Independent bookstores aren’t the only retailers chafing at the practice of showroom. Just ask Target.

In showrooming, customers enter a retail store and, when they have located the product they’re shopping for, walk out, go home and purchase the item on the Internet at a lower price.  Some shoppers simply scan the barcode of the production in the store and order it online on the spot. This in effect makes the brick and mortar store a mere showroom for customers to examine products they have no intention of buying there. Last Christmas Amazon actually promoted the practice, outraging alarming and outraging many stores and store chains. We know of at least one publisher that fought back by discontinuing distribution of its books on Amazon.

The latest objector is Target, the giant retail store chain. Executives, reacting to what they perceived as showrooming of Amazon’s Kindle e-book reader, informed Amazon they would no longer carry it.

Though Amazon sells most of its Kindles on its own website, many customers like to examine them physically, just as they may now do with Kindle’s rival, Barnes & Noble’s Nook, which may be “road-tested” by customers in B&N’s brick and mortar bookstore.  Recognizing consumers’ natural impulse to touch, Amazon began distributing Kindles in big retail chains.

It’s hard to predict what impact Target’s action will have on Kindle sales.  With nearly 1,770 stores in 49 states and gross revenues of $65 billion, boycott of a product by Target can have some seriously detrimental impact on any supplier. More ominously, if Staples, Best Buy and Wal-Mart, which also sell Kindles, see themselves as showrooming victims and follow Target’s lead, it could put a crimp in Amazon’s sales – and its image.

For the complete story read Target, Unhappy With Being an Amazon Showroom, Will Stop Selling Kindles by Stephanie Clifford and Julie Bosman in the New York Times.

Richard Curtis

This blog post was originally published on Digital Book World as Target Targets Amazon as Showrooming Enabler

She was his first love and he was willing to overlook her imperfections at the time. Though she could be charming, cultured and articulate, she was also dowdy and old-fashioned in tweeds and sensible shoes, unworldly and inclined to tedious intellectualism. But she was richly endowed and ripe for the plucking, And pluck her he did, first seducing her, then playing fast and loose with her heart, tormenting her with infidelities as he relieved her of her fortune.

Then he found a new fascination, charismatic, classy, fashionable and rich. He succumbed to her irresistible allure. Only one question remained: Would he throw his first love over?

This is the metaphor that may have occurred to some Amazon-watchers when they read that the behemoth retailer is launching an initiative in the high-end clothing business that resonates with its original efforts to revolutionize publishing.

“Having wounded the publishing industry, slashed pricing in electronics and made the toy industry quiver,” Stephanie Clifford wrote in the New York Times, ”Amazon is taking on the high-end clothing business in its typical way: go big and spare no expense…In the retail clothing world, fears are growing that few will be able to compete with a stepped-up Amazon.”

Though we in the book industry consider our little corner of the media to be glamorous, compared to the fashion field it is lackluster, unsophisticated and impecunious. Looking at it through the eyes of a shrewd businessman, the profit margin on high-end sales – even with free shipping and returning – beggar those of the book industry.”Gross profit dollars per unit will be much higher on a fashion item,”said Amazon founder Jeff Bezos, one of the shrewdest businessmen on the face of the Earth. Bezos was Honorary Chairman at the glam opening of a classic costume exhibit at the Metropolitan Museum. See New York Social Diary for photos of him with Vogue fashionista empress Anna Wintour.

Will the more precious commodity drive the cheaper one of Bezos’s attentions and affections? Keeping our Eternal Triangle metaphor in mind, read the Times‘s article and judge for yourself. Amazon Leaps Into High End of the Fashion Pool

Richard Curtis

This blog post was originally published on Digital Book World as Will Amazon Grow Bored with Publishing?

Laura Hazard Owen, writing for Gigaom.com, reports a unique strategy for combating the practice known as “showrooming”.

In showrooming, customers enter a bookstore, browse, then select (or scan the barcode of) the book they want to purchase, walk out of the store and order it from an online bookstore. Which makes the independent store a mere display space for customers to order books from its competitors. Last Christmas Amazon actually promoted the practice, outraging indy stores. One got so mad it stopped doing business with the behemoth. (See Can You Survive without Amazon?)

