Holt Uncensored

Holt Uncensored

 

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  #283
by Pat Holt

Tuesday, November 27, 2001

 





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SUE 'EM (AGAIN): BARNES & NOBLE SEEKS 7 MORE YEARS OF SILENCE
TO HECK WITH 'EM (AGAIN): AMAZON FORGETS 'CUSTOMERCENTRISM' (GOOD RIDDANCE)
LETTERS

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SUE 'EM (AGAIN): BARNES & NOBLE SEEKS 7 MORE YEARS OF SILENCE

I can't believe Len Riggio of Barnes & Noble thought he could get away with talking like a thug - again - as a way to save the company's future with investors.

If you think "thug" is too harsh a term, here's how David Kirkpatrick describes Riggio's behavior in yesterday's (11/26) New York Times.

"In a recent conference call with Wall Street analysts," Kirkpatrick writes, "Mr. Riggio made what sounded like a threat: that Barnes & Noble might take unspecified 'decisive actions' to 'persuade our suppliers to be fair to us,' possibly as soon as early next year."

While Riggio denies that what he said was a "threat," he does make Barnes & Noble's plans to "persuade" publishers sound as intriguing as the Spanish Inquisition. He gets to do that, apparently, because publishers have an unfair advantage. They own a "monopoly" on titles, says Riggio.

Come again? As the writer in LETTERS below suggests, the head of Barnes & Noble appears to have confused "monopoly" with "copyright." It's another indication of the kind of intelligence with which the company brings literature to the world in the 21st century.

The idea that publishers need to be "fair to us" is worth noting. Apparently, this means that Riggio will be demanding deals that Barnes & Noble couldn't have gotten away with a few months ago, when the lawsuit filed by independent booksellers (through the American Booksellers Association) against Borders and Barnes & Noble was still underway.

Now that the lawsuit is settled, Riggio is back to his old - well, threats. As he back-pedaled to the Times, "fair to us" means various ways that publishers can "make things better for both of us" - i.e., pay through the nose for B&N promotions and extra discounts - whether they like it or not. "Fair to us" means that B&N wants deals from publishers that are unfair to everybody else. It's interesting that this latest combination of belligerence and a Poor Me act should emerge after seven years of angelic behavior on Riggio's part, or so he believes.

It's not B&N's fault that company projections have not been met, he wants investors to know - it's those vermin independent booksellers and their nuisance lawsuit that are to blame.

"How powerful can one be with their hands tied behind their back?" he eloquently asked his investors. "Because of the court cases, we haven't even spoken to publishers about terms."

Well, gosh, if that's the case, why not recognize the lawsuit's unexpected benefit and sue the chains again? If it took a court case to keep Riggio from pursuing "unfair deals that are not made available to small stores" (meaning "independent" stores), as the Times has characterized the charge, how about filing new legal arguments that could shut down B&N's threats for years?

I think I know why: The whole conversation by phone between Riggio and financial analysts has the feel of contrivance and grandstanding. Ol' Len may be up to his old tricks again, and certainly he'll always push for "better" (to him) deals from publishers. But this time, right on the cusp of what may be a better holiday season than anticipated, the bid for new investors with the New York Times as unwitting shill seems a little shameless.

Barnes & Noble has been unable to deliver on its promises to open 27 new stores by October 2001 (only 12 have opened). The company has been reeling from a single day's (November 8's) loss of 36 percent in stock value when it "reduced its 2001 earnings forecast," as the New York Post reported. This Thursday, B&N is expected to report a quarterly loss of 10 cents a share, up from 4 cents a share last year.

The NY Post says that "Wall Street analysts believe the market may have had unrealistic views of Barnes & Noble's business, and the plunge was just a needed correction." The Post's story yesterday makes it appear that "analysts still seem to like the company's prospects."

So. If you were Len Riggio, wouldn't you conduct a conference call with Wall Street analysts in which you sounded like a Big Cheese Tough Guy peddling threats and innocence at the same time? And wouldn't you invite the New York Times to hear those remarks so you could answer charges and sound all threatening and unleashed and powerful so that prospective investors would consider you a Player once again?

I dunno. That sounds like Riggio's style. For shenanigans like that, let's sue 'em again.

