The price war began last week when Wal-Mart announced that it would offer Walmart.com customers who preordered any of 10 of the coming holiday season's biggest potential best sellers the chance to buy the books in hardcover editions for just $10. Typically new hardcovers sell for $25 to $35, although some discounting is common.
Amazon.com quickly matched Wal-Mart's preorder price on the same books, which include "Ford County" by Mr. Grisham, "Under the Dome" by Mr. King and "Going Rogue," Sarah Palin's memoir. Wal-Mart then lowered the price to $9, and Amazon followed suit. By late Friday afternoon Wal-Mart had cut another penny off the price.
On Monday, Target entered the fray by offering six of the preorder titles on Target.com for $8.99. By Tuesday Wal-Mart had lowered the price on those titles to $8.98.
The association's letter, which is signed by the group's nine board members, accused the retailers of "devaluing the very concept of the book" and effectively selling the books at a loss in an "attempt to win control of the market for hardcover best sellers." Retailers typically pay publishers a wholesale price of half the list price of a hardcover book -- so on a $35 hardcover, the retailer pays $17.50, meaning that it loses money on a $9 consumer price.
The American Bookseller's Association represents independent bookstores, whose members cannot afford to sell top bestsellers as loss leaders. But the interest of antitrust law does not lie in protecting small, inefficient sellers for the tiny minority of Americans who prefer to shop there. They lie in making sure that there is robust competition in the bookselling market. What they're trying to do here is stop bigger, more diversified companies from competing with them, because they'll lose.
But as this makes clear, the big players are competing: with each other. Which is where the market is going to end up anyway, because outside of a few big cities, independent booksellers can't compete with the convenience of Amazon or Barnes and Nobles' economies of scale. The only way the American Booksellers Association is going to save its members is by forcing Amazon, et al to sell books at a 10% premium.
This suit is even more ridiculous, considering the high percentages of hardcover bestsellers sold by airport shops and drugstores. Anyone believing that either Amazon or Walmart are attempting to corner the market on hardcover bestsellers is delusional.
Good point. With access to a fantastic inter-library loan system, I haven't purchased a book outside of an airport in years.
Right. Independent booksellers can't possibly compete on the books that everyone knows that they want to buy. And because of the problem of stocking, neither they nor brick and mortar chains can compete with online when it comes to low-volume in print books that people know that they want to buy either. (A book sells one copy in a city a month? A chain would need a copy in every story to ensure that the customer would be able to find it; Amazon can have just one copy in one warehouse.)
Independent booksellers can go on Amazon Marketplace to provide out of print and used books, or just do that themselves. They also can be useful for recommending books that people wouldn't already try, though Amazon tries to do that too.
I'm convinced that Borders and Barnes and Nobles are really just coffee shops that use books as a loss leader to get people inside to buy coffee.
Especially since the new B&N eBook reader lets you browse any book while at Barnes and Nobles - get them to sit there reading eBooks, and they'll buy coffee!
I think that there's room for the specialist independent bookstore. But perhaps not as much for a generalist independent bookstore that sells in-print titles, outside of best sellers in restricted places like airports.
Idlewild Books (http://www.idlewildbooks.com/) in NYC is a great example of this. (Travel books seem like the kind of thing you want to thumb through before buying).
The books I actually want to buy--mostly highly obscure niche technical titles--are available at the same price from both Amazon and Powell's (or Elliot Bay Book Co.), because even Amazon balks at discounting once your sales rank reaches the 7 digits. Indeed, my latest purchases aren't even available from Amazon, only Amazon Marketplace.
So the independents get my business because I can flip through in store rather than having to rely on 2 reviews, one 5-star and one 2-star.
I think we need a Book Czar. It really isn't fair to force latte sipping elites to buy their books from the likes of Walmart and Target.
Hysterical! You cracked me up! :)
By the way, I don't think the latte sipping elites are buying any of the aforementioned books anyway so the question may be moot.
I dunno about that- first Walmart undercuts book stores on the latest Stephen King novel, and, before you know it, you are forced to buy L'Étranger while rubbing elbows with Billy Ray Cyrus fans. It's a slippery slope.
Not to mention that they will only carry English translations, and the store cafe will serve only Maxwell House.
The Horrors!!! This must be stopped immediately!!
