The Macmillan vs. Amazon Throwdown

The recent throwdown between Amazon and Macmillan publishers is very, very interesting. I'm observing from three perspectives -- as a working author trying to make a living as such; a Macmillan author, and an ex-music business exec.

When I read this on an Amazon forum: "I am not in the habit of supporting bullies..." I thought, yes. The idea that Amazon would actually refuse to sell an item because the supplier would not consent to their pricing demands was shocking, awful, a manifestation of everything that is wrong with the way we sell art/entertainment in our culture. A total and complete bully's move.

Then I read this, "...and will forever refrain from purchasing any book published by Macmillan [heretofore known as 'the bully'] or any of its divisions. I vote with my money and they just lost my vote."

Oh my. How did the American public get hoodwinked into believing that the suppliers are the bullies rather than the retailers?

As an ex-music business exec (1989-2000), I've already seen how the story ends when an industry allows retailers (rather than suppliers) to set product pricing. Recording companies waited around for someone else to take the hit by telling Best Buy or Walmart to stuff their "loss-leader" strategies and outrageous price and position fees. But no one did. Kudos to Macmillan's John Sargent for his bold gesture. And shame on Amazon for calling the move to accept Macmillan's pricing (for now) a capitulation. That word really gave me the creeps. Silly us-and-them PR, dudes. As if you were the ones struggling to hold on to margins, not publishers and not the lowest paid of all in this supply chain, the author. (Somehow, we're never considered in this debate. If the publisher's prices fall, so do our royalties. Which are an urban legend anyway.)

As we wait and see how it will all play out, I thought it might be interesting (to me only, perhaps) to take a look at what led the music business to unwittingly fall on its pony-tailed sword and how it might play out differently for my new (and beloved) industry, book publishing.

Here is one woman's blow-by-blow view of how we got to a place where retailers control basically everything about how a book reaches your hand. (Social media phenoms notwithstanding.)

Shift in purchasing patterns from regional to national. In the 90s, there were things called record stores. They sold recordings. There were things called appliance stores. They sold appliances. There were things called grocery stores. They sold food. Somewhere in the early 90s these things started to get all mixed together. When it became apparent that the CD was for real and not only were people going to buy new releases in this format but also replace every single thing they already owned, the industry kaboomed. In a good way. Suddenly every retailer wanted to stock CDs. (I'll never forget the time Rounder Records (my employer at the time) got a 3000-piece bluegrass catalog order from Blockbuster video stores.)

Around the same time, we saw the rise of big box stores selling music. The famous phrase "loss leader" came into our lexicon. CDs became those inglorious leaders. They were imagined to be just the thing to lure unsuspecting customers into the big box with the hope, I suppose, that they'd realize they needed a new washing machine while shopping for Nirvana's Nevermind, or perhaps the other way around. To capture market share, Best Buy, Circuit City, and others priced music below even wholesale costs in some cases. What knucklehead thought of this, I have no idea, but this was the beginning of the end. Suddenly regular record stores had to compete on price in order to survive. But they couldn't achieve the economies of scale, so instead they ate each other. 20-store chains became 100 store chains. 100-store chains became 800-store chains. Independent stores began to die. First individual stores and then small chains.

So what, you might think, it's the American way to compete on price and anyway bands were still making music, so what's the big deal. The big deal is that purchasing became centralized. This had two important consequences:

One, regional bands or labels couldn't sell records to a buyer in their own hometown, thereby building a local base, and, drum roll please,

Two, Central buying can only succeed with hit-driven product. When one guy in an office in Albany is deciding what's going to go in 1200 stores throughout the country, he can't buy this for Miami and that for Ann Arbor. He doesn't have time to buy 500 copies of a new release this week and then monitor sales patterns and buy another 500 (or 10 or 1000) the next week and then keep 2 copies in the bin just in case someone wants to buy it in a year. Too labor intensive. Plus he has no idea what people care about in Miami or Ann Arbor. He needs quick turns on music that's going to blow up out of the box and then be gone. For good.

Buh-bye regional music.

Nationalization of music distribution. Central purchasing systems do not thrive on having a multitude of vendors, each with different terms, sales cycles, pricing structures, and styles of customer service. They want to buy a bunch of stuff from as few people as possible. Distributors had to figure out a way to do business with retail behemoths. They had to become behemoths themselves. Major labels actually began scouting indie labels and offering distribution deals to the bigger ones. Smaller indie distributors and one stops began gluing themselves together to form national distribution companies. Though they were once the bastion of new music, indie labels and distributors had less and less time for developing artists themselves.

Buh-bye developing artists.

Nationalization of radio. The final nail in the coffin came in 1996 when President Clinton passed the Telecommunications Act removing ownership restrictions for radio stations. Instead of being limited to how many stations one company could own in one market, they could own a whole bunch. Programming decisions would no longer being made city-by-city, but format by format. You could turn on the radio in Sacramento or Scranton and hear the same exact thing. Local radio lost its local-ness and all the pride, quirkiness, and opportunity for new artists and creative programming that went with it. Again, a few people making decisions for a huge number of outlets. And, again, only hits serve an infrastructure like this.

Buh-bye new music.

Shift in creative locus. Hits, hits, hits. Have I made my point? Instead of a record label being able to survive by selling a few copies of a zillion different recordings, they had to sell a zillion copies of a few recordings. Product lines became less and less diverse, less and less risk-taking. What can sell a zillion copies without artist development? Only already-established artists or those lucky few whom a label would choose to get behind and push, push, push until they made it to the top (as long as it happened within the first month after the record came out). To do this would literally require millions of dollars. To spend millions of dollars, you have to have a sure thing. To have a sure thing, you look at what has already succeeded and try to copy it by going out and finding an act that fits the bill. When you copy others, you end up with bullshit.

So at this point, instead of music coming off the streets and up to the marketing
office, it was imagined in the marketing office and then shoved out onto the street. Of course with this kind of creative process, someone new is going to win the popularity contest today and by tomorrow, Mr. Today will be Mr. Yesterday. It's just what happens when instead of starting with the musician and working forward to find the audience, music starts with the audience and works back to what kind of artists it will sign.

This is the only model the industry can support now.

And the saddest thing of all? We didn't even notice that music itself was dying. We can no longer tell what is music and what is posturing. If we could, when it came to A&R decisions, we kept it to ourselves.

The introduction of digital downloads could almost be seen as a desperate measure on the part of consumers to listen to music in an unrestricted, un-mandated, un-stuffed-down-their-throats way. When you add to this the rise of social networking as the distribution means of the present/future, and word of mouth as the primary marketing tool, I think we have an incredibly hopeful and optimistic situation. For music. Not for music executives.

Publishing execs, good luck to you! I wish you all the fortitude necessary to tear down and rebuild your own walls.