Transcript: Up Against Amazon

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Interview with Karen Christensen

For podcast release Monday, August 18, 2014

KENNEALLY: In the book world, telling horror stories about Amazon is a common enough way to pass the time at conferences and receptions. The details may vary, but the plot is the same. Amazon eats publishers for breakfast.

Welcome to Copyright Clearance Center’s podcast series, I am Christopher Kenneally for Beyond the Book.

What dramatically has changed in the summer of 2014 is not the Amazon horror stories, but their arrival in the headlines and on the front pages. The focus currently is the war over pricing with Hachette and Amazon, but the antagonism goes well beyond the trade world. Indeed, academic publishers are increasingly beholden to the e-retailing giant, and as Karen Christensen, CEO and founder of Berkshire Publishing has learned resistance may be futile. She joins me now from her office in Western Massachusetts, and welcome to Beyond the Book, Karen.

CHRISTENSEN: Thank you very much for having me, Chris.

KENNEALLY: We’re looking forward to chatting with you because an article that you wrote for the Independent Magazine, which is published by IBPA, Independent Book Publishers Association, in their August issue caught my eye. I felt it was important to give you a chance to tell this story because it, I think, opens up the conversation around Amazon beyond the trade world.

But before we get into the details, tell us a bit about Berkshire publishing. What kind of books are on your list and what kind of an audience do you have?

CHRISTENSEN: Berkshire Publishing is a specialist academic and educational publisher. We focus on global issues. We’re particularly known for working on all topics connected with China. I’m an environmental author myself, actually published a book that was distributed by Hachette, so I feel a certain special interest in that battle. So I wear the hat of an author as well as that of a publisher.

The way that the article you saw came about is actually one of the things Berkshire is known for as being very much engaged with its global network of thousands of authors and librarians and readers, contributors – our thousands of academic expert contributors. And so I write letters that go out to those folks, usually every month, and that article was actually a post that I did for our blog and for the Berkshire Publishing newsletter. It got enormous attention. It got a huge response from people who said they had no idea. It was reprinted in a couple of places. It got me on BBC television, and then interviewed by The New York Times, so it’s fascinating what the kind of simple outreach that a small publisher like Berkshire does, how we are able, I’m glad to say, to have a kind of impact that some years back we might not have been able to do.

KENNEALLY: As you say, Karen Christensen, you publish a variety of books. This network that you have of contributors is, in part, because of several encyclopedias you publish. So I would imagine there are dozens, if not hundreds of contributors to, for example, the Berkshire Encyclopedia of Sustainability.

CHRISTENSEN: There are over a thousand authors.

KENNEALLY: Right. So really what you do does have an impact far and wide. So let’s discuss the situation here. What was it that prompted all the attention? What were you writing about? What was the challenge t hat Amazon had presented to you? Before we get to that, let me just ask you, you’ve been a customer of Amazon for some time, correct?

CHRISTENSEN: Oh, yes. I’m a great admirer of Amazon, in fact, in many, many ways, and have been a happy customer until recently. It’s really hard, now that I’ve become so much connected with the criticism of Amazon, I don’t dare to have Amazon packages turning up at my house. But it is frustrating. It’s an admirable system, and it’s one of the things that – the fact is that every publisher has to decide now whether they’re willing to deal with a monopolist, which is what Amazon has become. In a sense it’s the fact that they have developed over the years, without making much in the way profits, but they have developed a very impressive system. I think we can all learn a lot from what they’ve done.

Unfortunately, the deleterious effects of what Amazon is doing today are affecting the way even people like me, who have, in the past, really admired what Jeff Bezos has done, and in some ways actually agreed with him when he has said that publishing needs to be disrupted. As a new, small publisher, I’m quite keen to do things better, faster, more efficiently, more creatively than some of the older, more established big box publishers with deep pockets. I would like to be able to be innovative.

KENNEALLY: For some people listening, they want to understand better the distinction between what you’re trying to do and the so-called trade publishers. It really matters, not only in terms of your approach but in your business practices. I guess we need to tell people very briefly about the so-called trade world and the trade discount, which is something that Amazon has replied upon, as have bookstores for many years.