Else we will all be destined to look like this: http://www.peopleofwalmart.com/
Already seen that site. Was still laughing a couple of weeks later.
It does look more like competition to me. I find it unlikely that Amazon, Walmart, and Target are all in cahoots against the small booksellers. But is it even too early to tell?
Often discerning between "predatory pricing" and "competition" can be very difficult - that's why economists get paid the big bucks when serving as expert witnesses on these cases - and why two people may look at the same situation and give differing opinions. I might find a claim of "predatory pricing" more compelling if the small booksellers get pushed out of business and then the big three jack up their hardcovers to much higher price levels. But then again, that could still be a normal response to differing competitive pressures.
But the interest of antitrust law does not lie in protecting small, inefficient sellers for the tiny minority of Americans who prefer to shop there.
Actually the purpose of antitrust law IS to protect inefficient competitors, not consumers.
http://en.wikipedia.org/wiki/Standard_Oil
In 1890, Rep. William Mason, arguing in favor of the Sherman Antitrust Act, said: "trusts have made products cheaper, have reduced prices; but if the price of oil, for instance, were reduced to one cent a barrel, it would not right the wrong done to people of this country by the trusts which have destroyed legitimate competition and driven honest men from legitimate business enterprise".
Similarly the Microsoft trial focused exclusively on the "harm" done to Sun, Netscape, and others, with almost no attention whatsoever paid to consumers.
Noah,
Excellent points. But I think you need to substitute "rent-seeking" for "small, inefficient."
Congress doesn't care how big or inefficient the rent-seeker might be.
Wrong. Antitrust law protects competition, not competitors. Brunswick v. Pueblo Bowl-O-Mat. It is not an antitrust violation if a larger competitor by merely being more efficient drives smaller ones out of business. Since Brunswick, courts have focused more on harm to the consumer. http://books.google.com/books?id=oT07hNxzMwQC&printsec=frontcover#v=onepage&q=&f=false
The Microsoft case was about tying - leveraging market power in one product (OS) to gain an advantage in another market (internet browsers). This is not the same as booksellers.
Let us all pause to reflect on the many ways the Great Bowling Bubble of the 1950's has given us useful case law in a variety of fields.
Thank god the EU wasn't around to protect us from car-makers "bundling" radios or air-conditioning or GPS with their cars.
Didn't Brown Shoe suggest that a merger creating a more efficient entity would hurt the less efficient competitors and thus should be stopped?
"[W]e cannot fail to recognize Congress’ desire to promote competition through the protection of viable, small, locally owned business. Congress appreciated that occasional higher costs and prices might result from the maintenance of fragmented industries and markets."
I'm just joking around--this part of Brown Shoe is clearly wrong under current law.
Bowl-o-mat stands for the narrow proposition that the plaintiff must allege a harm to consumers.
"The issue for decision is a narrow one. Petitioner does not presently contest the Court of Appeals' conclusion that a properly instructed jury could have found the acquisitions unlawful. Nor does petitioner challenge the Court of Appeals' determination that the evidence would support a finding that had petitioner not acquired these centers, they would have gone out of business and respondents' income would have increased. Petitioner questions only whether antitrust damages are available where the sole injury alleged is that competitors were continued in business, thereby denying respondents an anticipated increase in market shares."
Had they alleged predatory pricing, different result.
Bottom line: Your comment is just a technicality that drives how lawyers write the complaint and doesn't address the driving issues, such as Congress' motivation for passing the Sherman Antitrust Act or the (any) Administration's propensity for enforcing it.
From what I can tell, independent bookstores bundle a set of products.
1) Selling the books that the store actually has in stock.
2) Recommending books to those customers who happen to share tastes with the staff.
3) Allowing customers to leaf through books.
4) Offering to "special order" any books that the seller doesn't have in stock.
Unfortunately, unless the seller can add a lot of value through step 2, it looks like the business model isn't going to hold up.
The unfortunate thing for the plaintiffs in this case is that they were forced to add Amazon as a defendant. I had to laugh when I read the Huff Post argument today that Amazon's existence *limits* the selection of books available. I can't count the number of times I have walked into an independent looking for a book and not found it, or found a slim selection that forced me to go to Amazon.
WalMart has never, ever been about Oligopoly. WalMart is all about MONOPOLY. They would sooner form a cartel with Hugo Chavez than with Amazon or (gasp) the Evil Red Empire.
