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The Amazon Conundrum

Karin Kallmaker Business of Books

This post primarily concerns Amazon practices around paperback sales and what are now called “sponsored products” that persisted until circa 2013.

Writing gets in the way of blogging, as it should, and so I have been silent over the last several weeks and the topics I want to address are stacking up. I’ve been wrestling with a particularly sticky issue–bookselling models–and realized that there’s one part of it that is necessary to address, but has so many tangents and unique aspects that it deserves its own space.

Yes, I’m going to talk about how books are sold, the money part. I think it worth saying that as with sausage, if you like it, you might not want to watch it being made. The story of books in the marketplace is not an easy one, it has neither devils nor angels making it easy to choose sides, and there is no beginning, middle and end. The big beastie we love-hate, in this case, is Amazon.com.

  • Amazon’s business practices have resulted in and continue to result in loss of income to writers and publishers. (Bad.)
  • Amazon is the #1 visibility and marketing tool for books, especially its reviews. (Good.)
  • Amazon manipulates availability of titles to the detriment of writers and publishers. (Bad.)
  • Amazon pays its bills and doesn’t return books. (Good.)

Love Amazon, hate Amazon–what is a writer to do? How does she take advantage of the good and not suffer the bad?

I’ve blogged about Amazon’s practices before, so for some my opinions won’t be new. I can say on the positive side that Amazon makes no bones about its business model: Make money. The method: Give customers better deals than anyone else. That’s it. Speaking as a customer, what’s not to like? As I said above, they also pay their bills, and because they don’t overstock they rarely return books instead of paying the bill.

Nowhere does Amazon say they’re in business to support literacy through books or oral hygiene through toothpaste etc. They have no loyalty to any product base or supplier. They make money, customer saves money. End of story. If a writer keeps that in mind, she may be dismayed or angered by Amazon’s decisions, but she should never be surprised. Even when they delisted all the gay books I knew it had to be, ultimately, a mistake. (Yes, I know, our books were delisted by real people who equated gay lit with porn for the purposes of a software change, and that’s some ugly thinking. But the implementation of that thinking was a mistake. Why? It cost Amazon money.)

If they could figure out how to make more money delisting gay books they would. If they could figure out how to make more money by carrying nothing but gay books they would. There is no appeal to “fairness” or a “greater good.” For their missteps and PR gaffes of the past year, has it hurt business? Not even a little bit.

A Look at the Entire Amazon Income on Books and Other Products

Customers are largely unaware that anything on an Amazon product page that is not about that specific product may be a paid advertisement. For example, let’s talk about undergarments (it’s more fun). Let’s say you are searching for your favorite Glam undies. Glam paid to be on Amazon’s site. There are “suggestions” for Vavoom bras on the page. Vavoom paid for the unique placement. Over on Vavoom’s page there are the very same helpful “if you like these bras, you might like …” suggestions, all of which happen to be Glam products, because they quickly saw that Vavoom was getting sales. Of course Glam paid to make that so. Hinder Huggers gets a letter explaining that they too can receive marketing suggestion push like their competitors already enjoy.

They really don’t dare not pay, do they?

So now while customers pick out Glam undies, they also get suggestions from Vavoom bras and Hinder Huggers and every other maker of undergarments. Eventually, all the undie manufacturers are paying just to get the same exposure as everyone else, which is the very same exposure they got before anybody paid extra marketing fees. It’s a very clever money making model, because once one manufacturer paid, they would all have to pay or risk disappearing from a chunk of their customer’s minds.

Another twist: If you make the best danged underwear on the planet, your page gets lots of hits. So there are also ads for other things that even may say “sponsored placement” or something like that. Certainly, every page has an ad for Amazon’s own Kindle product, a profit making enterprise of their own. Your excellence has allowed Amazon to sell or use space on your page to benefit what might very well be competitors; at a minimum, that content distracts from your product. If you’re the customer it’s all usually helpful or cool. After all, if you’re looking for a book about mental illness, you might need a therapist and there they are, just follow the link.

What it’s not, however, is Amazon the merchant using high-end computer modeling and fancy algorithms to examine your preferences and offer you an unbiased list of suggestions. They’ve been paid to push some products and services at customers who fit certain criteria, just like most retailers. Is there anything wrong with that? No, as long as the customer knows.

So Really, What’s the Issue?

