petty to me.
Indeed, I have trouble imagining how anyone could consider it petty. I run into that problem all the time reading what journalists write. Just yesterday, I read one in the Washington Post who equated a high-powered rifle with a 22 rifle. And the paper published the fool. Bizarre.
Do you know what journalism is like. There’s a near perfect analogy.
Imagine a reporter driving to cover a story. Suddenly, there’s a sign on the road ahead, “Warning, now entering Thought Zone. Enter at your own risk.” He slams on the brakes, turns around and looks for some other way to “cover” this story without entering that dangerous “Thought Zone.” That is journalism.
That’s exactly what happened when two friends of mine were interviewed for a major story. When the NY Times reporter who flew in finished the interview, he told them, “I can’t write the story I was sent to write.” What did he do? Certainly not show courage and integrity. He was, after all, a reporter with a career to consider. He passed his notes to another reporter, who distorted them to give the NYT the story it wanted. When the LA Times called, wanting to fly in a reporter for a similar interview, my friends refused. Why aid and abet lying?
That was in the 1970s, but nothing has changed. I recently read Trump’s The Art of the Deal (1987) and discovered two critical facts.
First, it explains quite well why Trump does what he does. The Facebook post media frenzies he created as a candidate are like those he did when he needed to attract residents for his Trump Tower. He didn’t care what Manhattan’s snobbish architectural critics said about his buildings. He knew that their stories would have to mention just how gorgeous the Trump Tower was and that spaces in it were going fast. That and a host of other explanations about how Trump does business—and hence politics—were in the book. He’s not a mystery and he’s certainly not as most journalists have tried to portray him. He is extremely clever, fast-moving and flexible.
The second was even more revealing. As I read The Art of the Deal after the election, I racked my brain to recall any occasion when someone in the so-called mainstream media showed they’re read it. I drew a blank. True, reporters, as they zealously tried to trash Trump and elect Hillary, were saying much about Trump, most of it stupid. But nothing they said indicated that any had read one of Trump’s best known books. That’s what I mean when I say that journalists, almost without exception, avoid Thought Zones—meaning anything that challenges what what their J-Cult believes.
I could give numerous other illustrations, but yours will suffice. For you, any efforts that Trump might make to level the playing field between Amazon and anyone across our country getting stomped on by that 800-pound gorilla, is “petty.” That is ridiculous. Everyone from small bookstore owners and small publishers to the CEOs at industry giants knows better than that.
When I majored in engineering, some older students laughed at our rather bookish professors and quoted the adage, “Those who know, do. Those who don’t teach.” There’s truth there. There’s also truth in an adage that those who could not even manage to teach a topic often feel qualified to report on it. That’s journalism.
——
For the record, I doubt Amazon will be among Trump’s first moves. One early move is likely to be a severe restriction on H-1B visas. High-tech companies use them to import low-paid software developers from countries such as India. The result is out-of-work Americans and the eventual migration of those jobs overseas.
H1-B visas make the founders and executives of Silicon Valley companies even richer. That’s why they poured huge sums into Hillary’s campaign and bashed Trump. Trump not only owes them nothing, severely restricting those visas mean more jobs. Restricting those visas is also likely to force Silicon Valley to move some operations to parts of the country where the cost of living isn’t as hideously inflated.
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Fortunately, I don’t have to worry about whether or not I’m “journalistic.” I’m not trying to do “journalism.” This is a blog.
This isn’t a newspaper front page, and it’s not trying to be. This is an opinion column. Hence, I can have as many opinions as I want to, and express them freely.
And by the way, Trump didn’t actually write The Art of the Deal, and the guy who did has disowned it.
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Mark Coker is a salesman with a brand to hawk, namely, self-publishing. He says what he says to support his brand.
