Tag Archives: Market Place

Distorting Free Markets In The Book Industry

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Seth Godin has published at least a dozen best-selling books on the post-industrial marketplace, ideas, social media and consulted with many Fortune 500 companies.  His insights make following his blog a must for anyone trying to make their way in any marketplace.

Part of his genius is being able to put into a few words, great thoughts.  Most of his blog posts are simply great.  Occasionally, they are mindbending, not because they are novel but, in fact, because they state clearly something we already know.  His latest post, titled The Free Market, is one such post.  I encourage you to read it before continuing to read here.  It won’t take you long.

The gist of Seth’s point is that:

1) Free markets are great and will generate good results if they are not usurped by those trying to benefit from it.

2) Those trying to benefit will attempt to make the market un-Free in any way that gives them leverage in that market.

3) Without checks and balances against those using their leverage, the free market will suffer and be less free.

We all know that what Seth says is true.  But do we talk and act like we do?  Look at the debates about the need (or not) of government regulation of business as just one example that suggests we’ve lost sight of this basic logic.

But I’m not here to talk politics.  Seth’s post caused me to to think about the book industry.  I think that often our discussions about what’s going on in the book industry right now center on the more trivial issues rather than the big ones.  For instance,

DRM: is it good or bad?

DRM (digital locks on our eBooks) is touted as a “copyright protection” mechanism.  It’s argued that it’s needed to prevent piracy.  To counter that there are those who worry about being able to lend their eBooks or to be able to sell them.

Truth is, DRM has little to do with copyright and it certainly isn’t actual copyright protection as this comes from the legal ramifications of copyright law.  DRM is, first and foremost, a way for particular hardware manufacturers to control their consumer base – to disrupt of the level playing field if you will.  The best evidence for that is the fact that there isn’t a single eBook format or DRM scheme.  Each hardware manufacturer has and uses their own.  If both industry and consumers would understand this, the debates would change and we’d more often find publishers and consumers on the same side of the debate.

Agency Pricing Model

This is debated, on the one hand, as a way for publishers to retain the perceived value of their product (low price de-value books).  Others say that it is counter to traditional manufacturer/retailer models where manufacturers set their selling price and let retailers determine what they’re going to sell the product for.  In point of fact, this is how hardcover street prices are determined, with retailers regularly discounting them from their publisher retail price.  Why not for eBooks?

The ‘why not’ is best understood from history.  The Agency model came about because Apple knew they couldn’t compete with established booksellers like Barnes & Noble and Amazon so they told the publishers, “We’re going to help you out, publishers.  Put your higher-priced books in our iBookstore.  We’ll let you do this if you’ll to agree to enforce those prices across the industry.”   And by doing this, Apple disrupted the free-market pricing model, to its advantage.  Random House held out until recently but even they succumbed as they wanted Apple as an outlet for their products.

Conclusion

There are other examples of how various entities in the book industry are attempting to disrupt the free market conditions of the market but there is one unavoidable conclusion.  The tail is wagging the dog. Consumers, authors AND publishers are being manipulated by hardware manufacturers.   They are trying to create circumstances tha lock consumers into a ‘system’ that favors their sales and limits the abilities of consumers to buy from other vendors.  Until publishers and authors insist on open and easily convertable eBooks, they will continue to do so.

 

 

 

Doing Business the Amazon Way

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One of the things the Internet has given consumers is a soapbox on which to whine and complain about being wronged by this or that company.  It’s a powerful tool.  This is a problem for companies, of course, as a 1% error rate (I wish my track record could be that good) can become a steady stream of complaints about its products and/or policies if nothing is done about it.

Conversely, the Internet has provided companies with tools to better serve customers, if they use them.  Having Twitter accounts with an action person managing the account, making good support people available via email, and even the use of targeted advertising helps companies keep customers happy.

Sadly, few companies have caught on to the fact that the Internet is doing something that is quite ironic.  It is personalizing customer relations.  Over the past 100 years or so, we’ve moved from small-town business models where owners knew their customers and vice-versa to a time when large brick-n-mortar stores couldn’t care less about their customers and who hire people who will work cheap but don’t know a thing about the products being sold.  They try to paint a different picture in their ads but we all shop.  We know the truth.  Now, as people debate whether the Internet is destroying our ability to interact directly with humans, the Internet is moving us back to a ‘small town’, knowledgable owner way of doing business.  In an earlier post I mentioned one company, Goulet Pens, as an example of this.

It might surprise some who are down on Amazon as being the ‘big brother’ of the book industry, that I like them… very much.  In my dealings with them, they very much live up to their email signature line of “We’re Building Earth’s Most Customer-Centric Company.”  Unlike so many online companies, they are responsive and often do things that surprise this cynical consumer.

And so it was this morning when I received an email from Amazon saying they were refunding $14.40 to my account.  The email explained that when I’d purchased two Kindle covers (the ones with lights) they’d charged me $7.20 each for “import fee deposit.”  I vaguely remembered these charges, both when I bought these covers and when I’d bought my Kindles.  I remembered not being very happy about those charges but given that the vagaries and expense of having products shipped across the Canadian/US border, which is akin to moving from west to east in 1960s Germany, I accepted the charges as part of doing business.

The interesting thing is that this transaction took place at the beginning of February!  I’d long since forgotten about it.  I had to look it up to figure why they were refunding money to me.  I had filed no complaint.  I never asked for a refund.

But Amazon kept track of it… somehow, and they reimbursed me because, I guess, they didn’t need to use the money to buy off the Canadian government to allow my package to get to me.  I really don’t know the details.

What I do know is that this stuff breeds loyalty.  These sorts of actions breed consumer confidence.  And this sort of consumer-centric thinking is rare in our world.  Is it any wonder that Amazon leads the pack and is pulling away?  Give consumers what they want, for fair prices and we’ll flock to your stores, be they online or otherwise.  Treat us fairly while you’re at it and we’ll be yours for life.

Cheers — Larry