Nobody in Arkansas sees a long term future that includes Target, Amazon, Barnes and Noble, Best Buy, Krogers, Costco, Piggly Wiggly...
Whether through competition or collusion, the result is the same. Does intent matter here? I don't mean intent in the legal aspect of the anti-trust law, but rather in the sense of whether Amazon or Target should be castigated for their prices.
Does it matter?
OPEC was the classic Cartel, back in the 1970's and 1980's. Their intent was to keep prices high, high, high.
Now that so many other nations have oil, and the intent is to compete, look at the impact.
In real dollars, petroleum is unbelievably cheap - even though overall demand for it is more than doubled since the 1970's.
Crude oil prices from 1947 to present in 2008 dollars.
http://www.wtrg.com/oil_graphs/oilprice1947.gif
Bad link. But using data:
Average price of Crude, per bbl, real dollars. Source (http://inflationdata.com/inflation/inflation_Rate/Historical_Oil_Prices_Table.asp)
1980-1989: $55.20
1990 - 1999: $26.15
2000 - 2009 (partial 2009): $48.42
It's cheaper today than it was 20 years ago. It was MUCH cheaper 10 years ago than it was 20 years ago.
Demand for crude, as Al Gore reminds us all, has gone up more than a bit over those same 20 years...
Ok, we'll use your link.
Average annual domestic crude prices(in inflation adjusted dollars)
1946 - $17.73
1950 - $24.84
1955 - $23.56
1960 - $21.24
1965 - $20.59
1970 - $18.84
1975 - $48.91
1980 - $98.07
1985 - $53.98
1990 - $38.17
1995 - $23.71
2000 - $34.29
2005 - $55.21
2009 (year to date average) - $43.56
(and for those that are interested, 2008 was $91.35)
picking your dates to coincide with a bubble is disingenuous.
Back to the question: Since, as you suggest, the intent was to keep prices high, it seems to have brought in new competitors looking for easy money, with the outcome of lower prices. Should OPEC be applauded for lowering prices, though that was not their intent?
As disingenuous as claiming "constant dollars" go back much more than 20 or 30 years?
Prior to 1980 there weren't even cell phones and PC's, let alone hybrid cars and PDA's. To claim constant dollars much prior to that is weak, at best.
Rob, we were using your data source. If you have a problem with that data, perhaps you should have used a different source.
You still didn't answer the question.
My antitrust professor remarked that there's an easy way to tell whether some business activity is pro-competitive (and therefore allowed) or anti-competitive (and therefore proscribed): look at who's complaining.
If a seller's customers are complaining about a given business practice, it may be anti-competitive.
If a seller's competitors are complaining about it, it is almost certainly pro-competitive.
That's a good point, but you also need to be aware of the alleged harm. The claim is not that consumers are harmed now as a result of a cartel exercising market power (as you suggest, consumers are the only ones who really matter), but that this is an attempt to exclude certain booksellers from the market, which if left unchecked, will allow the defendant firms to create power over price in the future. Consumers are not complaining now because they haven't been harmed yet. Indeed, consumers are free-riding right now by buying hardcover books below cost even though they will (it is alleged) be forced to pay well above the competitive price for hardcover books in the future.
You would need to prove an actual agreement between the companies, which requires more than parallel conduct. Plus, excluding small companies will not reduce competition if there are plenty of large companies left at the end (which there will be). Predatory pricing would require a likelihood that the offender be able to charge higher prices later on.
And I feel confident that I can assume that the plaintiffs do not have a single shred of proof, other than wild and baseless speculation, that Target, Walmart, and Amazon are going to collude (or even be able to collude) to inflate prices once those pesky independent booksellers are out of the way.
My point was that based on the allegations, you wouldn't expect consumers to complain, thus a lack of consumer complaints is not indicative of no antitrust violation.
I did not intend to pass judgment on the merits of the allegation, but given how fact intensive the analysis is, I think its hardly obvious that there is no violation (nor is it obvious that there is a violation). The ABA asked the DOJ to look into it, and its probably worth at least a cursory investigation when retailers with such huge market shares are charging well below marginal cost.
Ah, well I agree with you that you would not expect consumers to complain. And rereading your post, that does seem to be your main point. I think your other point is that one should be careful about jumping to conclusions.
