Thursday, April 12, 2012

The big book publishers learn who their friends really are, and also what their customers think of them

It is always a traumatic moment when a restauranteur reads the first review of their new restaurant. It is even more traumatic when they start reading those customer reviews on Urbanspoon and other social media sites. Even the good reviews often say something that causes a restauranteur to cringe just a little.

Imagine what it is like this morning for the big publishers caught in the Justice Department lawsuit over price fixing in the book business. While some express a bit of sympathy for the publisher's point of view, most customers are positively full of glee. Like the big music labels, few, it seems, find that there is much to like about publishers.

The problem for the book reading public is that they have direct experience with the old big box retail chains and the pricing they found there. They remember wanting to buy that big cook book, but thought $50 was a tad too high price to pay. But Amazon.com is selling that same book for $30, and offering free shipping to boot. Who doesn't like cheap books? (Cue Tom Hanks.)

Even Apple is getting hammered. They chose a strategy that promised publishers higher prices at the expense of the reading public. People who are discovering this are not expressing much sympathy for Apple. Worse, Apple may be great at PR surrounding product launches, where they have the tech websites wrapped around their fingers, but the news stories online have comment threads, and Apple is finding that their customers are suddenly not so happy with them. But still Apple remains silent.

Amazon.com, on the other hand, immediately sent out a release: "This is a big win for Kindle owners, and we look forward to being allowed to lower prices on more Kindle books," Amazon said yesterday in its statement.

Smart. Plus the DOJ probably is happy, as well. Only those adamant that government should stay completely out of business matters, see the DOJ's move today as a bad thing.

For the big publishers, though, reading those comment threads has to be painful. Book publishers, many are saying, are old fashioned, greedy, bad at business, anti-consumer. For many, the lower prices found on Amazon.com are a good thing. Period.

For Apple, the lawsuit is a natural outcome of their drive to gain content. Just as Apple promises its developers greater return by selling through the App Store – and promotes it heavily during product launch speeches – it wanted to to a foothold in the book market by offering publishers a way to make more money. Fair enough, until the prices start getting fixed.

The agency model that both Apple and Macmillan want to defend are great for the seller (the publisher) and the retailer (Apple), but not that great for the consumer. The traditional wholesale model was great for the seller, the distributor and the publisher, but not so great for the consumer until online retailing appeared. Then it was great for the seller (Amazon) and the consumer, but not so good for the publisher (and really, really bad for the distributor who was locked out).

There is probably no system that is great for everyone, but publishers really fear Amazon most of all. But this whole episode should get them thinking about their customers.

Amazon probably thinks things couldn't be going better. But one thing Apple has learned, is that having the content is the thing. Amazon may win this battle, but they've made no friends in the book publishing business. For Apple, their inability to change their ways of handing press relations and their clumsy interaction with the publishers led them to this lawsuit and its customer feedback.

Many think Apple has gotten too big. I just think they've grown too fast (cue Tom Hanks again, this time in Big) and are having a hard time adjusting. But whatever the case, this lawsuit may be the thing that finally damages the brand.

As for authors and independent publishers, the perfect outcome would be one that keeps both the wholesale and agency model existing side by side. Authors need outlets for their work, and the ability to publish freely is vital. A great outcome would be one that makes Apple loosen its rules for publishers and authors, but keeps the iBooks store going; meanwhile, by not handing the keys to the entire eBook market to Amazon, it would force the online retailer to serve the interests of their content providers and developers. Publishers and authors want a fair return on their products and work; consumers want to pay a fair price and not feel forced into one retail channel. Somewhere there has to be a middle ground – let's hope the players and the DOJ find that space.

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