Barnes & Noble, the highest-profile target of showrooming, is now in a position to fight fire with fire. Microsoft’s investment in B&N’s Nook business gives the bookstore chain the potential for a showroom that loops back to its own inventory via the Nook.

“B&N CEO William Lynch says that the company plans to embed NFC (near field communication) chips into Nooks,” reports Owen. “Users could take their Nook into a Barnes & Noble store and wave it near a print book to get info on it or buy it.”

It’s an interesting concept, but there’s a big flaw in the reasoning.  Showrooming enables customers to scan a high-priced book in a brick and mortar store, then buy it at a discount on an Internet store.  In other words, if you scan a $20.00 book in a Barnes & Noble bookstore, then go to B&N’s online store, you’ll be able to buy it for, say, $16.00.  Then why, you will ask, can’t I pay $16.00 inside the bookstore?

For a showroom to work properly you need two components: a physical space with physical books to browse; and a virtual space to actually buy them. Think of a library where physical books are on display for browsing only. Customers choose the titles they want, swipe a credit card, and wait a short time while the book is printed on an Espresso-type printer.

We’ve been buttonholing readers with this mad scheme for years, and you can see some of our postings about kiosks here.

Richard Curtis

This blog post was originally published on Digital Book World as Showdown for Showrooms

If you seek cogency on digital publishing subjects you’ll always find it in Laura Hazard Owen’s postings.  A good example is a recent one on the implications for consumers of the settlement agreements with the Department of Justice in its conspiracy lawsuit against five major publishers and Apple.

What does the settlement mean for customers? Here’s a summary:

1. Let the Discounting Begin. “Readers are likely to see lower prices on e-books published by HarperCollins, Hachette and Simon & Schuster — at least at Amazon, which expressed its glee over the settlement. But you won’t see those lower e-book prices until at least June…I wouldn’t be surprised to see some shockingly cheap bestsellers from those publishers — think massive summer promotions where big titles by authors like James Patterson, Jodi Picoult and Nicholas Sparks are $1.99.”

2. Amazon rivals will discount too. “Other e-book retailers, like Barnes & Noble and Kobo, are likely to want to enter into new contracts quickly as well so that they are on a more even playing field with Amazon.”

Owen points out that Amazon competitors “may not be able to afford to discount a wide range of e-books as deeply as Amazon can.” But that has not prevented Barnes & Noble, Kobo, and even the struggling Sony from maintaining a healthy market share of the e-book retail business.

3. Bundling of e-books, and e-book/p-book combo packages. “Justice notes that agency pricing ‘prevented e-book retailers from experimenting with innovative pricing strategies…such as offering e-books under an ‘all-you-can-read’ subscription model where consumers would pay a flat monthly fee,’ bundles or buy-one-get-one-free promotions. The settlement opens the door for those types of promotions on Hachette, HarperCollins and Simon & Schuster titles.”

4. Less predatory loss-leader pricing. “When it comes time for Simon & Schuster, HarperCollins and Hachette to negotiate their new contracts, the settlement allows them to ‘negotiate a commitment from an e-book retailer that a retailer’s aggregate expenditure on discounts and promotions of the Settling Defendant’s e-books will not exceed the retailer’s aggregate commission under an agency agreement in which the publisher sets the e-book price and the retailer is compensated through a commission.’”

5. Will Apple now sell e-books at a discount? “If it simply removes Simon & Schuster, Hachette and HarperCollins titles from its shelves without negotiating new contracts — yes, this would mean Walter Isaacson’s Steve Jobs biography, published by Simon & Schuster, would no longer be available through iTunes — it will be losing a large part of its catalog. If Apple agrees to negotiate new contracts that don’t require agency pricing, it could also make agreements with the many publishers who have not been able to sell their books in the iBookstore before. That would mean a much wider book selection for iBookstore shoppers.’

