NY Times: Price War Over Books Worries Industry

As a writer this article has caused me to be concerned about the future of the printed book. Let me know what you think.

Price War Over Books Worries Industry

By MOTOKO RICH

Published: October 16, 2009

A tit-for-tat price war between Wal-Mart and Amazon accelerated late on Friday afternoon when Wal-Mart shaved another cent off its already rock-bottom prices for hardcover editions of some of the coming holiday season’s biggest potential best sellers, offering them online for $8.99 apiece.

Publishers, booksellers, agents and authors, meanwhile, fretted that the battle was taking prices for certain hardcover titles so low that it could fundamentally damage the industry and the ability of future authors to write or publish new works.

The price cutting began on Thursday when Wal-Mart announced that it would take pre-orders for 10 yet-to-be-published hardcovers for $10 apiece on its Web site, Walmart.com. Later that day Amazon quietly began cutting the prices of those same titles to the very same $10, prompting Wal-Mart to lower its price to $9, a markdown of 59 to 74 percent off the list price of the books. Amazon had matched the $9 price by Friday morning, and Wal-Mart had lowered its price again, to $8.99, by late afternoon.

The titles affected include Sarah Palin’s memoir, “Going Rogue”; John Grisham’s short-story collection, “Ford County”; Stephen King’s “Under the Dome”; Barbara Kingsolver’s new novel, “The Lacuna”; and the latest installment in the Alex Cross thriller series by James Patterson, “I, Alex Cross.”

Although Wal-Mart, Amazon and other retailers like Costco, Target and even pure bookstore chains like Barnes & Noble typically discount best sellers, they usually don’t take more than 50 percent off the list price. Wal-Mart’s move, and Amazon’s reaction, signaled a new threshold in price cutting for books and left publishing insiders wondering how low it would go when the beleaguered industry is already worried about the effect of $9.99 e-books and a slowdown in book sales over all.

On Friday a spokeswoman for Wal-Mart said in an e-mail message that the company would “continue to adjust our pricing so that Walmart.com offers the lowest prices on these top pre-sellers in books.” Amazon declined to comment.

Wal-Mart has said for the moment that its $8.99 offer is limited to 10 titles that will officially be released in November. Once they are published, the company said, the price could go up. Still, publishing industry veterans were worried about the potential long-term effect on the consumer mindset.

“If readers come to believe that the value of a new book is $10, publishing as we know it is over,” said David Gernert, Mr. Grisham’s literary agent. “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.”

The immediate impact of the low prices was likely to be felt by other bookstores, including chains like Barnes & Noble and Borders. As of Friday, neither of the Web sites for those companies indicated that it was matching the $9 price. At BN.com and Borders.com, the titles were generally discounted by 40 percent.

A spokeswoman for Barnes & Noble declined to comment. In a statement Borders said the majority of its revenues did not come from best sellers. “Our model does not rely on being the lowest priced,” the company said in the statement. “It relies on offering our customers a true bookstore experience — the opportunity to explore a vast array of titles within a comfortable environment where shoppers can go where their interests take them.”

Independent booksellers have long struggled to compete with discounts offered by Barnes & Noble, Amazon and Wal-Mart. William Petrocelli, an owner of Book Passage, an independent company that has stores in San Francisco and suburban Corte Madera, Calif., said that for now he was relying on the loyalty of customers who valued staff recommendations and author events as much as prices. But, he said, if the low prices siphoned off too many customers and put independent stores out of business, it would ultimately affect what would get published.

“What this does is accentuate the trend towards best sellers dominating the market,” Mr. Petrocelli said. Without independents, decisions about what books to put on store shelves would reside in the hands of a few corporate executives rather than hundreds of idiosyncratic booksellers, he said.

“You have a choke point where millions of writers are trying to reach millions of readers,” Mr. Petrocelli said, “but if it all has to go through a narrow funnel where there are only four or five buyers deciding what’s going to get published, the business is in trouble.”

For now, Wal-Mart and Amazon will make a loss on the sales of the discounted titles because publishers generally charge retailers 50 percent of the list price.

Publishers hoping to sell large volumes of titles like “Going Rogue” or “Under the Dome” might see the discounts spur more sales. One publishing executive also said Wal-Mart’s move was welcome because it signaled that another large competitor was taking on Amazon, which currently dominates online sales of books. As long as the $8.99 price was promotional, rather than a permanent trend, this executive, who spoke on condition of anonymity to avoid commenting publicly about a customer, said there were some positive aspects to Wal-Mart’s move.

“If this is a short-term statement to let hundreds of millions of people know that they will be able to buy books from Walmart.com,” the executive said, “it’s a good thing.”

Rafi Mohammed, a consultant and author of “The Art of Pricing,” said he was surprised by the radical discounting because he could think of no other industry in which retailers cut the prices of the newest or most popular goods. “You always pay the highest price for the latest and greatest,” he said. (In fact, new music CDs are often discounted.)

Indeed, Mr. Patterson, who said that while he was glad to be included in the top 10 most popular preordered books at Walmart.com, he could not think of any other industry accepting such dramatic discounts.

“Imagine if somebody was selling DVDs of this week’s new movies for $5,” Mr. Patterson said. “You wouldn’t be able to make movies.” He added, “I can guarantee you that the movie studios would not take this kind of thing sitting down.”

Brad Stone contributed reporting from San Francisco.

A version of this article appeared in print on October 17, 2009, on page C1 of the New York edition.