[Infowarrior] - Barnes & Noble's Convoluted Defense of Pricey Books

[Richard Forno]

Barnes & Noble's Convoluted Defense of Pricey Books

June 7, 2012 RSS Feed Print

http://www.usnews.com/news/blogs/rick-newman/2012/06/07/barnes--nobles-convoluted-defense-of-pricey-books

You practically need a study guide to understand why book retailer Barnes & Noble thinks more expensive books are in  readers' interest.

As everyone knows, Amazon has become a goliath in the book business, at one point grabbing a 90 percent market share for books sold online and effectively driving Borders out of business. Part of its strategy has been aggressive pricing of e-books—perhaps taking a loss on each book sold—in order to corner the market. That led to a counter-strategy by five publishers, in conjunction with Apple, that allowed publishers, rather than the retailer, to set the price—with Apple taking a 30 percent cut. That effectively allowed publishers to raise their prices by $2 to $5, since there was no pressure from the retailer regarding what to charge. The publishers, in turn, agreed not to allow any other retailer to sell their books cheaper than Apple did.

That smelled like collusion to the Justice Dept., which sued the Apple consortium in April, charging them with fixing prices and costing consumers "tens of millions of dollars." Three publishers immediately settled with the government, while MacMillan and Penguin vowed to fight.

Now, Barnes & Noble has officially protested the settlement, arguing in a letter to the Justice Department that the settlement could raise book prices, reduce choice for consumers and even wreck the whole book business.

If this sounds more confusing that a Dostoevsky plot, here's why: It's not really about the price of books today. If it were, it would be hard to argue that Amazon offering the lowest possible prices and even taking a loss on some books is bad for consumers. And Amazon offers more books than any retailer could ever stock on its shelves, so choice isn't a problem either.

What's really going on is a turf battle in which Barnes & Noble fears for its very existence. Amazon really is powerful enough to drive big retailers out of business, if allowed to compete unchained. It has also shown an appetite for blood, by encouraging shoppers, for instance, to browse for merchandise in physical stores but then use a Kindle Fire or some other mobile device to order what they want from Amazon, cheaper.

So Barnes & Noble is really arguing that consumers will suffer if B&N goes out of business some day and Amazon becomes a monopoly. That's plausible, but even without a big retail chain like B&N, there would still be independent bookstores and Wal-Mart. Although who knows, Amazon might target them next. That would leave online booksellers such as Apple—a formidable competitor, for sure, but not one that's typically interested in keeping prices low.

Barnes & Noble may be standing on weak ground. Technology changes so fast these days that it can be impossible to predict what will happen a few years from now, especially when you pile hypotheticals on top of hypotheticals. Plus, readers seem to like e-books, which have succeeded in no small part because of Amazon.

As for authors—who generate the product that all this fuss is about—they may have little say either. As a book author myself, I'd like consumers to pay the highest possible prices for what I produce. But I also recognize that it's virtually impossible to shackle technology and it's a bad idea besides, because it often generates terrific new innovations that defensive corporate executives or myopic regulators can't possibly foresee. So B&N may lose even if it truly believes it's sticking up for the little guy. Time to amp up that digital strategy.


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