Read details in What the DOJ e-book lawsuit means for readers now

Richard Curtis

This blog post was originally published on Digital Book World as E-Book Prices Must Come Down

To contemplate publishing books without partnering with Amazon is to lose a lot of sleep, weight,  hair or all of the above.  Luckily most of us steer well clear of any action that might provoke the behemoth to put the Big Chill on our Buy buttons.

To deliberately terminate one’s relationship with Amazon is almost inconceivable. Almost but not quite.  We have the example of an executive that did it and has lived to tell this David and Goliath tale.

His name is Randall White and he’s the head of a distributor called Educational Development Corporation that also has a publishing imprint of about 1800 titles like Everyone Poops and The Noisy Body Book. Now it is known as The Company that Opted Out of $1.5 Million in Amazon Sales. White simply got tired of Amazon’s practice of  buying EDC’s books from a distributor and drastically discounting them. “They were becoming showrooms for Amazon,” he complained to David Streitfeld, reporting his story for the New York Times (Daring to Cut Off Amazon).

White had another reason to be irritated.  His books are sold via a network of “independent sales agents,” ladies who market EDC books from their homes and were losing food off their table as a result of Amazon’s tactics. Seizing the “chance to make 7,000 women happy in one day,” he pulled the plug on Amazon, or perhaps Pressed Flush is a better metaphor. Yet he claims his firm is doing better than ever.

When we have more poop on EDC’s war with Amazon we’ll let you know.

Richard Curtis

This blog post was originally published on Digital Book World as David Poops on Goliath

In another coup for its book publishing enterprises, Amazon’s Thomas & Mercer imprint has acquired fourteen novels in Ian Fleming’s James Bond thriller series, plus two nonfiction books by Fleming.

If Amazon’s policy holds true the books will be carried exclusively on the Kindle e-reader.  As Publishers Lunch‘s Michael Cader points out, however, the news “brings attention again for Barnes & Noble, and whether they will carry the print editions. Since Amazon says the ebooks will be Kindle exclusives at the outset, and BN has already declined to carry titles from Amazon Publishing in their physical stores, the policy is unlikely to change.”

B&N has stated its position about Amazon Publishing’s books in no uncertain terms.

Richard Curtis

This blog post was originally published on Digital Book World as Amazon’s Fleming Acquisition May Not Bond with B&N

After complying with the draconian reporting requirements imposed by the Department of Justice, the three publishers that have settled to avoid prosecution may wish they’d fought the charges. The conditions are just a little less stringent than house arrest. We will not be surprised to hear that executives at Simon & Schuster, Harper or Hachette have been fitted with ankle monitors.

Richard Curtis

Here is a summary of the compliance requisites for the parties that settled (from Publishers Weekly):

Compliance:
This is the most onerous part of the settlement, and helps explain why Macmillan and and Penguin have decided to fight. Under the Settlement, each publisher will have to engage in a number of compliance measures including:

The appointment of an “Anti-Trust Compliance Officer,” reporting directly to the company’s general counsel.

In addition, the publishers must provide at least “four hours of training” for relevant staff delivered by an attorney and conduct “an annual compliance audit.”

The Settling Publishers must also furnish to the DoJ “on a quarterly basis” electronic copies of any non-privileged communications containing allegations of noncompliance and must “maintain and furnish to the Department of Justice on a quarterly basis, a log of all oral and written communications, excluding privileged or public communications,” between the publishers “officers, directors, or employees” involved in the development of the Settling Defendant’s plans or strategies relating to e-books.

Under the Settlement, the DoJ can also inspect the publishers’ offices, and “require Settling Defendants to provide to the United States hard copy or electronic copies of all books, ledgers, accounts, records, data, and documents in the possession, custody, or control of Settling Defendants, relating to any matters contained in this Final Judgment.”

DoJ officials can also interview “either informally or on the record” the Settling Defendants’ “officers, employees, or agents.” But, if you’re tabbed, you do get to bring your an attorney.

And, upon request, the Settling publishers must submit “written reports or respond to written interrogatories, under oath if requested,” relating to any of the matters contained in the settlement.