To defend myself against your second point, I think that it seems rather unlikely that anything nefarious is going on here. If you look at the letter, the ABA is complaining that its members are harmed more than it is complaining that competition is harmed.
http://www.publishersweekly.com/article/CA6703526.html
The ABA complains that publishers will have to decrease their prices because consumers will no longer think that new books are worth $35. It seems to me that part of the problem is that the retail industry can now exert pressure on the publishing industry to reduce its prices. Which the ABA does not like because it cannot gain those efficiencies. The core problem is that booksellers will never again be able to charge such high prices.
But as for facts that show anticompetitive behavior, the complaint only states that $9 is probably below price. I guess that is enough to warrant an investigation. Amazon, Walmart, and Target will still face competition from themselves if small booksellers are gone. And the national brick & mortar book retailers.
I expect the market for hardcover books will be vanishing rapidly over the next 10 years.
Publishers like Baen are already selling books electronically for $6.00 and even giving away others for free. Barnes & Noble is coming out with their own e-reader to compete with the Amazon Kindle. Within a few years, I expect e-readers to be as common and MP3 players.
E-readers are, initially, competition with paperbacks more than hardcovers, since they offer advantages of convenience, portability, and potentially marginal cost per book. Though, of course, they're all subsitutes for one another to some extent. E-readers will eat into the part of the market that's indifferent as to format and only buys hardcovers because they don't want to wait for the paperback.
There'll certainly still be a market for hardcovers in ten years, though it may grow smaller and more niche over time. (Look at the course that vinyl has taken over the last generation in the music industry for a comparison.)
There may come a time when no one under thirty has ever touched a paper book (though it'll take a while, if only because schools tend to be conservative and to have underfunded tech budgets). But in my lifetime there'll always be people who didn't grow up with them, who aren't comfortable reading long works on a screen, don't want to spend money for a standalone ereader for the small number of books per year they read, or simply prefer paper and will vote with their wallets to get it.
I worked in an independent bookstore back in the late 1980s. Like so many independent bookstores, we were driven out when a competitor moved in whose offerings we couldn't match. I refer, of course, to a new video store.
If you're looking for a plan to rake in the filthy lucre, getting a monopoly on the book trade to leverage your pricing power may not be the best strategy out there. I imagine WalMart and Target know this and are just trying to increase the stickiness of their sites by serving the needs of casual readers with value priced offerings of the sort their customers expect to find in all their departments.
I guess I could understand why they don't like it. I heard that they was doing it for 10$ but I didnt know it drop even more.
So that good for anyone who want to buy these books, but as for me, I hate hate hate hardback books(because of price and just the size). I just hate having to wait for the paperback to come out months later. oh well i guess
If I were a small book seller, I'd buy the loss leaders from Wal-Mart then resale them at the same price at my store.
They do. Sad but true.
It doesn't even have to be loss-leaders. The publishers who desperately need the independents often price books so much higher for them that it can occasionally be cheaper for those stores to get them from a chain than from the distributor. (Of course, it's money up front and no returns, so it doesn't happen too often.)
I have no use for bookstores since Amazon came along.
Yes let's have a stimulus package for small independent bookstores that can't hack it.
Which is where the market is going to end up anyway, because outside of a few big cities, independent booksellers can't compete with the convenience of Amazon or Barnes and Nobles' economies of scale.
Agreed that this is the direction things are heading, but I doubt that we're looking at good things for the book market as a whole.
History has not been kind to suppliers to Walmart.
In fact, destroying the market by destroying the bricks and mortar has occurred time and time again, although usually in niche markets. (it used to happen via mail order, now its the internet).
Creative destruction might simply mean that books as we know them will cease to exist. It doesn't guarantee that book-lovers will personally be served better. Whole classes of product that I purchased ceased to exist because of the growth of consumer electronics. If I want what everyone else wants, its ten times cheaper. If I want something a little off the beaten track, it's not available at any price. Creative destruction, yes, but it doesn't mean in that case it has served *me* well.
Personally, for the book market, I expect big problems.
If bricks and mortar dies, the last great divide between self-publishing and publishing disappears, specifically, the ability to get it into a bookstore. (At present, you can't practically buy your way into bookstores.)