This is all business. The usual stuff, in fact. It’s Wal-Mart for the Internet. Suppliers who can’t stay in business giving those discounts or paying the marketing fees go away. Another supplier may take their place, or else there truly wasn’t enough demand for that many brands of underwear and the consumer has spoken with their wallet. As one of the members of their supply chain, I know that staying in their supply chain means more and more squeezing on the suppliers. Funds publishers used to have to sponsor community events or market books elsewhere are increasingly commandeered by Amazon. I see small suppliers (not just publishers) struggling to provide the same quality for less money.

At no point have I ever believed that Amazon has sold any more of my books than would have sold through the women’s bookstores if they still existed, even though they are taking more of the cut than those bookstores ever did.

To get specific for small publishers, after Amazon’s discount, sales commissions, listing fees and the royalty to the author, the publisher has perhaps 30-32% of the cover price left. From that, Amazon wants more marketing payments just to keep that publisher’s entire line visible to customers, and there’s printing the book, of course. The editor, typesetter and graphic artist would also like to be paid from the roughly 13% that’s now left. After that, the owners of the publishing house, who have assumed most of the risk, get what’s left for equipment, web sites, warehouse staff or contract fees to a distributor, taxes, electricity, food, that sort of thing. Small publishers can almost not afford to list books at Amazon, and most can’t afford not to either. (See above, #1 site for marketing books, etc.)

It’s all business. Some of this whole scenario is true at other booksellers. It’s also all prelude, because Amazon has made one more business decision to make money, and that resulted in direct loss of sales to all writers and publishers, permanently. Loyalty to books for being the product that helped build the company? Of course not.

In 2002, Amazon listed used books alongside new ones, making it just as easy for the customer to buy a used book as a new one. Publishers–who had helped build the company with advantageous discounts–begged them not to do this. The Authors Guild retaliated by telling authors to unlink to Amazon for their own long-term good. But it was good for customers and it made them money, so of course Amazon did it. What had been a savings a customer had to invest time to find had become easy. One-click, big savings, and on an unprecedented scale.

[Update, 10/2011: For over a year, Amazon has been fulfilling orders of used books for certain marketplace sellers. That means that the customer can buy a used book directly from Amazon, same invoice, same checkout, same free shipping offers and often the customer may not even realize they’re buying used. For those of my books that they are doing this for my sales of new books have stopped almost completely or they are listing the new books at full retail, which encourages the used book sales even more.]

Like other booksellers, Amazon said that those used books sales would give customers more money to buy more books so authors would ultimately make more. When the Authors Guild pointed out the flaws in the argument, Amazon reverted to the truth: Book owners can do whatever they want with their books, and Amazon can make money off it anyway they like.

Yep, so why the attempt to make customers think authors weren’t harmed by the largest scale rollout of used bookselling in the most convenient form to date? Because, I think, customers genuinely do want writers they like to stick around and write more and hope the income will trickle in anyway.

And it sucks to be the messenger telling readers that “used books help authors” is a myth because it’s a real shoot-the-messenger opportunity.

A merchant can sell all the used books they want and customers can buy all the used books they want. But for a merchant to tell the customer that the author is being helped by the process is the same as telling the customer the book is new when it only looks new. It’s deceptive and it’s done at the expense of the artist. Amazon, after their initial attempt to use that argument, no longer makes any pretense. They make money, the customer saves money. At least it’s honest.

Why do I think that used books hurt writers? Certainly, there are lots of anecdotes of readers finding a book used and then buying all that author’s books (some even new). It does in fact happen. But does it ever get the author back to even a breakeven point? Without even having data, logically, if used books sold new ones at no ultimate loss to me, wouldn’t I have noticed? If the magical used-leads-to-new-sales scenario worked, wouldn’t the sales of my 20th novel be exponentially more than my 10th, which has had years of used sales?

Putting aside anecdotes, a loss of half the royalties on the sales of older titles is my data. As a veteran writer, I’ve already seen the hit from increased competition and other forms of entertainment to the sales of my new releases. The loss of royalty income on older titles goes far deeper. Why would a book sell 500 copies annually in its 5th through 9th years since publication and then drop to 250 in year 10 and never rise again? Year 10 was 2003. This pattern repeats for all of my books published before 2001.

But wait, you say. Why should I expect my books to have such a long demand curve? After all, most paperbacks go on a shelf for three months and that’s it. This is a subject for another blog, because it’s a valid question.

In short, my books are not written nor produced to be disposable; they’re meant to be an asset. That production choice of course means they are excellent fodder for reselling. Another conundrum, and as I said, a subject of another blog.

