Two weeks ago, the American Booksellers Association, an organization of independent booksellers, asked the Justice Department to investigate what it describes as “illegal predatory pricing” by big-box retailers Amazon.com, Wal-Mart, and Target. The price war began on October 15 when Wal-Mart.com slashed prices on new hardcover bestsellers, including books by John Grisham, Stephen King, Barbara Kingsolver, Sarah Palin, and James Patterson. These books usually retail between $25 and $35, and are sold to retailers for approximately $50% off the suggested list price. But Amazon.com, Wal-Mart, and Target dropped prices far below cost, selling these and other titles for as low as $8.98. The big-box retailers are therefore losing up to $8.50 on each unit sold, marketing mega-bestsellers as a loss leader to attract customers to buy other, more profitable merchandise. The ABA believes that these predatory pricing practices are an attempt to “win control of the market for hardcover bestsellers” and drive other booksellers out of business. A precedent for this episode was set by the loss-leader pricing of digital content by Amazon.com, which retails digital editions of new hardcover books at $9.99 and releases them simultaneously with high-priced print editions. By systematically conditioning consumers to pay less for books than it costs to make them, the ABA contends that Amazon.com, Wal-Mart, and Target are “devaluing the very concept of the book,” a move that will be “damaging to the book industry and harmful to consumers” in the long run. In an October 16 New York Times article, David Gernert, John Grisham’s literary agent, said:
If readers come to believe that the value of a new book is $10, publishing as we know it is over. If you can buy Stephen King’s new novel or John Grisham’s ‘Ford County’ for $10, why would you buy a brilliant first novel for $25? I think we underestimate the effect to which extremely discounted best sellers take the consumer’s attention away from emerging writers.
Others, like Jeff Jacoby of The Boston Globe, view the price war as “spirited competition” that has spurred sales and “increased the appetite for books.” Independent booksellers, he said, should play to their strengths: “attentive and knowledgeable service, eye-catching displays, a reader- and author-friendly atmosphere, community involvement, the serendipitous joys of browsing.” And in The Atlantic, Megan McArdle wrote, “the interest of antitrust law does not lie in protecting small, inefficient sellers for the tiny minority of Americans who prefer to shop there.” The big players are competing with each other, McArdle said, and this is where the market is going to end up anyway, “because outside of a few big cities, independent booksellers can’t compete with the convenience of Amazon or Barnes and Nobles’ economies of scale.” Bill Petrocelli, an ABA member and co-owner of Book Passage in San Francisco and Corte Madera, addressed a larger concern: that what appears to be a simple price war is really a fight over what you get to read.
Some readers think that if their favorite store closes they can always buy the book they want somewhere else. But that’s a dangerous delusion — the books they want may not be there at all. In fact, these types of disruptions in how books are sold or distributed have a profound effect on what publishers decide to publish in the first place. … But when the system is dominated by a small handful of powerful buyers, their decision can make or break a book. … One of the dirty little secrets of the book business is that publishers often check in advance with the buyers for the chain stores and mass merchandisers before agreeing to publish a book. If the answer they get is no, the book may never see the light of day.