After that, most books have next to no advertising budget.
What happens when Amazon effectively becomes the only way to purchase books? (Other than the top 50 best-sellers) Either browsing dies, or more likely Amazon makes authors purchase virtual "shelf space". (The publisher's don't have the budget for that except for best-sellers.)
Want to bet that most self-published authors are willing to pay for a bigger marketing budget than most mid-list authors?
Even if the B&N stores die, the book industry will live off the existing authors for quite some time. But after that, good luck getting a shot at success if you aren't don't have a recognizable name or have a big chunk of personal money behind you.
And we all know what that means for books.
Actually, it should mean greater choice for consumers and writers will be able to self publish electronically without the huge overhead of pulping up dead trees and spraying them with ink.
People can e-mail links to their favorite e-books to friends. Rate them online, etc just like in iTunes. You no longer need a big name just to make it on the shelves.
Yes, I agree. Personally, I expect it to be about as rewarding as looking for great movies on YouTube.
Beats trying to find good books in stock at the library. I'd love to just pick SciFi and sort by user ratings descending.
If free libraries didn't kill book publishing, merely low prices from Wal-Mart certainly won't do it.
Very different dynamic. Walmart only stocks best-sellers. How do you know what is a best-seller? Because the previous book by the author sold well.
What happens when there are no outlets to promote beginning authors? A dozen years later, you don't have any best-sellers except for those who are famous for other reasons than writing. Walmart exits from the market.
Everyone wants to skim the cream off the market built by someone else. Eventually, there is no market from which to skim.
Grocery chains have been selling (only) best sellers for years. It hasn't hurt the book business as a whole. The notion of everyone's preferences devolving to want "only" the top 20 books or so because of discount chains is ridiculous.
David Wellington started off podcasting his first book as chapters. In just a few years he has churned out nearly a dozen descent pulp horror novels (which I've purchased and read all of).
Technology helps the creative artist get his stuff out their without the mainstream publishers acting as gatekeepers.
The notion of everyone's preferences devolving to want "only" the top 20 books or so because of discount chains is ridiculous.
It is as long as there is a book eco-system for it work within. Unfortunately, if really steep discounts mean the bookstores lose their biggest sources of income, they will die (those few that aren't already dead). Then your choice becomes Walmart or Amazon.
And as my original post said, the problem with using Amazon alone is that there's no way of distinguishing "real" books from self-published, except that most self-published authors are willing to spend more on marketing as they're not trying to make a living on it.
Bookstores build readers, and as the bookstores die, so does the supply of new readers. It won't be a quick death, but it'll happen.
At least, so it's happened with pretty much every other field that's lost it's bricks & mortar representation. With luck, B&N won't join the rest of the booksellers as a distant memory, but I'm not very confident.
What happens when Amazon effectively becomes the only way to purchase books? (Other than the top 50 best-sellers) Either browsing dies, or more likely Amazon makes authors purchase virtual "shelf space". (The publisher's don't have the budget for that except for best-sellers.)
I think we need Bastait to make a new fable. Think about how books killed off all the great orators like Homer. It's so unfair! To respond to your specific case, people will go to Wal-Mart's website or Barnes and Noble's website. You can already browse books at Amazon and Google books. I do much more browsing from Amazon than I do from brick and morter booksellers. Why? Because (1) I read the entire profiles of good reviewers. (2) Listmania's and So You'd Like To Guides, and (3) the Customer's who bought this book also bought .... The common denominator is that they reduce search costs because other people have aggregated and processed knowledge about good books for me. At a brick and morter I'd have to do that myself by picking books essentially at random. And I'd be limited to their much smaller physical stock of books.
I know progressives like to frame every change in markets as a blow to consumers, but sometimes it is sad and trite. The 19th century Luddites destroyed the machines that actually cost them jobs. The 21st century Luddites destroy machines that improve their lives.
Hagios, back to my original point.
First, you have to assume that, as a general principle, the quality of published books is much higher than for self-published books. If you disagree, I'm happy for you, but you don't need bookstores anyway, as there is a ton of sites providing all the reading material you'll ever want for free.
However, for those who consider themselves well served by the current system, there may well be problems in the future.
Hagios, you get your clues from recommendations. How do the people who are doing the recommending find the book? They find them by looking into bookstore to see what the publishers are selling. This filtering doesn't cost the publishers anything, which is good because the publishers have no budget for marketing mid-list books.