Trade books are often sold to their distributors, whether bookstores or Amazon, at a discount, a trade discount, that can range between 20 and 55%, but typically around 45, 50%. Whereas the type of book that you’re publishing there on the academic side is what’s known as a short discount. What are the common discounts for the short discount publishers?

CHRISTENSEN: I would say an average is probably 20%, but our standard as a very small publisher has been 10. There’s some range depending on the particular distributor, but when I talk to colleagues, I would say that’s a ballpark. The reason is that we do specialist books that are not going to sell in large numbers. They tend to be really quite demanding, quite costly to develop. Certainly the encyclopedias I produce, very costly, they take a long time, a lot of input from a lot of people. They’re not going to sell in vast quantities. Trade publishers, obviously some of their books don’t sell in large quantities, but their hope always is they’re going to get the blockbuster that sells tens of thousands, hundreds of thousands, millions of books, and that is simply not going to happen with academic books. I suppose one in a million might, but –

KENNEALLY: If you’re Thomas Piketty, perhaps. But the other distinction for Amazon, for a short discount publisher is that on the trade side, they may get that deep discount, but they also sell the books at a discount. As I understand, at least with Berkshire’s books, Amazon was selling them at list price, is that right?

CHRISTENSEN: Yes, yes, quite extraordinary. So they were demanding a trade-level discount, but they were not passing that discount on to customers.

KENNEALLY: So what happened, exactly? You had been doing business happily, or at least you were accommodating yourself to the situation for a number of years – you began working with them in 2006 – but then in 2012, Amazon decided to change the game.

CHRISTENSEN: Yes. Not just for us but across the board, made a unilateral decision that they were going to increase the percentage that all of us short discount publishers gave them. This would shore up their margins. Any business tries to improve its margins, that’s quite natural. But to do it unilaterally, and in a case like this with publishers who – actually publishing is not an industry in which there’s a lot of fat, certainly not with small companies like ours, and that’s why I think it’s very important for people to realize that this isn’t a matter of one big company fighting with another big company. This is a matter of one dominant, monopolistic entity in the market trying to swamp everyone else, small and large.

What they did is simply send a notice in through their online system, saying that they were correcting the discount that we were giving them, and increasing it by, in that case, 5%. When I found out, I was furious, because I was already giving them what seemed to me a huge discount that wasn’t justified by the volume of sales.

The theory with Amazon is, and they’ve come out with this recently in one of their releases, is that they should get these higher discounts because they can pass, then, the discount on to customers and people, on the whole, are simply across the board going to buy more books. So the publisher will benefit because even if they make less on one book, they’re going to sell so many more that their overall numbers will be better.

It’s simply not true. I haven’t seen that happen. But if you think about it – say you have a book – a specialist book on what happened in the 19th century in upstate New York in the religious revivals – a book, I’m sure, fascinating to some, but a limited audience, no matter what, no matter how well you market it. But those kinds of books, that is what scholars, that is what researches do, and even in the sciences. They’re very specialist topics, but the fact that they’re specialist doesn’t make them marginal. They may just be that crucial thing for a crucial, small group of people that will have major social, technological, economic impact over time.

KENNEALLY: And what’s interesting about that, Karen Christensen, I think, is that that’s certainly the view from the publishing world, perhaps from the authors’ world as well. But Amazon sees things differently. They just see it as a business transaction. As I understand, the ability to change discounts is something that’s part of their contract with any publisher.

CHRISTENSEN: Well, yes. The problem here is that of course the only leverage any party in a contract has, if the contract says it can be changed by one of the parties, is you have to be able to walk away. And as people have asked me, they’ve said, why have publishers let themselves get in this position? Because in a normal distribution arrangement, in a normal business arrangement, you negotiate until both parties are content with the terms. And if it’s going to be changed, most contracts say, any change in this will be negotiated in good faith and agreed in writing.

