Brief word from Lulu

In that same forum (link in yesterday's post, I'm too busy to go get it for ya and you have to be a Lulu user anyway):

"We would like to assure our users that Lulu continues to have a strong relationship with Amazon..com. As a result, the recent changes Amazon.com has announced should not adversely affect Lulu content listed within Amazon.com in any way.

Regards,
Adam"

Outta here!

UPDATE 4/2 6:00 AM: Publishers Weekly reports Ingram's response to Amazon's policy and open letter here. Most of the article simply summarizes the open letter, but here is the gist of what Ingram is saying:

In his statement, John Ingram said that while “the questions that are being raised about Amazon.com and its Booksurge division don't directly relate to Ingram - either Lightning Source Inc. or Ingram Book Group - it clearly is alarming many of our publisher partners.” According to John Ingram, “publishers are telling us they feel Amazon.com’s actions are not appropriate.” John Ingram’s statement adds that the company has been unable to get a direct response from Amazon about its pod shift.

“We all live in a world where decisions are made about insourcing and outsourcing, and free choice is important,” the statement continues. “At Ingram Book and Lightning Source, we are going to work really hard to continue to be the compelling choice as publishers make their outsourcing decisions. Our breadth of distribution channels including the online retailers remains the same, and Ingram still provides one day turnaround in the fulfillment of orders for books including print on demand titles.”

And Ingram's POD division Lightning Source has apparently issued the following statement to its customers:

Dear Customer,

Lightning Source has been following the recent press coverage and discussions about Amazon.com and BookSurge. We are aware of the concern this is causing the publishing community. The issue centers around Amazon.com tying the availability of your books and terms of sale at Amazon.com to the production of books at the Amazon.com subsidiary BookSurge, specifically requiring you to use BookSurge in order to sell on Amazon.

Like you, we are very concerned about any conduct that would serve to limit a publishers choice in supply chain partners and to negatively impact the cost of your products to consumers. We believe that choice and selection of best of class services are critical to the long term success of publishers and a vibrant book market.

Lightning Source continues to provide the highest quality digital on demand print and distribution services for every one of our customers. All your titles continue to be available to all of our channel partners, including Amazon.com, with immediate availability for shipment within 24 hours.

We are committed to providing you with the best of class quality product and fastest distribution service in the market, and will continually work to develop new channels and new offerings.

Lightning Source will continue to monitor this situation and let you know when we have more information.
Please feel free to call your Lightning Source point of contact, if you have any additional questions.

So...Ingram's saying Amazon can still order from them the way they have been. Lulu (whose books on Amazon are currently supplied by Ingram) is saying there will be no affect on Lulu customers. But unless Amazon modifies its policy to specify certain POD books, not all POD books, all three cannot be companies cannot be correct, and we have what looks like an impasse but is probably just a logical blackhole created by the PR. [speculation] Since Lulu and Ingram seem to either be resisting or compromising with Amazon, I am *guessing* that Amazon will, in effect, modify its policy (perhaps without stating that they are doing so); it would make sense for them to continue to order Lulu, Lightning Source & other non-BookSurge POD titles that are doing well for them. Otherwise they stand to lose revenue and their place as the "we've got everything" retailer. The POD titles that are not selling well for Amazon will continue to be deactivated unless the publishers (micro, small or self-) comply with the BookSurge requirement. This will probably hurt self publishers the most.[/end speculation]

As I sort of vaguely pointed out in the "In practical terms" post, switching to the Amazon Advantage program is being touted by Amazon as an alternative to adding BookSurge for Amazon availability. But the publisher of my first poetry book used that--it was a new press using traditional offset printing and did not qualify for a contract with Ingram, Consortium, or other distributors/wholesalers (which have annual sales/volume requirements a new small press can't meet). The publisher sent 5 books at a time to Amazon, which reordered as necessary. The resulting lag time between reorder and fulfillment meant my book was often "out of stock--more on the way" much of the time. (Which is primarily why I bought a bunch of copies and started selling it myself on my website.) How do out-of-stock books better serve Amazon's customers? Beats me.

In practical terms...

I thought it might be useful to show how Amazon's new requirements for POD books (see yesterday's post) will affect some small presses, using my own press as an example. (I realize not every reader of this blog gives a hoot about POD and retail distribution, but a lot of us micropresses and individual self-publishers use these services, so bear with me.)

