ABA CEO Update on Google eBooks and Association’s Meeting With DOJ

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    Dear ABA Member Bookseller,

    We’re still in the first week of April, and already it’s been a busy month.

    On Tuesday afternoon, the American Booksellers Association was notified by Google that they will be discontinuing the Google eBooks reseller program, worldwide, effective January 31, 2013. As you may be aware, the reseller program is Google’s program as an e-book wholesaler to numerous online retailers, including IndieCommerce, as well as Powell’s and other partners in the U.S. and around the world, including partners in Canada, the U.K., France, and Australia.

    Google’s decision to discontinue the program is, therefore, far larger than just IndieCommerce and the users of our product. After January 31, 2013, Google will sell e-books through Google Play only.

    To say the least, we are very disappointed in Google’s decision, but it was not entirely unexpected. However, we have every confidence that, long before Google’s reseller program is discontinued, ABA will be able to offer IndieCommerce users a new alternative e-book product, or choice of products, that will  not only replace Google eBooks as it currently works on IndieCommerce sites but that will be in many ways a better product.

    From the start, we have recognized certain realities of our working with Google. As an enormous, multinational corporation, Google has interests far beyond independent bookstores, and the book world at large, and, at times, it has lacked understanding of many basic principles of our industry. Also, recognizing that it is never advantageous to rely solely on only one vendor, throughout the time of our relationship with Google, ABA has been actively engaged in talking to many other potential industry partners, in case the need arose to replace or to supplement Google’s offering. Clearly, Google’s move will accelerate ABA’s implementation of a new e-book solution.

    As you recall, we partnered with Google in 2010 because it was the only viable means for us to enter the e-book market. However, like so much else in our industry, the e-book landscape has changed rapidly, and we have options that simply did not exist 18 months ago.

    While we know that our volume of e-book sales has been modest, we also know that being able to offer e-books to your customers is an indispensable feature of any bookstore’s web offerings, and this capacity has helped drive online traffic that has contributed to increased overall sales. Moreover, we’ve all learned a lot about selling e-books in the last year and a half, and we’re looking forward to the opportunity to offer an improved product.

    We are totally committed to providing IndieCommerce stores the means to continue selling e-books, and we expect to move forward quickly with one or more partners who will better understand — and who will maintain closer ties to — your stores, and to the book industry in general.

    We recognize that this is a significant development, and I want to underscore that, in this transition period, Google eBooks will continue to be available via your websites. Also, e-books purchased from your store will persist in your customers’ Google Accounts after the reseller program ends. We will share additional details as we learn them. Matt Supko, our technology director, has prepared an FAQ that provides answers to some of the questions that you and your customers may inevitably have.

    There’s a very important issue related to this that I wanted to give you an update on as well, and that is the ongoing Department of Justice (DOJ) investigation of the agency model.

    As has been widely reported in the media, there is a chance that DOJ may take steps that would result in a significant change to publishers’ e-book pricing terms. While DOJ has acknowledged that it is investigating the agency model, beyond that, all speculation about what actions it might take and how those actions might affect the sale of e-books is just that, speculation.

    However, it would be naive to stay on the sidelines at such a critical juncture. To convey just how important the agency model is for the health of the book industry and a truly competitive marketplace, ABA met with DOJ in Washington, D.C., on Monday, March 19. At that meeting, ABA President Becky Anderson, Vice President Steve Bercu, association General Counsel Deanne Ottaviano, and I expressed to Department of Justice representatives ABA’s strong support for agency model pricing of e-books.

    We made very clear to DOJ that we believe the agency model has corrected a distortion in the market fostered by major online retailers, which sought to eliminate competition both on the publishing level and at the distribution level.

    As we understand it, the investigation is not questioning the legality of the agency model, but, rather, whether it was arrived at in an illegal manner. The critical point we made to DOJ was that any attempts on the government’s part to remedy any alleged wrongdoing must not end the agency model, which has created a more competitive marketplace.

    Since the introduction of the agency model, the market has become not less competitive, but, rather, far more competitive. There is much more competition in the retail sector, as Apple, Barnes & Noble, Google, Kobo, and indie booksellers have all entered the market, offering consumers many more choices. There is also far more competition among publishers, which are now regularly offering special promotional offers, with lower-priced titles. In our channel, we have seen that the average prices to booksellers and to consumers have dropped since the introduction of the agency model.

    Before the introduction of the agency model, a single online retailer was selling e-books significantly below cost, dominating this nascent market, and rapidly growing readership in their proprietary format. It may be that their intent was to capture this market not only for book purchases, but, perhaps more importantly, to sell these consumers products from the full range of other online product offerings — everything from lawn furniture to flat-screen TVs. As many analysts have noted, the losses that online retailers have been willing to accept on book sales by selling below cost can be seen from another perspective as nothing more than shrewd ongoing customer acquisition costs.

    In our meeting with DOJ, we argued strongly that if the agency model goes away, there is every reason to conclude that major online retailers will again use considerable resources to dominate — and ultimately monopolize — the market, and that, in a relatively short amount of time, consumers will have a radical reduction in choice when it comes to purchasing books in both digital and print formats. The market will be far less competitive on all levels, and this stark reality will adversely affect the health of the entire publishing ecosystem. In the end, we believe, it will mean a far less diverse range of titles being published and a much diminished range of publishers.

    Publishing thrives on diversity. What’s particularly galling about some online retailers is that they are free-riding on the resources of their bricks-and-mortar competitors — indie and chain, and in many industries besides books — to gain market share.

    The special promotion of Amazon.com’s price-comparison app last holiday season brought into high relief that Main Street retailers are essential showrooms marketing and promoting sales for Amazon and other online retailers, and there is data that clearly support this fact. That Amazon refuses to comply with the law and collect sales tax where it is due only increases their strategic advantage.

    At this point, it’s completely unknown what the Department of Justice will do. But given the importance of this issue, I wanted you to know what steps ABA has taken to communicate directly to DOJ just how essential the agency model is to the health of our industry.

    Together we will see what the upcoming weeks will bring, but, I want to assure you that ABA will continue to take whatever steps possible to help indie bookstores remain fully competitive in the sale of both print and e-books on their websites, and will continue to advocate as aggressively as possible on your behalf.

    In the meantime, if you have any questions, please do contact me.

    Warm regards.

    Sincerely,

    Oren Teicher, CEO
    American Bookseller Association