Now, eliminate the bookstore. Okay, the reviewers log in to Amazon. How do you distinguish between the 100,000 books, 95% of which are self-published? Well, traditionally, you really on the commercial grade product having substantial marketing behind it. It's why most people buy Coke instead of Dr. Smedley's Soda. Unfortunately, for books, especially first books, outside of those pretty much *guaranteed* to sell because of the Author's fame, there's no money for marketing whatsoever.
Worse than that, many of the self-publishers are probably willing to spend quite a bit on marketing their books (I've been impressed with how hard many self-publishers work to promote their books.)
Which means that on Amazon, the self-published will likely have a much higher profile than the published books. if you're a publisher trying to (cheaply) promote new authors, do you see a problem?
Of course, you can just put more money behind fewer books, but what does that mean? Yes, you guessed it, no taking chances. Choose ghost written books by celebrities, authors who are almost identical to current best-sellers, etc. We already see a lot of that now. Are most readers well-served by having it get even worse?
That is the crux of my argument. Unfair? Doesn't matter, the market moves where the market moves. But as I've said, in my lifetime I've seen a number of niche markets take this route and eventually die. It's only a tragedy for those who cared about that niche. I happen to care about the book niche.
You say that with the demise of conventional book marketing structures, the whole industry will collapse over time. Which would be a great point, except that you're making it on the website of someone whose primary claim to fame is being someone who wrote for the sake of writing, and who was good enough at it and got popular enough at it to land a real job as a writer. If Megan, and the dozens/hundreds of other professional bloggers, can make it, then that tells me that we don't need a conventional publishing industry to feed us written materials. Word of mouth and its high-tech equivalents really are good enough sometimes.
Word of mouth and its high-tech equivalents really are good enough sometimes.
First, what we get from a website and what we get from a magazine are quite different. I'd be happy to read some 10,000 word articles or even 100,000 word books by Megan on many of the points she raises, but I won't get it. The model doesn't support that.
So, are web sites a replacement for magazines and books? No, they're a worthwhile supplement to it. I enjoy YouTube as well (okay, my sons enjoy it), but I don't think that means that movies no longer have worth.
In the end, there will be hobbyists whose work matches or exceeds the professionals, but they're damn few. I would not trade a few talented hobbyists for 10,000 professionals. I'd happily *add* them, though.
There is nothing wrong with pricing something below your costs to make sales - unless the purpose of that pricing is to drive competitors out of business. This is most effective when the barriers to entry for a market are high - drive your competitors out of business, hike the prices either back up to where they were and increase revenue/profits via your larger market share, or higher than before knowing you have lost any competitive incentive to keep prices low.
If Walmart/Target/Amazon are colluding to drive the small folks out of business, that is illegal. If, however, their price war is intended to bring more customers in general to their stores, or for store name recognition (not really an issue in this case), it is probably legal. The reason I qualify that with "probably" is that it is possible that the unintended consequence of wiping out the small bookseller may be considered illegal under anti-trust laws. As somebody commented earlier - that's why economists get paid the big bucks to testify in anti-trust cases.
Personally, I am torn on this one. I hate the idea of the small bookseller having to close because they cannot compete with the big(box) boys. However, that has been happening for years. My local mall used to have 2 book stores. Now, there's a B&N in the strip plaza next to the mall, the locally owned store closed years ago, and the B. Daltons closed due to the B&N partner in the strip plaza. Legitimate competitive forces killed the little guys.
Barriers to entry are crucial to predatory pricing allegations and there are some interesting debates about scale efficiencies as barriers and the ability of small scale new entry to constrain large incumbents. However, I'm not sure that an unintended consequence of a unilateral expression of market power can render conduct unlawful. What is interesting about this casee is that appears to combine a unilateral monopolization case with oligopoly theory to suggest a concerted effort to price the little guys out. That's a hard case to prove for lots of reasons. To pick just one, we usually need to show that recoupment is available post-exit. That seems pretty tenuous here. On a more basic note, I am always skeptical when I hear people say how much they love the idea of small stores. I like them too, and personally, I'm willing to pay more to shop at them but I don't kid myself that I'm part of the majority on that front. People may say they like small stores but they shop at Walmart because it is cheaper. Most consumers want independent stores but they are not prepared to pay higher prices. So, who kills small stores? We do. Every day.