My press uses Lulu.com for convenience and value. I could have the books printed more economically--I'd still be using a digital short-run printer to do it--but Lulu's distribution packages include the purchase of an ISBN, database listings for Books-in-Print (without which nobody knows the book exists), and availability via Ingram to physical and online bookstores, including Amazon. Lulu also offers online store space at Lulu.com (though personally I don't emphasize it, preferring to encourage people to buy directly from my press). In addition, with my Lulu account, I get a dashboard where I can maintain all my book files, and keep up with sales reports broken down by channel. That's one-stop shopping for me. Extremely convenient.

With Lulu, I get bulk discounts on the per-copy cost--the more books I order, the cheaper they are. I pay an additional flat fee per title of $99.95 for the ISBN, listings, and distribution network access. (Until recently in fact, this flat fee was on sale for more than a year at $50.00, so I took advantage of that. Periodically Lulu offers special bulk discount rates on top of their already discounted rates, and I take advantage of those when I can.)

Working with Lulu this way means I can release a book for less than $100 up front. It ends up costing me more than that up front because I order proof copies, author copies, review copies, and some stock to fill direct orders. (That's when I take advantage of the bulk order discounted rates.) Still, compared to buying a full print run from another digital short run printer (forget offset--a press as small as mine would be nuts to try to afford that), I'm paying less out of pocket up front--and eliminating any risk that I will have unsold or returned copies on my hands down the road. I'm also eliminating the potential cost of damaged copies, and saving quite a bit on shipping, since there aren't boxes and boxes of books being trucked from printing facility to warehouse. Once I place this order, the distribution network channels--Lulu's store, Ingram's customers-- take care of the rest. When a bookstore orders from Ingram, I do nothing. I just log in to view my reports on my Lulu dashboard, and each quarter they send me a check. When a customer orders from Amazon, same thing. I make less Ingram these sales than I do on Lulu.com sales, and I make the most on direct sales that I fill myself. Because I emphasize direct sales, I am able to clear quite a bit more than I would do otherwise.

Remember, we're talking relatively more here. This is still book publishing. I can't afford to pay myself a salary yet, but I can reasonably hope to recoup the cost of purchasing my bulk order as well as the cost of mailing supplies and postage associated with publicity mailings, etc. (2 out of 4 of the books I have released have already hit this threshhold, and I may get to pay myself a pittance after all in 2008.) Like many micropresses, I'm pretty happy to break even, thrilled if I earn beyond that. If I'm shrewd about how I promote the books (the spring tour is going to end up costing me only $200 out of pocket for instance, but that's another show!) I can potentially not only break even but generate enough sales to become profitable. (Again, note that I did not say "rich.") That puts me squarely in the DIY realm of doing this because I love it. While it may sound more like a passion or a hobby than a profession, thanks to the distribution reach and presence I'm able to create with Lulu's service, my books are just as available as Random House's (where I used to work). You can even get them outside the US.

Choosing this model allows me, so far at least, to be a staff of one sitting in my home office. And I have a nonpublishing day job. Compare that to the wages of 10 full timers, a couple of part-timers and a gaggle of interns we used to maintain at Soft Skull Press (where I also used to work), plus the expense of renting office space and paying associated utilities, etc., and you can easily see the how value and convenience make this a good option for me. If I were publishing something other than poetry the volume of sales might be too much for this pared-down scenario. If I had to spend much more time actively chasing down payment for orders, processing returns, coordinating with warehouses, etc. I'd not have time for my day job. Which means I couldn't afford to run the press at all.

On an 80 p. poetry book sold directly by the press, I can clear anywhere from $9 to $12 dollars, depending on how much of a discount I got on my bulk order and whether the customer is a bookstore or an individual. (That's how I can afford to do buy-two specials, etc.) I clear $7 on books sold through Lulu's store, which takes a commission in this case. I get $3.50 on books sold through Ingram, which supplies bookstores...and until this new policy goes into effect, Amazon. This amount reflects not only Lulu's commission, but Ingram's distribution commission and the retailer's cut of the cover price.

Additionally, on every book sold, I pay my authors a 7% royalty on the cover price. That's $1.05 on a $15.00 book. That means with my current set-up, the press retains a little less than $2.50 on Amazon and bookstore orders processed by Ingram.