I’m not going to say his predictions are wrong, but based on past purchases of his brand – my dissatisfaction was complete – I can safely say, if anything happens to Amazon, I will not be seeking out his brand for good values in books. Sure, his brand costs less, but Pabst Blue Ribbon or Two Buck Chuck cost less than craft beer and wine, though I’d personally decline to drink the stuff. So what can Coker’s brand offer that’s better than the Pabst Blue Ribbons of reading? He predicts growth is his market but I’m a consumer who has sampled and rejected his brand – that is, no growth is coming from me. But maybe I’m just an outlier.
In any case, there is Kobo and iBooks if Trump takes a dump on Amazon, but I might not want to invest in a different eook system.
For the record I live in the Seattle area and work in technology, but a job at Amazon probably isn’t in the cards, nor do I really want one. Nevertheless it’s a good company to have in town.
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For what it’s worth, Two Buck Chuck (actually Three Buck Chuck in my state) really isn’t THAT bad. You wouldn’t confuse it with Chateau Something-or-Other, but it’s no MD20/20.
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Charles Shaw is “remaindered” wine, and can be surprisingly drinkable.
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Great observations, Chris. Coker is an interesting guy with value to add, but he’s not the Steve Jobs of the ebook world–else Smashwords, which I use and appreciate, would be the Apple of digital publishing. His observations are valuable, but they need to be challenged, especially when they seem to be trying to establish a narrative out of line with observed reality. Predictions are hard, especially about the future, to paraphrase Yogi Berra.
In a market and industry that’s constantly changing and being disrupted, staying flexible and agile on the business side while providing content people want is the formula for success, rather than trying to make predictions. That’s where indie authors shine–they can pivot on the proverbial dime, away from Amazon if need be.
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Interesting response, Chris.
I have always viewed Coker’s prognostication powers to be nothing short of incredible. Call me a huge fan.
Frankly I have never been a fan of Kindle devices — they were hellish to create ebooks for. But I do admire how Amazon has created kindle apps for non-native devices and all sorts of readers targeted for specific audiences. Also, it has clearly thought through how to send ebooks and personal docs easily to the device (although stupidly, they still refuse to do conversions of epub to mobi — how stupid is that?!)
But it’s time that consumers and publishers move on and stop focusing on an Amazon only strategy.
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One more thing. This is NOTHING against Amazon per se, but I miss having ebook sellers who focused on ebooks. I get the impression that ebook share of Amazon’s profits is a pretty small percentage of the overall tally. It’s still a very important mission for Amazon, but I get the impression that Amazon could eventually decide to abandon the ebook sector if it weren’t making enough money. (But that’s not going to happen for a while obviously).
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ALL books are commodities until they are examined because an unexamined book is just a bunch of words strung together and is undifferentiated from any other unexamined book.
The concept of “commoditization” is asinine because it focuses on availability and scarcity is gone forever with Amazon’s breaking of the publishing oligopoly. ANYBODY can have their book available but that means nothing.
The important concept is on getting *recognized* as being available and worthwhile. That means advertising AND, when it comes to advertising, Amazon is the only game in town, baby.
Amazon is the great equalizer between the Big 5 and go-it-alone writers because all are equally available on their website; complete with in-depth summaries and reviews encouraging recognition. Search for a Big 5 publisher’s book and you’ll get 50 similar books from go-it-alone writers. Now HERE’S the part that publishers fear: When a consumer is faced with a choice of 2 e-books: A Big 5 for $14.95 OR one they judge *just* as acceptable — and maybe *better* because they might discover a new author that they like in the process — for $2.99 (or *free* with KU) which do ya think they’re gonna buy?
A giffen good is a product with higher perceived worth, the higher it is priced. That isn’t the book biz. “Agency pricing” is here, for now, as are publishers BUT it is just a question of time before both will disappear. THAT’S because the writers who keep the Big 5 in business are gonna realize that they no longer need them.
Anyone who babbles on about “commoditization” and such, as did the subject of the piece here, is an idiot trying to confuse the issue with nonsense.
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@BDR
I disagree that Amazon is the only game in town for getting books recognized. Personally, I have a few main sources for discovering new books: The Washington Post, NYT Book Review, NPR, and BBC Radio Books and Authors top the list.
