Forward to next post: Blake Charlton experiences suffering
Macmillan author and former record company exec Susan Pivar has a brilliant piece at HuffPo, The Macmillan vs. Amazon Throwdown, about the significance of sales and distribution structures, the perils of letting retailers control prices, and how, starting in the 90s, their mishandling of the issue “led the music business to unwittingly fall on its pony-tailed sword.” Her analysis goes far beyond Amazon’s grab for lebensraum and other issues of the moment. I suspect people will be reading and quoting it for years to come.
Among other things it’s the first explanation I’ve seen that accounts for a big difference between the recorded music industry and trade book publishing. The music industry promotes and releases a relatively small number of albums, which it expects to sell in vast numbers. The trade book industry publishes a vast number of titles, of which a tiny fraction are bestsellers, a small fraction are modestly profitable, and the rest either lose money or come darn close to it. I mostly understand why we do what we do, but I’ve always wondered why the music industry took the other path.
I’ll try not to quote her entire essay:
…How did the American public get hoodwinked into believing that the suppliers are the bullies rather than the retailers?Yeah. Bullies that are into self-pity feel justified no matter how badly they’re behaving. It’s also been creepy watching days pass without Amazon re-listing the books. I’m increasingly wondering whether the whole point of their “capitulation” announcement was to kill the story in the mainstream media.
As an ex-music business exec (1989-2000), I’ve already seen how the story ends when an industry allows retailers (rather than suppliers) to set product pricing. Recording companies waited around for someone else to take the hit by telling Best Buy or Walmart to stuff their “loss-leader” strategies and outrageous price and position fees. But no one did. Kudos to Macmillan’s John Sargent for his bold gesture. And shame on Amazon for calling the move to accept Macmillan’s pricing (for now) a capitulation. That word really gave me the creeps. …
Here is one woman’s blow-by-blow view of how we got to a place where retailers control basically everything about how a book reaches your hand. (Social media phenoms notwithstanding.)That represents a huge loss of expertise in the overall system. Local stores knew their territory and their customers, and had diverse but well-informed tastes. That is: they had superior resolution when it came to answering a basic question: “Are there people out there who (a.) buy records and (b.) will really like this recording? And if so, who are they, and how do I sell it to them?”
Shift in purchasing patterns from regional to national. In the 90s, there were things called record stores. They sold recordings. There were things called appliance stores. They sold appliances. There were things called grocery stores. They sold food. Somewhere in the early 90s these things started to get all mixed together. When it became apparent that the CD was for real and not only were people going to buy new releases in this format but also replace every single thing they already owned, the industry kaboomed. In a good way. Suddenly every retailer wanted to stock CDs. (I’ll never forget the time Rounder Records (my employer at the time) got a 3000-piece bluegrass catalog order from Blockbuster video stores.)
Around the same time, we saw the rise of big box stores selling music. The famous phrase “loss leader” came into our lexicon. CDs became those inglorious leaders. They were imagined to be just the thing to lure unsuspecting customers into the big box with the hope, I suppose, that they’d realize they needed a new washing machine while shopping for Nirvana’s Nevermind, or perhaps the other way around. To capture market share, Best Buy, Circuit City, and others priced music below even wholesale costs in some cases. What knucklehead thought of this, I have no idea, but this was the beginning of the end. Suddenly regular record stores had to compete on price in order to survive. But they couldn’t achieve the economies of scale, so instead they ate each other. 20-store chains became 100 store chains. 100-store chains became 800-store chains. Independent stores began to die. First individual stores and then small chains.
So what, you might think, it’s the American way to compete on price and anyway bands were still making music, so what’s the big deal. The big deal is that purchasing became centralized. This had two important consequences:Context matters. Developing new artists requires a long-term commitment to their work and readership, and close attention to their sales patterns. You can’t do that if every new release has to be a blockbuster. It’s like expecting children to pay the entire cost of their education.
One, regional bands or labels couldn’t sell records to a buyer in their own hometown, thereby building a local base, and, drum roll please,
Two, Central buying can only succeed with hit-driven product. When one guy in an office in Albany is deciding what’s going to go in 1200 stores throughout the country, he can’t buy this for Miami and that for Ann Arbor. He doesn’t have time to buy 500 copies of a new release this week and then monitor sales patterns and buy another 500 (or 10 or 1000) the next week and then keep 2 copies in the bin just in case someone wants to buy it in a year. Too labor intensive. Plus he has no idea what people care about in Miami or Ann Arbor. He needs quick turns on music that’s going to blow up out of the box and then be gone. For good.
Buh-bye developing artists.
As I said on Boing Boing right after the story broke:
If you strip away the industry’s margins, you lose the things the industry can do.…while a fixed $10 price point would undoubtedly be good for Amazon’s ebook business, it would take a shark-sized bite out of the market for hot new bestsellers, which is trade book publishing’s single most profitable area.