Back to Amazon.com, because once again, they’ve been very clever. Amazon figured out how to make money at selling used books without ever handling the inventory or assuming any kind of risk. They have publishers and authors paying them to list new books and providing extra content for free so the book’s continuing value is presented, and they use that page to sell another version of the very same thing for which the author and publisher receive nothing. If a new book is very popular or in a certain niche, they can even put paid ads on that page, and the author and publisher receive none of that either.

Yes, the author and publisher were paid the first time that book sold on Amazon. But by offering the used book right there next to the new one it means fewer new ones will sell. As the supply of used copies increases (and this happens more quickly for the popular books) new sales begin to stall. Now Amazon has a problem, because they did need that book new at first. But those used books sale have undercut their profit model on the new book. They don’t send back unsold books, remember? So how do they avoid getting stuck with new books when their own marketing of used books undercuts their own sales of the new ones?

Here’s where it gets fiendishly clever: By having a ready supply of used books to convince customers they are a portal to anything and everything a person could want to read, Amazon can now strategically decide when to let a new book become Unavailable or Special Order. These are both availability statuses that are guaranteed to have most customers buy used.

Unavailable on Amazon does not mean out-of-print. Special Order doesn’t mean it’s hard to get from the publisher, either. It means that the pace of sales for a new book has slowed below a tipping point (aided, remember, by the sales of used books), and Amazon lets the new copies sell out before demand for new has been satisfied. That way used books will definitely make them money, and they’re not stuck with inventory that moves too slowly. This is very good business modeling.

With the economic downturn, the tipping point has lowered drastically. The more niche a book is, like lesbian speculative fiction or lesbian historicals, the quicker to the tipping point. Please take note, that quality of the book is not the issue; quality and sales do not have a direct relationship. If it did I can name a few lesbian spec fic writers who ought to own us all.

Summing Up

So here’s the reality from the writer’s side of the money table. So far, to sum it up, Amazon has made money, the customer has saved money, and the writer has made money on an initial sales period for her new book. The moment Amazon lists a book as Unavailable or Special Order its new sales virtually stop regardless of what that demand might have continued to be and what word-of-mouth, awards or reviews are yet to come for that book. Sometimes a great book from a small publisher takes a while to catch on.

By the time that happens in a small market, the book may no longer be selling new on Amazon. If anyone has wondered why some writers have ready-to-go plant reviews and friends lined up to give word-of-mouth, trying to get as many new books out the door before Amazon declares you Special Order is one reason.

So, unlike the used bookstores, or used book sections in your local indie bookstore or even eBay, Amazon has the power to decide when a writer will stop earning a chunk of royalties for any given work. The impact on her is directly related to her dependence on Amazon. Like many writers, I have a hard time identifying what Amazon has given me for them to have so much control over my fate.

It leaves the writer truly caught in the rock and hard place zone. To maximize her most recent book she adds content to her Amazon pages, free of charge to Amazon. She does get paid for new book sales until Amazon throws the switch and stops readily stocking new. Meanwhile, Amazon profits off the new books sales too, gets paid ads sometimes, and sells marketing “suggestions” for her competitors. That’s one ka-ching for the author, and three ka-chings for Amazon. Then, still using her content-enriched page, Amazon cuts her out completely.

The customer gets cheaper books. There’s no apparent downside for the customer, but as with many things Amazon, reality is very subtle in the small market, which is where I live. It makes no sense citing Nora Roberts or Dan Brown as a model any niche writer can emulate. The realities are simply not the same.

The writer in a small market who once counted on a book’s lifespan to last at least 18 months now lives with as little as 9 months for all books sold through Amazon.

Some estimates put Amazon’s share at 20% of the marketplace; for many self-published writers or those with very small presses, it’s 95% of their marketplace. The writer, to maintain her income, is under intense pressure to write more quickly, taking away the time available to strive for excellence. Or she decides to live with as little as half her income for the same effort, which also takes away some of the impetus for excellence. Or she decides to write fewer books. Or she gives up writing completely.

It’s All Good, Here’s Something “Similar”

In the Amazon model, no worries for the customer, though. The customer is offered “similar” products that were produced by another writer or publisher – maybe smarter, hungrier, more efficient so they can endure the financial realities. Or maybe that “similar” book came to market without an editor or is printed on paper or bound in a way that won’t survive more than a couple of readings.

The customer won’t know until she receives the “similar” book that she’s bought something disposable, not something she’ll want to keep or share.

