Price Wars for Books Are Probably Bad News for Authors

Is heavy book discounting bad for authors? Matt Yglesias is puzzled:

Buzzfeed has a baffling article up about how Amazon and Overstock are waging a price war on physical books featuring deep discounting and huge wins for consumers. According to Andy Meeks this leaves authors “authors caught in the crossfire.”….[But] authors are paid by publishers, who hand out advances and royalty checks. The royalties are based on a percentage of publishers’ gross revenues so the retail price of the books sold doesn’t mean authors get less money. If anything, retailer discounting is good for authors and publishers because it boosts book sales.

I think there’s a fairly straightforward way that this could be bad for authors. Amazon has been waging a battle for years now to get consumers accustomed to low prices on both e-books and physical books. So far, this means only that Amazon doesn’t make any money on books. So far.

But what happens when Amazon drives everyone else out of business and there’s no one left but Amazon selling books? One possibility is that prices go back up to their old level. Another is that consumers have become so accustomed to price-war pricing that they just won’t pay more. Amazon, however, will no longer be willing to lose money on books, so it will demand lower wholesale prices from publishers. The publishers will have little choice but to agree, and authors will get squeezed.

Nobody knows if this is how things will eventually shake out. But there’s not much question that Amazon really, really wants to train consumers to expect low prices for books. Unless you believe that Amazon is doing this out of a sense of public spiritedness and will continue losing money on books forever, eventually the piper is going to be paid. That’s likely to be bad news for authors.