This blog post was originally published on Digital Book World as Compliance Requirements for Publishers That Settled: Everything But Ankle Monitors

The below announcement from the Authors Guild reports that Barnes & Noble has acceded to pleas from the Guild not to make authors collateral damage in the war with Amazon over the latter’s business practices including exclusive content agreements.

Here’s the Guild’s announcement in full:

Richard Curtis

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Here’s some welcome news: Barnes & Noble has agreed to our request to bring Marshall Cavendish children’s books back to their stores’ shelves. By our count, more than 250 authors and 150 illustrators have been affected.

How these books got pulled in the first place is a lesson in how exclusive content agreements have begun balkanizing the book marketplace.

In December, Amazon Publishing purchased Marshall Cavendish’s children’s book list, more than 450 children’s and young adult titles. The next month, Barnes & Noble announced that it would not be stocking any Amazon published titles in its stores. B&N released a statement from Jaime Carey, its chief merchandising officer, saying that it would not stock books published by Amazon, “based on Amazon’s continued push for exclusivity with publishers, agents and the authors they represent.”

With this announcement, B&N pulled Marshall Cavendish children’s books from its shelves. For Debby Dahl Edwardson, the timing could not have been worse or more devastating. Her most recent book, “My Name is Not Easy,” had been selected as a 2011 National Book Award Finalist. This sort of recognition can transform an author’s career, and authors typically visit countless bookstores to make the most of such opportunities. Ms. Edwardson, however, found her opportunity drastically curtailed. Barnes & Noble removed her book from its shelves (including from the shelves of its store in Fairbanks, Alaska, the one nearest the author’s North Slope home) about two months after the National Book Awards ceremony.

As we’ve made clear over the last several years, we’re very concerned with Amazon’s rapidly growing dominance of bookselling. Exclusive content is a big part of that story. With $9 billion in cash, Amazon can afford to cut more deals as it did with DC Comics to acquire exclusive e-book rights to titles, as it tries to gain the upper hand in the e-reader and tablet market.

So we’re sympathetic to the position of brick-and-mortar booksellers, even the largest of them: this isn’t a fair fight, by any stretch. Still, it’s essential that authors and readers not become collateral damage. The authors and illustrators who signed contracts with Marshall Cavendish had no way of anticipating that the publisher would assign their contracts to Amazon. For these authors to lose their vital showroom presence in Barnes & Noble stores was clearly unfair and harmful. Children’s books, especially picture books, need to be seen to be appreciated by readers.

We fear that more and bigger battles in bookselling and book publishing loom in the months ahead. For the sake of authors and readers, we hope those fighting it out will avoid using access to vital literary marketplaces as a weapon.

Unfortunately, this seems unlikely. Amazon is seizing an ever-growing share of the bookselling market, but it’s after far bigger game. Deploying some of its cash to buy publishers with deep backlists is an inexpensive way for Amazon to ensure that its Kindle Fire is an essential device to many readers, who then can be sold movies, TV shows, and music through the platform. Amazon’s history suggests it won’t be shy in these efforts.
Meanwhile, Barnes & Noble isn’t backing down. Its executives made clear to us that it is making this exception because it announced the policy after Amazon announced its purchase of the Marshall Cavendish titles. For any new Amazon acquisitions, Barnes & Noble’s policy is to ban the books from their shelves.

For now, however, some good news for Marshall Cavendish authors and illustrators.
We’ll keep you posted on any developments.

This statement from Authors Guild President Scott Turow just in…
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Dear member,

Yesterday’s reports that the Justice Department may be near filing an antitrust lawsuit against five large trade book publishers and Apple is grim news for everyone who cherishes a rich literary culture.

The Justice Department has been investigating whether those publishers colluded in adopting a new model, pioneered by Apple for its sale of iTunes and apps, for selling e-books. Under that model, Apple simply acts as the publisher’s sales agent, with no authority to discount prices.

We have no way of knowing whether publishers colluded in adopting the agency model for e-book pricing. We do know that collusion wasn’t necessary: given the chance, any rational publisher would have leapt at Apple’s offer and clung to it like a life raft. Amazon was using e-book discounting to destroy bookselling, making it uneconomic for physical bookstores to keep their doors open.

