July 01, 2011

Racing to the Bottom

by Alan Beatts

"Racing to the bottom" has become a bit of a buzzword recently.  The common usage has moved a fair bit away from the origin, which dates from the late 19th century and related to the economic practice of states reducing taxes and regulations for corporations in the interest of attracting them.  Today it's used anytime financial pressures cause businesses to reduce their prices in response to competition, which prompts their competitors to drop _their_ prices and so on and so on.  The cascade effect can drive prices downwards to the point that none of the businesses involved can make a profit while producing a good quality product.

And what, you may ask, the hell does that have to do with books?  For a very long time, it had nothing to do with them.  The majority of books were created by a small group of publishers who all worked within a very similar set of financial constraints (i.e. the cost of paper, shipping expenses, rent in New York, editor and other production staff pay rates, advertising expenses, usual discounts, reasonable expectations for author advances and so forth).  Additionally, the prices were set by the publisher and printed on the product.  All of this left very little room for price drops as well as no real interest or willingness to do so.

On top of that, the distribution chain for books was pretty firmly fixed.  Books were published, sold either directly to retailers or to wholesalers who then sold to retailers.  Though it was possible to self-publish a book, it was very hard to get it into that distribution chain.  And, for all intents and purposes, it was impossible to get a self-published book into that chain on anything like an equal footing with books published by major publishers.

But now, it's all changing and I'm worried we might start seeing a race to the bottom on book pricing, with disastrous consequences.  And I'm not saying that as a bookseller -- I'm saying that as a reader.

As I've mentioned several times before, I'm not against ebooks per se.  I know that they are going to have negative consequences for my business but I see them as a logical and beneficial technological advance.  But -- they are changing the economics of publishing and writing in ways that I don't think we can even predict right now.  And one way that they might change things is by making racing to the bottom on price a reality for publishing.  That's driven by three factors:

1)  There are no fixed costs to producing an ebook.  Almost all of the costs associated with producing a physical book don't apply to ebooks.  The only one is distribution and even that can be cut down to almost nothing.  For example, if I were to inflict a novel on the unsuspecting world I could write it, edit it (probably poorly -- it's _hard_ to edit your own work), lay it out, and use one of the (free) tools out there to convert it to an EPUB file (which is a common, open format for ebooks).  I could then post it on a blog provided by Google and ask for people to pay for it by donations to my PayPal account (which I don't have -- privacy issues there -- but I could certainly get).

Total cost?  Nothing more than my time.

Of course, the most likely outcome is that some of my friends and my mom would hear about it, read it, and perhaps donate some bucks.  Given all the time I spent writing it and so forth, I would have been much better off getting paid hourly digging ditches or flipping burgers.

Or, I could let Amazon have a piece of the profits (either 65% or 30% depending on the deal I make with them) and in exchange they'll make it available throughout their sales channels (i.e. both their website and via direct purchase through Kindle devices and clients, which include iPhones, iPads and Android OS devices).  In this case, if I'm lucky, I might get some attention which could lead to some meaningful money.  Meaningful in this case being thousands of dollars or even over ten thousand.  I know that seems like pocket change but remember, I'm a bookseller and cafe owner -- writing would just be a hobby.  And ten grand is pretty damn nice money for a hobby.  And it's also more than any number of authors get for an advance when they sell a book to a "real" publisher.

2)  There's no fixed or even standard price for ebooks.  Granted, many publishers have semi-fixed the price of ebooks somewhere around $9.99 to $14.99 but in the first place, that is not true for self-published ebooks.  And in the second place, I think that is a temporary state of affairs.  Long term I think that books pricing is going to slide fluidly based on how long a book has been out, how popular it is, and promotional desires of the publisher and author.  In general, I think that prices are going to drop down through a number of price points during the life of the book, much the way that a popular book will be published in hardcover for no other reason than the public's willingness to pay upwards of $25 to read it.  After the sales die down a fair amount, it will be published in paperback, and all the people who wouldn't pay hardcover prices for it buy it then.  If an author is very popular, the paperback will coincide with the release of their next book in hardcover and it's used to create interest and buzz for the hardcover.

With ebooks however, there is no format difference and so there's no need for arbitrary price-points.  A publisher could drop the price every time sales slow enough to warrant it, thereby getting the most money from readers based on their desire to read the book.

Net result is that there is no "usual" price for a book.

3)  The internet makes it easy to compare items and their prices.  Almost all ebooks are sold on-line and the vast majority of them are sold by a short list of companies so it is very easy to compare them.  Which means that price competition can be very fierce.  Example:  I'm in a book store and I want a Spanish to English dictionary.  I ask the nice bookseller and she directs me to the single copy they have on hand.  There is no good way for me to check if the one on the shelf is more or less expensive than any of the other ones currently in print.  Even if they have three or four different ones, all I can do is compare what they have for sale.  And, if I need that dictionary, they're going to make a sale.  Regardless of how high or low their prices are.

On the other hand, if I'm looking around Amazon's web site, it's trivially easy for me to compare the price of pretty much all the Spanish to English dictionaries in print.  But that isn't really going to make much difference to what I spend because I'm looking at printed books, which are generally priced close to each other (questions of format and size notwithstanding) for the reasons I mentioned at the beginning of this article.

But what if I'm looking at ebooks?  And moreso, what if I'm looking at fiction?

Let's say that I'm in the mood for a nice space opera, something along the lines of Iain M. Banks or Neal Asher, and all I want is something "good".  I do a search at Amazon.  I choose "Kindle" format, "science fiction" as the department, "space opera" as a keyword and ask for it sorted by average customer review.  I'm not going to tell you what the list was (though please do try it yourself) but I will say that, out of the top 12, there were only four books by authors I know.  If those 12 books were my choices, I'd probably buy The Rookie by Scott Sigler.  I know Scott and he's a good writer.

But, if I were the average shopper, I think that I might very well buy a different book by Scott.

The Starter is only $2.99.

It's never been possible for me to shop for books by price.  Sure, there was a long, broke time in my life when I only bought used paperbacks because I couldn't afford anything else, but most of the time the only way that price affected my book-shopping was whether I'd look at paperbacks or hardcovers.  But now, I can easily consider all the ebooks out there on the basis of price.  If I'm looking for bargains, I could shift my spending to the cheapest ones -- which could be very cheap indeed.

So, what happens if people start doing that?  We may start racing to the bottom.

But that's not what really concerns me.  When it comes to books, I don't actually think that you get what you pay for.  Gods know, I'd far rather read a cheap paperback of Kipling or Poe (or a free ebook -- they're both in the public domain and you can get them at project Gutenberg < http://www.gutenberg.org >) than anything Danielle Steel or Don Pendelton ever wrote.  If some guy wants to self-publish his ebook and sell it for $1.99, I'm fine with that.  It might actually be good.

What concerns me is that a race to the bottom might mean that authors can't make a living as writers.  It's already incredibly hard to support yourself as a word-smith.  There really is a reason that many solid, talented writers live in moderately priced, unromantic areas of the country like Ohio (yes, Scalzi, I'm talking to you) or Sacramento (you too, Roche) -- it's too damn expensive to live anywhere else on what even a pretty successful writer earns.  If, as a society, we decide that cheaper books are _better_ books . . . not so good.  Not at all.

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