You can see where this is headed, yes? My press currently makes $2.50 per book sold on Amazon. Amazon will (reportedly) be taking %48 of the cover price. Since there will be no additional Lulu or Ingram commissions on these sales, that translates to $7.80 (52% of the cover), minus the author's royalty of $1.05: $6.75. That's more than I make now on Amazon sales, but less than I make in any other way. But that doesn't take into account the $50 set-up fee per title. This is where it gets a little fuzzy and will affect every POD-based press a little differently.

$50 a year per title may not seem like much--except all that gets you is availability at Amazon, the channel where you make the least money. Even if you stand to make a bit more on Amazon sales, if your press doesn't do enough Amazon sales to reach whatever your total set-up cost will be (determined by how many titles you want to put into their system at $50 a pop), you're just paying more and not earning more. What this means for different sized and differently structured presses will vary. A lot of presses use Lightning Source in a manner similar to how I use Lulu. They print their in-house stock with them and then buy a distribution package to make additional sales possible through Ingram to bookstores. If a small press focuses exclusively on Amazon--through their Amazon Advantage program or as a Marketplace seller, for example--this could be an OK deal for them if they can consolidate digital printing with Amazon availability. My press can't give up Ingram--college course adoptions and bookstore sales for readings are too important. (See yesterday's post; these are two big factors that apply particularly to POETRY.)

I think the real sticking point is this: before this new policy, Amazon availability was already a benefit of distribution via Ingram. I was the press, Lulu was the printer, Ingram was the distributor, and Amazon the retailer. Amazon is changing the terms of the relationship. Amazon, unlike retailers and distributors in the rest of the industry, is taking itself out of an integrated network and creating a closed loop. Because they can. And presses have to pay to play.

My press make the least money at Amazon already, and Amazon doesn't count for the majority of my sales. While my calculations above show that I could clear a better margin per sale with Amazon, running the numbers that way doesn't accurately reflect what I'm getting for <$50 and 48% x number of sales>. For my press, and probably for many others, when I project how many sales I'm likely to do via Amazon, the value of the "service" goes down. If--and as of this morning there's still no word from Lulu--Amazon's new policy affects my press, I will have to decide whether or not to pony up. Even if it's not worth it financially, finances are not my only concern. What will my authors think if they are no longer available on Amazon?

I'm leaving in the morning on the book tour, and won't have much time to think about this (yay!) while I'm away. But when I get back and see how things have shaken out, I'll probably be removing all Amazon links from the press site and encouraging customers to avoid them, even if my books remain available. In my house we've instituted an Amazon ban. I already didn't buy books from them unless I had to, but my husband shopped with them quite a bit, for both book and nonbook things. Not anymore.

There's a petition here. I never really know if those things are effective, but it might make you feel better.

Do not panic...yet.

Publishers Weekly reports that Amazon is forcing some POD services to either use their printer (BookSurge) or else.

Apparently Amazon is approaching some publishers who sell POD books via Amazon.com to tell them that if they do not make their books available via BookSurge, Amazon's POD arm, they will be deactivated, i.e. have their buy buttons turned off. What this potentially means is that publishers who use POD printers other than BookSurge will have to either 1) replace their current printers with BookSurge (not likely for many, see next paragraph), or 2) add BookSurge as an additional printer in order to remain available via Amazon.com (more likely). (I have *not* seen any reports that Amazon is demanding that publishers use *exclusively* BookSurge. If anyone else has, please point!)

In order to reach bookstores, many publishers use Lightning Source, which is owned by Ingram, the largest book wholesaler in the US. Lulu.com's distribution packages include integration with Ingram/Lightning Source, for example. Using Lightning Source and Ingram makes books available to bookstores beyond Amazon, both physical and online. So I can't imagine current Lightning Source customers dropping Lightning Source totally in favor of BookSurge. Amazon is not the only sales outlet. In fact, most POD publishers emphasize direct sales, because the profits are better. (Reminder: Buy directly from the press whenever possible! Also good options: independent bookstores & SPD.)

I can imagine publishers adding BookSurge as an additional printer to retain their Amazon buy buttons however. Amazon may not be their only sales outlet, but it's important enough that publishers and their authors will not want to lose it. Adding BookSurge as an additional printer will be a pain for preses though, and more expensive. Honestly, the last thing small presses need is another entity taking a cut. Angela Hoy of WritersWeekly.com and several posters in the Lulu forums (linked below) have also suggested that the design specifications for BookSurge are different than for Lightning Source. If that's true, conversion to or addition of BookSurge as a printer would mean redesigning headaches and the hassle and expense of creating and maintaining more than one file. (POD books are typically uploaded as PDF files.)