We were so eager to have the reach that an electronic bookstore would give us, that we essentially gave up something very important, which is the independence that we need. Now fortunately, I don’t have anything like the same volume percentage of my business going through Amazon as some publishers do. There are quite a few publishers where 60% of their business may be going through Amazon, and they may be in a position where walking away from that is not, at the moment, without there being a real competition, is not an option. And that is the problem, and this is what I’m hoping that the Department of Justice in the United States will eventually decide to consider, is the fact that Amazon has become, for all practical purposes, a monopoly within the market, and that it has become impossible for a competitor to set up, which is one of the ways one defines monopoly.

KENNEALLY: Right, and Karen Christensen, it is your view that all of this is harming not only the bookstores, the publishers, the authors who work for the publishers, but you say that it has an impact on readers, that readers ultimately are going to be hurt by these practices.

CHRISTENSEN: One of the wonderful offerings of an online bookstore or any kind of online offering, is that you have access to so much useful stuff, whether it’s for education or entertainment. The fact is that one can get pretty much any book through Amazon in English and in European languages. That’s certainly not true with Chinese, for example, and other world languages. But you can get a lot of stuff. What happens when the range is simply not as – there might be a larger number of books because, of course, Amazon is also promoting self-publishing, but what if there are fewer books of the sort that we want and need, whether for professional purposes, for educational purposes, for scholarly research, or for entertainment? What if the actual quality of the product offering deteriorates, and it’s inevitable that it will because publishers are offering authors lower advances, probably half what they were some years back. It’s because they can’t make as much money, they can’t offer authors as much money, which means that that are certain very talented people who can’t afford to write books at all or can’t afford to write a book as fast. So authors are being affected, and that means that readers are not going to have the books that they would like to have, and sometimes need.

KENNEALLY: And you say that authors and publishers perhaps can’t afford to write and publish these books. But for you as a publisher, it’s also true that you can’t afford to give up the relationship with Amazon.

CHRISTENSEN: Well, I’m in a better position than many publishers because I don’t have such a high percentage of my sales going through them. Nor do I have a lot of stockholders watching every move I make. But the publishing world is thinking about what comes next. You’ve seen all the press about Amazon. There’s a far more open debate about this than there was a couple of years ago. When I first started talking a little bit, and writing a little bit about this after my experience in 2012, people were either not very interested or telling me, how did I dare say anything? Wasn’t I afraid? People still say that, but now, really, as a friend said to me last night, now everyone’s saying the stuff you’ve been saying.

Now where that leaves us, I’m not sure because the fact is that what will sort this out is when there’s real competition for Amazon and Amazon is not in the monopolistic position that it is today. So every publisher is going to have to make individual decisions about what is acceptable and look for alternative routes to its readers. There are a lot of ideas bubbling up with technology companies, with bookselling people, and with publishers themselves. So I consider the current debate and discussion and all the press really very exciting.

I’m not sure what the solution will be, but the fact is that we need something better than Amazon in order to serve our customers well. That is our mission, publishers – we want to make information and knowledge public. We want to educate and entertain. We have all sorts of new and exciting ways to do that, but we can’t do that if we can’t stay afloat in a practical way – pay our employees, pay our authors, pay to keep the lights on.

So a lot of challenges but I really appreciate the chance to talk to you about this, and I’m continuing to do a lot of outreach and a lot more research and investigation into what the options may be. People have been coming to me with new ideas, some not so great and some quite interesting, so who knows what’s going to percolate out of this?

KENNEALLY: Well, we certainly appreciate, Karen Christensen, your sharing your story with us. And Karen Christensen is CEO and founder of Berkshire Publishing Group, and her article on her taking on Amazon, going up against Amazon is in the August, 2014 issue of the Independent, the newsletter from the Independent Book Publishers Association. Karen, once again, thank you for joining us today.

CHRISTENSEN: Thanks so much for having me, Chris, I really enjoyed talking to you.

KENNEALLY: Beyond the Book is produced by Copyright Clearance Center, a global rights broker for the world’s most sought-after materials including millions of books and e-books, journals, newspapers, magazines and blogs, as well as images, movies and television shows. You can follow us on Twitter, find Beyond the Book on Facebook, and subscribe to the free podcast series on iTunes or at our Website, Our engineer and co-producer is Jeremy Brieske of Burst Marketing. My name is Christopher Kenneally. For all of us at Copyright Clearance Center, thanks for listening to Beyond the Book.

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