Just before Amazon introduced the Kindle, it convinced major publishers to break old practices and release books in digital form at the same time they released them as hardcovers. Then Amazon dropped its bombshell: as it announced the launch of the Kindle, publishers learned that Amazon would be selling countless frontlist e-books at a loss. This was a game-changer, and not in a good way. Amazon’s predatory pricing would shield it from e-book competitors that lacked Amazon’s deep pockets.

Critically, it also undermined the hardcover market that brick-and-mortar stores depend on. It was as if Netflix announced that it would stream new movies the same weekend they opened in theaters. Publishers, though reportedly furious, largely acquiesced. Amazon, after all, already controlled some 75% of the online physical book market.

Amazon quickly captured the e-book market as well, bringing customers into its proprietary device-and-format walled garden (Sony, the prior e-book device leader, uses the open ePub format). Two years after it introduced the Kindle, Amazon continued to take losses on a deep list of e-book titles, undercutting hardcover sales of the most popular frontlist titles at its brick and mortar competitors. Those losses paid huge dividends. By the end of 2009, Amazon held an estimated 90% of the rapidly growing e-book market. Traditional bookstores were shutting down or scaling back. Borders was on its knees. Barnes & Noble had gamely just begun selling its Nook, but it lacked the capital to absorb e-book losses for long.

Enter Steve Jobs. Two years ago January, one month after B&N shipped its first Nook, Jobs introduced Apple’s iPad, with its proven iTunes-and-apps agency model for digital content. Five of the largest publishers jumped on with Apple’s model, even though it meant those publishers would make less money on every e-book they sold.

Publishers had no real choice (except the largest, Random House, which could bide its time – it took the leap with the launch of the iPad 2): it was seize the agency model or watch Amazon’s discounting destroy their physical distribution chain. Bookstores were well along the path to becoming as rare as record stores. That’s why we publicly backed Macmillan when Amazon tried to use its online print book dominance to enforce its preferred e-book sales terms, even though Apple’s agency model also meant lower royalties for authors.

Our concern about bookstores isn’t rooted in sentiment: bookstores are critical to modern bookselling. Marketing studies consistently show that readers are far more adventurous in their choice of books when in a bookstore than when shopping online. In bookstores, readers are open to trying new genres and new authors: it’s by far the best way for new works to be discovered. Publishing shouldn’t have to choose between bricks and clicks. A robust book marketplace demands both bookstore showrooms to properly display new titles and online distribution for the convenience of customers. Apple thrives on this very model: a strong retail presence to display its high-touch products coupled with vigorous online distribution. While bookstores close, Apple has been busy opening more than 300 stores.

For those of us who have been fortunate enough to become familiar to large numbers of readers, the disappearance of bookstores is deeply troubling, but it will have little effect on our sales or incomes. Like rock bands from the pre-Napster era, established authors can still draw a crowd, if not to a stadium, at least to a virtual shopping cart. For new authors, however, a difficult profession is poised to become much more difficult. The high royalties of direct publishing, for most, are more than offset by drastically smaller markets. And publishers won’t risk capital where there’s no reasonable prospect for reward. They will necessarily focus their capital on what works in an online environment: familiar works by familiar authors.

Two years after the agency model came to bookselling, Amazon is losing its chokehold on the e-book market: its share has fallen from about 90% to roughly 60%. Customers are benefiting from the surprisingly innovative e-readers Barnes & Noble’s investments have delivered, including a tablet device that beat Amazon to the market by fully twelve months. Brick-and-mortar bookstores are starting to compete through their partnership with Google, so loyal customers can buy e-books from them at the same price as they would from Amazon. Direct-selling authors have also benefited, as Amazon more than doubled its royalty rates in the face of competition.

Let’s hope the reports are wrong, or that the Justice Department reconsiders. The irony bites hard: our government may be on the verge of killing real competition in order to save the appearance of competition.

This would be tragic for all of us who value books, and the culture they support.

Sincerely,

Scott Turow
President