It's worth noting that Amazon has already made similar moves with ebooks (now that they have Kindle) and will probably do it with digital audio too--they *just* bought Audible. Because I don't work with those formats I know a lot less about the options and haven't really kept up, but Amazon's behemoth size and growing tentacles probably scare the bejeebus out of their competitors. This doesn't *quite* add up to monopoly, however. Amazon may be able to control how POD books sold via Amazon.com are printed, but as long as other retail alternatives exist, they can't insist that BookSurge be any publisher's exclusive printer.

As for how this will affect DIYers who use Lulu--it might not? Lulu has yet to issue any statement, but report that customers can expect one "early this week." (Here is the forum to watch, but please note that much of what is there right now is *speculation* and has not come from Lulu.) Lulu already works with BookSurge, at least for some titles with distro packages. So Lulu may not be affected in the same way as companies like Publish America (whose books have already been deactivated in the Amazon system) that do/will not work with BookSurge. In other words, Lulu seems to already comply or be making plans to comply with Amazon's new requirements.

Why is Amazon doing this? Because from their perspective, not only will mandatory BookSurge printing increase profits, it will, admittedly, be more efficient for them and their customers. Amazon will have to decide whether the ill will generated in the publishing/writing community is worth it. Can they afford to piss off Ingram by poaching Lightning Source business? If they endanger Lightning Source will the trade publishers who use Ingram to distribute their books and Lightning Source to print their POD backlists step in? Amazon surely can't afford to take on the entire trade publishing industry, can they?

But I think some small presses may have to choose between being sold on Amazon.com and being available via Ingram. This is bad news, for independent bookstores (again), small presses, their authors, and BookSurge's POD competitors.

I'll post further developments to the DIY News feed as I see them, but I'll be out of town for the next couple of weeks on the Bloof tour, so you might also wanna keep an eye on the PW front page here. And if you're a DIYer who uses a POD service *other* than Lulu and have more news, please do share.

UPDATE 3:00 PM: Aaron Shepard's Publishing Blog has more

UPDATE 3:45 PM: This article has a little more detail, including what Amazon is offering as alternatives. Basically a pay-to-play option. Considering that a Lulu-based poetry press makes--for example--about $3.50 on $15.00 for an 80 p. poetry book sold through Amazon as it is, this "alternative" is as unfeasible as paying as two sets of printer fees.

UPDATE 3:50 PM: Amazon is listening. Er, reading. Multiple amazon.com visitors have already stopped by to read this post today via blogsearch.google.com (using search terms "Amazon" and "Booksurge"). So if you got something to say, sound off on your blogs. Can't hurt.

UPDATE 7:00 PM: Amazon has posted an open letter. However, all it does is confirm that yes they are requiring POD publishers to use BookSurge in order to remain directly available (i.e. not from Marketplace sellers) on Amazon.com. They mention the Advantage program, but do not go into details about what it will cost. They also do not mention that they will be taking 48%* of the cover price, nor admit that this percentage is on top of the $50 setup fee**, per title. So what I said above is still the case: publishers are being asked to either use 2 different POD channels--one for distribution through Amazon, and one for distribution everywhere else--or forgo one in favor of the other if the double fees are not affordable. They're banking (literally) on the idea that having your (you authors, you presses) books appear at Amazon is more important than having them available in other retail outlets. (And can I just mention that as poets, college course adoptions and college bookstore orders in conjunction with teaching and speaking gigs are muy importante. Guess where they usually get their books? Yep, Ingram.) The usual bookstore cut is 40% of the cover price. Amazon can claim (and they likely will, when/if they get specific) that the additional 8% is analogous to the commission taken by Lulu and other POD services. That might be technically true--I'd need more info about volume discounts, if any, through BookSurge to tell--but it's not going to fool any publishers who suddenly have to pay double fees to get their books distributed in "global" retail channels. Is it? (* **Note: The 48% and $50 figures have been quoted by affected POD publishers in several different forums I've read today; I repeat the figures here confident that they are correct, but without having verified them myself. My press has no direct relationship with Amazon at this time; our books are made available to Amazon via Lightning Source/Ingram by way of a Lulu distro package. No word yet from Lulu--supposedly Amazon's deadline to comply is tomorrow, April 1.)

I know these thoughts are a bit scattered, and I apologize if they are less clearly organized than usual. I'm packing and cleaning and doing laundry to get ready for my trip and it's either post on the fly like this or not at all.