The end result is that either quality declines or the amount of quality reading available decreases. I have to ask–and maybe I’ll get flamed for it–who thinks that the quality of lesbian fiction has gone up in a sustainable, demonstrable way in the last five years? If you’re a customer, are you more or less leery of buying a clunker than you used to be?

All of which makes me not want to be part of the Amazon marketplace. It literally pains me to sort through all this mire. I am an author first and a publisher second and I see writers all around me asking themselves, after years of investment into craft, is this worth it?

I can’t afford to leave Amazon, I’m just not that well-heeled. I want my books to reach readers too, and I’d like to be paid enough… not handsomely, but enough where I think about money less and writing more. Adding to the AK-47 of their practices, there’s also the rubber bands from Amazon, wherein I spend a lot of time trying to make sure–without paying them more money–that my books are represented accurately so I can try to sell as many new books as possible. My publisher fixes things, I fix things, it’s an endless task. Just recently I noticed the page counts for a half-dozen books had changed, showing the books 1/3 shorter than they really were. What a piddling little headache when I would rather write a book.

How have I Navigated this Conundrum?

It’s not easy and I have probably not done it as well as I might. I have never encouraged anyone to buy books through Amazon, though I have pointed them privately to the site for reference and reviews. I’ve never enabled any kind of link from which I could make money either.* Back when there were women’s bookstores, my love of the community wouldn’t let me do it. I was willing to make a little less so the booksellers would be there; their existence mattered to me in the long run.

Now that virtually all the women’s and gay bookstores are gone, I still can’t help but think taking affiliate fees from Amazon is just me paying myself, an attempt to make me forget that in the long run around of the money chain, I and my publisher took the hit that gave Amazon the spare change to toss to me if I sell books for them. And no, giving it to charity doesn’t change that feeling.

What’s more, I can’t bring myself to ask all the people who send me lovely notes to post their feelings on Amazon, even though I know it would probably sell more new books. Yet I’m happy to see reviews there because it is the #1 Go To site for reviews. So these many words later, there is the Amazon Conundrum. Can scarcely survive with it, can’t survive without it.

I wonder, still, if I cut off my nose to spite my face resisting their practices and trying to make sure people understand what’s really happening when you follow the money.

I’m one of the lucky authors with a good number of books that still haven’t been forced past the tipping point at Amazon because they do continue to sell enough new. Yet being “lucky” doesn’t take away the losses they have caused to my income. And if I feel it, I know that writers not as “lucky” must feel it more. Depressing is the reality that given that the financial health of their suppliers is not a factor in Amazon decision-making, the situation is not going to get better. Given their history, it’s likely to get worse.

Which brings me to a good stopping place about this big beastie. The length of this post reflects just what a tangled plate of spaghetti dealing with Amazon is. This blog is about Amazon very specifically, and the outcome for small niche writers based on their evolving practices. Some of these practices are spreading into other booksellers and increasingly biting into what writers hope to make for their labor from sales not handled at Amazon.

It is often suggested that all a writer need to do is write really good books and she’d not have to worry about such matters. I alluded to that above. In my next blog(s) I’ll talk about that and how, in some scenarios, writing really good books can come back to bite an author right in her wallet.

After spending far too many hours composing this blog there is one thing for sure. I am off to P-Town where two wonderful booksellers, NowVoyager and Womencrafts, are hosting lots of writers and we get to say thank you directly to the readers. It’s the best part of writing, in many ways.

To the readers who persevered in reading this blog: I know this is a downer. I know you’d rather just read the books. Believe me, I’d rather be writing 2,500 words of romance. Nobody wants to talk about art and money and creativity and selling something that comes right out of your soul to create.

I also know this: Those of you who love my work, who love lesbian fiction buy a heck of a lot of books, and there’s no way most people can afford to buy them all new. Many of you who buy used books pay it back with other kinds of support. You encourage your non-reading friends to get hooked. You arrange the shelves in bookstores. You write reviews. You ask libraries to order our books. You send us love letters. Given a choice between lattes and books, you buy books any way you can because it kills you to think you might miss tasting something really good.

And this I know: Many of you are here because you found a used book and it brought you into the community of lesbian readers. I’m glad you made the journey. I know you’ve since bought new books when you can. In short, my crazy, wonderful, amazing readers that put your money and enthusiasm into lesbian fiction, this is not about you. The consequences, however, can affect you. More about that…another day.

[Update 10/2011: I have enabled links to Kindle version only titles because some readers will not buy any other format and I do want them to know these books do exist, even if 2/3s of their dollars are kept by Amazon.]


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