That revenue source is what keeps a lot of publishing companies afloat. It provides the liquidity that enables them to buy and publish smaller and less commercially secure titles: odd books, books by unknown writers, books with limited but enthusiastic audiences, et cetera.
My honest estimate is that the result would be fewer and less diverse titles overall, published less well than they are now.
Nationalization of music distribution. Central purchasing systems do not thrive on having a multitude of vendors, each with different terms, sales cycles, pricing structures, and styles of customer service. They want to buy a bunch of stuff from as few people as possible. Distributors had to figure out a way to do business with retail behemoths. They had to become behemoths themselves. Major labels actually began scouting indie labels and offering distribution deals to the bigger ones. Smaller indie distributors and one-stops began gluing themselves together to form national distribution companies. Though they were once the bastion of new music, indie labels and distributors had less and less time for developing artists themselves.(Snipped: interesting history of the Telecommunications Act and its effects.)
Buh-bye regional music.
Nationalization of radio.
… Local radio lost its local-ness and all the pride, quirkiness, and opportunity for new artists and creative programming that went with it. Again, a few people making decisions for a huge number of outlets. And, again, only hits serve an infrastructure like this.Here’s the paragraph I think should be carved in granite and inlaid in gold:
Buh-bye new music.
Shift in creative locus. Hits, hits, hits. Have I made my point? Instead of a record label being able to survive by selling a few copies of a zillion different recordings, they had to sell a zillion copies of a few recordings. Product lines became less and less diverse, less and less risk-taking. What can sell a zillion copies without artist development? Only already-established artists or those lucky few who a label would choose to get behind and push, push, push until they made it to the top (as long as it happened within the first month after the record came out). To do this would literally require millions of dollars. To spend millions of dollars, you have to have a sure thing. To have a sure thing, you look at what has already succeeded and try to copy it by going out and finding an act that fits the bill. When you copy others, you end up with bullshit.I know this problem from other places. It’s why major entertainment franchises won’t allow character change or worldbuilding in tie-in storylines: you can’t let the creatives mess around with a narrative franchise worth millions and millions of dollars. It’s why you can’t take your artistic guidance solely from polling the fans: all they know is what they liked last time. It’s why it’s perilous to do editorial work on material with which you have no personal sympathy: if you’re making choices based on what thus-and-such market segment “ought to like,” you run the risk of choosing stuff that no one loves at all. Hell, it’s the single biggest reason acquiring editors are hesitant to get too specific about what they want: aspiring authors will write to fit that description, rather than satisfying their own sense of what’s cool/fun/interesting/worth reading.
Have you had the experience over the last decade of checking out the paperback wire racks at your local grocery, or a small airport newsstand, or the sundries store at a highway rest area, and found they were full of famous-author bestsellers, none of which you wanted to read? That state of affairs is the result of the same kind of processes Susan Pivar describes in music. Big-box retailers insisted on simplified purchasing deals with a small number of distributors, and while they were at it they gouged themselves out a bigger wholesale discount.
This triggered the collapse of the previous system of distribution, with its hundreds of regional distributors with all their accumulated expertise, to one where the handful of distributors left standing manage an impoverished system of huge territories with which they’re imperfectly acquainted. That’s why you see those wire racks, which used to have a diverse selection of books, stocked entirely with books by a small number of big-name authors, one vertical row per author. It’s called “famous author racking.” Publishers have run sales demos at selected airport newsstands, showing that a more diverse selection will sell significantly more books, but the distributors weren’t interested. Famous author racking is simple, it’s easy, and the distributors already have as much work to do as they can handle and their resources will allow.
Yay, retailers. We love the retailers. Commerce wouldn’t work without them. But if you let a few big retailers dictate your prices, next thing you know you’re going to be bidding to be allowed to supply them with wholesale merchandise at sweatshop rates so they can drive their remaining competition out of business by undercutting them. That’s bad if you’re making t-shirts. It’s disastrous if you’re making books or music.
It’s particularly disastrous if you care about having access to a wide range of well-made new art. Authors may grumble about publishers (and musicians certainly grumble about record companies), but when they’re not being forced into dysfunctional arrangements, publishing houses are companies whose job it is to find, nurture, shape, package, and sell good books to people who want to read them. When we do it well, we make a world where there are more books, and better books. Authors get paid more to write them, and can afford to put more love and effort into them, and more writers can afford to be authors. We co-enable good bookstores and booksellers. We package books so that they speak to you, telling you what kind of reading experience they are, and letting you decide whether that’s what you want.
If you want good art, you have to pay for good art. You also need a delivery system that connects that art with its audience. And you need for the money paid for that art to go to the people who make it. Macmillan’s fight with Amazon isn’t a meaningless corporate squabble over a few percents profit. It damned well matters.