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As Competition Wanes, Amazon Cuts Back Discounts

David Streitfeld
Friday, 5 Jul 2013 | 10:41 AM ET
Author James Hollock, with copies of his first book, "Born to Lose."
Jeff Swensen | The New York Times
Author James Hollock, with copies of his first book, "Born to Lose."

Jim Hollock's first book, a true-crime tale set in Pennsylvania, got strong reviews and decent sales when it appeared in 2011. Now "Born to Lose" is losing momentum—yet Amazon, to the writer's intense frustration, has increased the price by nearly a third.

"At this point, people need an inducement," said Mr. Hollock, a retired corrections official. "But instead of lowering the price, Amazon is raising it."

Other writers and publishers have the same complaint. They say Amazon, which became the biggest force in bookselling by discounting so heavily it often lost money, has been cutting back its deals for scholarly and small-press books. That creates the uneasy prospect of a two-tier system where some books are priced beyond an audience's reach.

It is difficult to comprehensively track the movement of prices on Amazon, so the evidence is anecdotal and fragmentary. But books are one of the few consumer items that still have a price printed on them. Any Amazon customer who uses the retailer's "Saved for Later" basket has noticed its prices have all the permanence of plane fares. No explanation is ever given for why a price has changed.

Bruce Joshua Miller, president of Miller Trade Book Marketing, a Chicago firm representing university and independent presses, said he recently surveyed 18 publishers. "Fourteen responded and said that Amazon had over the last few years either lowered discounts on scholarly books or, in the case of older or slow-selling titles, completely eliminated them," he said.

When the University of Nebraska Press brought out a bibliography of the novelist Jim Harrison four years ago, Amazon charged $43.87. The price this week: $59.87.

Rob Buchanan, a sales coordinator for the press, said the $65 list price of the book had not changed, nor had the price the publisher billed Amazon. "I can't think of a reason on our end why they'd be charging more."

Amazon says it is not belatedly trying to improve its anemic profit margins.

"We are actually lowering prices," said Sarah Gelman, an Amazon spokeswoman. "We pay for these price decreases with relentless focus on improving our execution—and this commitment to low prices is one of the reasons our print books business continues to grow."

Offered a list of random titles whose discounts had dropped, she said she would not talk about specific books. They included David Foster Wallace's essay on John McCain, which went from 20 percent off to 10 percent. Ellen Galinsky's "Mind in the Making" went from 32 percent off to 24 percent. Jim Harrison's "Songs of Unreason" dropped from 32 percent off to 16 percent.

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Higher prices have implications beyond annoyed authors. For all the hoopla around e-books, old-fashioned printed volumes are still a bigger business. Amazon sells about one in four printed books, according to industry estimates, a level of market domination with little precedent in the book trade.

It is an achievement built on superior customer service, a vast range of titles and, most of all, rock-bottom prices that no physical store could hope to match. Even as Amazon became one of the largest retailers in the country, it never seemed interested in charging enough to make a profit. Customers celebrated and the competition languished.

Now, with Borders dead, Barnes & Noble struggling and independent booksellers greatly diminished, for many consumers there is simply no other way to get many books than through Amazon. And for some books, Amazon is, in effect, beginning to raise prices.

Stephen Blake Mettee, chairman of the board of the Independent Book Publishers Association, said that Amazon was simply following in the tradition of any large company that gains control of a market. "You lower your prices until the competition is out of the picture, and then you raise your prices and get your money back," he said.

Authors like Mr. Hollock say they feel helpless about Amazon's control over their fate. Mr. Hollock says he has called Amazon several times to ask why the price of his book was going up, and never received an answer that made sense.

"Amazon is doing something vitally important for book culture by making books readily available in places they might not otherwise exist," said Ted Striphas, an associate professor at Indiana University Bloomington. "But culture is best when it is robust and decentralized, not when there is a single authority that controls the bulk of every transaction."

When Mr. Striphas's book, "The Late Age of Print: Everyday Book Culture from Consumerism to Control," first appeared in paperback in 2011, Amazon sold it for $17.50, the author said. Now it is $19.

"There's not much competition to sell my book," Mr. Striphas said. "The conspiracy theorist would say Amazon understands this."

Of course, many books on Amazon are still significantly discounted, especially popular titles where it has some competition. But even books by Nobel Prize winners are now being sold at prices that minimally diverge from the bookstores that were driven out of business in the last decade. Par Lagerkvist's "The Dwarf" is 5 percent off, while Halldor Laxness's "Fish Can Sing" is 10 percent off.

Amazon's experimentation with its pricing comes against a backdrop of tumult in bookselling and publishing. The Justice Department sued Apple and major publishers, accusing them of conspiring to raise the prices of e-books as a defense against Amazon. The publishers were worried that Amazon was setting an artificially low price to gain control of the e-book market. (The publishers settled without admitting guilt. Apple went to trial and is awaiting a verdict.)

(Read More: Buying a Picasso on Amazon? Not So Crazy Anymore)

In its 16 years as a public company, Amazon has received unique permission from Wall Street to concentrate on expanding its infrastructure, increasing revenue at the expense of profit. Stockholders have pushed Amazon shares up to a record level, even though the company makes only pocket change. Profits were always promised tomorrow.

Small publishers wonder if tomorrow is finally here, and they are the ones who will pay for it.

One small nonfiction publisher, which requested confidentiality because Amazon is a crucial account, said the retailer sold its books at a discount ranging from 25 to 35 percent for years. Then, despite steady sales, the discounts began to shrink. Their most popular book this week was 16 percent off.

For this publisher, that means less revenue and less profit as some buyers reject the more expensive books. It is a disappointing turn of events, particularly when he recalls the excitement that Amazon initially generated among independent presses. "Amazon enabled our buyers to find us, before any wholesaler would talk to us," he said. "Their slogan was about 'leveling the playing field for small publishers' and they did."

Curt Matthews, chief executive of the Independent Publishers Group, a Chicago book distributor that got in a dispute with Amazon last year over margins on e-books, speculated that Amazon could be data-mining its customers.

"They are wondering, 'If we knock off only 10 percent as opposed to 35 percent, where do we come out ahead?' " Mr. Matthews said. "They don't care how many books they sell. They want to know how many dollars they get."

For Mr. Hollock, the "Born to Lose" author, the issue is readers, not dollars. His award-winning book, published by Kent State University Press, had a steep list price of $35 to begin with. In the author's view, Amazon is simply compounding the trouble by raising its price to more than $30 from $23.

"I see all these other books out there that are cheaper," Mr. Hollock said. "I thought, 'Man alive, I don't know how I'm going to compete.' "

By David Streitfeld, The New York Times.

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