spiverI’ve been looking for good articles on Amazon/Macmillan from the authors’/publishers’ perspective I could link here that were thoughtful and analytical beyond the “here’s what’s happening” posts (and subsequent snark) Scalzi and Stross have been posting—and thanks to this post at Making Light, I finally found one.

In this piece at the Huffington Post, music-exec-turned-author Susan Piver compares Amazon’s sales of e-books at loss-leader pricing to the big box chain stores’ sales of compact discs at loss-leader pricing in the 1990s and the subsequent death of music stores and homogenization of the national music scene.

I grew up in the ‘70s and ‘80s, and I have little doubt that most people my age or older well remember when there were music stores (“record stores”, we called them before the CD). But I suspect most people more than ten years younger hardly remember them at all.

I do remember going into them, looking at the prices, and thinking, “This costs way too much. It’d be cheaper at Wal-Mart.” And that way of thinking, Piver suggests, is what led to music stores’ downfall.

From a free market perspective, things happened just about “as they should have.” Big chains were able to outcompete smaller chains and mom-and-pop stores because they had the buying power to get discounts—and because CDs weren’t the way they made most of their money, the chains could practically give them away to get people to come in and perhaps buy other things.

In the end, this led to the dark days before iTunes (as Piver says in comments below the article) “pulled the whole situation out of the toilet”—which suggests that in terms of maintaining the ability of all content creators to create and distribute their content, perhaps the free market might not be all it’s meant to be.

And Piver sees the start of the same destructive pattern of behavior in Amazon’s $9.99 e-book loss-leaders.

Whether you agree or disagree with the points she raises, the article provides some food for thought—and unlike John Scalzi, Susan Piver seems willing to engage in dialogue with people of opposing viewpoints in the comments. TNH has some thoughts to add in the Making Light entry as well.

I still dislike the anti-consumer implications of the agency model, but I find it hard to argue with the music industry’s example. It is interesting to note that the music industry tried to take control of the prices for which their records sold as well, but were not as successful at it as it appears the publishers are going to be.


  1. AHHHHHHHHHHH! One of the things that helped kill music sales was the big music labels illegally colluding to RAISE the retail price of CDs by hundreds of millions of dollars a year in total and end the price wars. The Federal Trade Commission investigated and found consumers had been overcharged by $480 million. See http://www.ftc.gov/opa/2000/05/cdpres.shtm

    “This retail ‘price war’ led to lower CD prices for U.S. consumers as prices for popular CDs fell as low as $9.99. The record companies adopted the MAP policies in 1995-96 to extinguish this “price war,” the Commission contends. The FTC alleges these MAP policies achieved their unlawful objective. The ‘price war’ ended shortly after the policies were adopted and the retail price of CDs increased. The distributors then increased their own prices, and since 1997, wholesale prices for music have increased.”

    Now there’s a lawsuit charging they did the same thing with digital music prices. An Appeals Court in New York gave the case the go-ahead to move forward a few days ago (See http://arstechnica.com/tech-policy/news/2010/01/digital-music-prices-are-they-illegally-fixed.ars)

    Furthermore, WalMart and Costco and their ilk have been selling best-sellers at deep, deep discounts for many years and publishers have never done anything to stop it – in fact, I think they go along with it. I have even found cases, like Michael Palmer’s last medical thriller, where the print hardcover book was cheaper at Costco than the Kindle ebook in the Kindle store. If big box retailers were somehow the problem that killed music, than the big book publisher are going after the totally wrong retailers.

  2. Ultimately, I think the analogy for the music industry is somewhat flawed. Primarily because Amazon is not the equivalent of the Big Box and Chain stores; rather Barnes and Nobles and Borders and the Big Box stores are. Before the rise of Amazon, most people probably bought their books at one of the big chains… why not they generally have the best selection. The fact that the selection was chosen on the National scale rather than the local scale was a factor most consumers didn’t think about. Long before itunes started bring selection back to music, Amazon had about as close to a universal selection of books as is likely possible. People buy from Amazon not just because of the price, but because they almost certainly will find what they are looking for.

    The Kindle is Amazon’s attempt to do for e-books what Apple did for digital music; make buying and downloading something you have to put as little thought into as possible. Amazon rightly recognized that $9.99 is a magic price — once you hit $10.00 people will think more about buying the book and thus are less likely to buy.

    Now mind you, I am not a fan of Amazon when it comes to e-books, I actually generally prefer the reading experience more on other readers and I despise DRM. That being said, I recognize that Amazon understands the ultimate market for books better than anyone.

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