Sure, I buy most books from Amazon, but that is due to few good bookstores outside of downtown Seattle, but Amazon has little effect on my choice of books, and there is rarely an equal but cheaper alternative to the books I want. If Amazon went away, I could order from other sources.
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Coker’s use of the financial term “commodity” to describe books is headed in the right direction, but the term doesn’t quite fit, and it never will.
On the other hand, the most important point does fit. The price per copy is inexorably dropping towards the point of zero profit margins.
That is not, however, because of the commodity nature of ebooks, but because of the monopsony nature of Amazon’s grip on the book business **combined with** the fact that the book business is less than 1/4 of Amazon’s business, and dropping fast as they expand into other categories of goods, and their market shares in those categories explode upwards.
We all know that there have been other near monopsonies in the past (Ingram, or the handful of chains, both back in the 90s, for example). But all of those companies needed book publishers to remain viable. Their businesses were all book-based, and if we died off, or diminished, they’d feel the pain, too.
Amazon doesn’t need any major publisher. They’ll get enough revenue if we are left with the otherwise-than-profit-motivated self-publishers. They enjoy the higher sales that come from the top 20,000 or so publishers, but they don’t need them.
Mark’s point is a good one. Amazon is a danger. There’s no reason that they should continue to offer even self-publishers the kind of terms that they are offering, and you can bet that they’ll squeeze all elements of the product mix in the book business gradually, but continually, until we’re all offering them every dime that they can get.
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I don’t always agree with everything Mark Coker says, but there’s zero doubt that Kindle Unlimited has killed the viability of the business for many independent publishers. Where there used to be thriving cash flow for Ellora’s Cave, Samhain Publishing, Torquere Press, retailer AllRomance eBooks, and many others, there was a marked and sudden drop in income from Amazon starting the month that Kindle Unlimited was debuted. I’ve met with no fewer than seven publishers and several indie authors to compare our sales numbers over time and we all saw a sudden drop at the same time, and continuing decline since then. Amazon figured out a way to take what was a river of money flowing downstream, choke it off, and ensure that they keep the lion’s share of it, while they magnanimously provide a ‘reasonable’ share to the self-published authors, and squeeze the publishers out of the picture as much as possible. They killed a thriving market in order to corner that market and the next step will be to start squeezing the authors, too–which they’re already doing in subtle ways.
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ARe and Ellora’s were, at best, mismanaged, else they would have been able to weather the storms. KKR asserts that ARe was undercapitalized, but court documents and the impending class action lawsuit shows that there was likely worse than mere bad decision-making. Their actions, or the actions of one or more parties among their management, may have strayed into the criminal. Torquere bounced checks and one of the owners was arrested, yet managed to post a bond in in excess of $10K. And everything I’ve been able to tell about Samhain publishing shows they are still in business, though presumably with a smaller staff.
So while KU was a stressor on their business models, it doesn’t seem to be the proximate, or even the primary, cause of the demises of those who failed.
Instead, I see this more as a case of “Who moved my cheese?” Some could not, or would not, adjust to new realities.
The publishers could have done what some indie authors did–pulled their books from everyone else and put them into KU.
Or they could have done what other indie authors did and stayed out of KU while concentrating on building their alternative-vendor platforms.
I’ve tried both and found KU to be more lucrative, but I could have stayed wide and still paid the bills, stayed in the black. Since I and my LLC function in some ways as a publisher for box sets and some co-authored works, I know I can split royalties and still stay in the black. I don’t think I have any innate advantages over them, and I’m subject to the same business stresses.
And plenty of other independent and small publishers are succeeding in the current environment. The fact that a few failed is not an inherent cause for alarm (to anyone except the unfortunate authors caught in the gears, with whom I fully sympathize): it’s expected in a free market.
Put another way, I feel for the authors, but not at all for the businesses, and I certainly don’t blame Amazon. As usual, Amazon changed the game, and these few publishers didn’t change with them.
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