As somone in the publishing industry, I find this to be a terrifically interesting discussion -- and telling, given that this pool of (presumably) educated and engaged Atlantic blog readers are a core bookbuying target pool.
Independent bookstores would be quick to tell you that they don't really sell what the big box and mass merch stores sell; they do much better with the midlist -- the kinds of less commercial fiction and narrative non-fiction that they can handsell. The Walmart.com / Amazon $8.99 price promo (and please note, it's Walmart.com, not bricks-and-mortar) includes mostly titles that fall into this commerical category. The exception is Barbara Kingsolver's LACUNA. Kingsolver is an author that independents feel a great deal of proprietary pride in; Kingsolver sold in the indie channel long before she caught on at the big box stores, and finding and handselling this kind of writer before they break out in a commercial way is exactly what indies do well. You can argue that the market will decide who wins and loses in the retail world, but I agree with Tom West that the loss of this channel would represent a cultural net loss in terms of building deserving writers. I do not buy the argument that Amazon can do this. Amazon tries to "recommend" books, based on algorithms of purchasing patterns, but that's not at all like having a real live person whose taste you trust, telling you that you are going to love a certain book, a certain reading experience.
I think the argument that technology means the demise of bookstores and publishing because every author can now self-publish and be represented by Amazon also misses a crucial point. The argument is valid for writers with a platform, or non-fiction writers in niche categories that consumers go to find, but not for literary fiction. Before Elizabeth Strout won the Pulitzer, indies represented 40% of the POS sales of OLIVE KITTERIDGE. Would she have won the PUlitzer without the indies? Of course -- but all those readers and sales would have gone missing. If you are a writer of this kind of fiction, you are going to want to hope the indies stick around. STORY OF EDGAR SAWTELLE -- same thing. It was embraced by the indies first, and rolled out from there. Would it have achieved its eventual success without the indies? Probably, but the path would have been more torturous. Fiction and narrative non-fiction is still a word-of-mouth driven business, and indies are still better than any other retail channel at generating and fanning that word of mouth.
Indies will tell you all day long about the other benefits of this channel. Anyone involved in urban development will tell you that there is very little that enhances the flavor of a neighborhood more than its independent businesses. In my own city, think of Brooklyn, especially Cobble Hill and Williamsburg. Indie success can significantly enhance urban renewal success and quality of life. And then there are all those studies on the economic impact of independent businessess in a community, vs chain stores or online stores -- the % of each dollar spent at an independent, that is reinvested in that community, is much higher than the % spent at Amazon or a chain. Sure, it's nice to prop up their share prices, but I also like a little prosperity in my own neighborhood, and so it's worth it to me to spend a little more to shop locally.
These price wars concern publishers, too, who worry about the devaluation of intellectual property. It's just not good for the industry to have books priced so much below cost. Amazon has already taught consumers that an e-book should be less than half the cost of a physical book. Amazon is taking the loss on e-book sales, but their $9.95 e-book pricing structure fails to account for the fact that the paper and cover and costs of shipping a physical book to a store is really only a small fraction of the cover price. The rest of the price of a book accounts for the advance paid to the author; the development costs (yes, some editors still do edit!); and marketing and publicity. Most radio and tv shows still require the author/interviewee to come to their studio for the interview; the publisher pays those costs for the duration of the publicity tour. In this scenario, brick-and-mortar stores lose, undercut by Amazon and e-books; publishers lose (if forced to sell at this retail, there is no way to meet their costs); and authors lose (they'd earn less than half their royalties; mega-hit commercial writers can certainly become wealthy, but everyone else--not so much). Amazon wins though, which is awefully nice for them.
I do not mean to suggest that the current publishing/bookselling model must stay where it is; everything changes. But the intangibles have a wide reach, and the unintended consequences of change can have an impact that many of us might not much like.
Counterexample - Baen Books claims to be making a profit and increasing net sales of hardbacks by selling completely DRM-Free ebooks at the cost of a paperback with availability before the hardback release. Niche market (Sci-fi), even.
They claim to be increasing sales when they GIVE AWAY items out of their back catalog, even.
Not just the publishing house, but the authors themselves have stated this.