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TO HECK WITH 'EM (AGAIN):
AMAZON FORGETS 'CUSTOMERCENTRISM' (GOOD RIDDANCE)

And now for a similar ploy, let's turn to the latest at Amazon.com.

Last week an Associated Press story said that Amazon.com investors are worried that the company may not make a profit - even a bogus "pro forma" profit - by the end of the year. What a surprise.

"Amazon is predicting lackluster sales in its all-important holiday season fourth quarter, and Wall Street is worried about the steep drop in revenue at its books, music and video store," wrote the AP last Friday. "That's Amazon's core business,and its only profitable sector."

(It's astounding that otherwise knowledgeable experts are still falling for the books-are-profitable-at-Amazon.com myth, since Amazon has never shown what changed in its original business model to make any division profitable, especially Books.)

"Shares in Amazon dropped more than 20 percent last month after the company said revenue would be flat or grow by at most 10 percent in the fourth quarter, the most important sales period for retailers," AP continued.

Then yesterday (Monday 11/26), Amazon shares rose over 30 percent - its highest level since early August - "amid signs that the online superstore's holiday sales may be better than expected," reported Reuters.

We can hope for this, apparently, because Amazon's "Delight-O-Meter," which tracks orders of items at its site and at those it operates for other companies, showed a distinct increase in sales.

"Amazon in its Friday 'Delight-o-Meter' report on holiday orders cited a return to 'shopping as usual,' " Reuters explained. "The company said customers had ordered more than 8.9 million items since Nov. 9. By Monday afternoon, that total had topped 11.7 million items that include everything from books and CDs to camcorders and power drills."

Why, this sounds as though Amazon.com is on the way back! "The business is still executing despite tough times," says analyst Jeetil Patel from Deutsche Banc Alex. Brown, and you know that when the word "executing" is used, we're in the hands of a Wall Street football coach who's telling us that Amazon is "executing" every play, carrying its stock down field and "back in play" again.

Summing Up

It doesn't matter how many times the bouncing Amazon stock has lured investors back, or how often Barnes & Noble has jumped up and down to get Wall Street's attention.

What matters is how much both companies seem to have forgotten customers in their struggle to look good to investors.

Amazon's once-dazzling website turned dull as dishwater the day it capitulated to a one-book-fits-all mode (Tiger Woods' guide to golf) on the Books home page. Increasingly, the presence of used book and auction announcements (more profitable to Amazon) on pages devoted to new book sales has become more invasive and distracting. Boxes dropping down that promise free shipping on orders over $99 are an insult. This from a company that still has the audacity to insist it's "customer-centric," a term that should have been banned from the English language at its inception.

And it seems that Len Riggio has lost all understanding of bookselling when "Barnes & Noble executives argue that the company deserves a price break," according to the Times, "for supporting the publishers by selling little-known or older titles."

Honestly! A price break for being a responsible bookseller? Hey, you don't carry these titles as a gift to the publisher, Mr. Riggio. You carry them as a service to the customer. Use this time not only to stop the threats but relax a little on the whining, too.

Well, to heck with both of them. Don't miss Friday's annotated and joyous List of Bookseller Websites, where independent bookstores from all over the country can be found recommending good books and serving customers' varied interests responsibly and well.

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LETTERS

Dear Holt Uncensored:

Re the New York Times article about Barnes & Noble on Monday 11/26. What especially interested me was this part:

"Retailers of all kinds of goods routinely haggle with suppliers over terms and prices, but the book industry imposes special constraints. Bookstores can seldom substitute one publisher's book for another's, nor can publishers sell a different, less expensive edition of a new book to one store and a more expensive version to another, as a toolmaker might do with hammers.

"'Each publisher has, in effect, a monopoly over each title they sell,' Mr. Riggio told the analysts.

"The news media's attention to the book business can be a problem, too, Mr. Riggio said. Trying to pressure a publisher for a bigger wholesale discount off the cover price by limiting new orders of its books can create a public outcry about curtailing freedom of expression. 'If we call a single publisher and basically tell them, as you say, if we have power, then if we dare say we change our purchasing activity based on their discount, the first call you get the next morning is the press,' he said."

It sounds like Riggio is complaining that the book industry as it stands doesn't work, or doesn't work well, on capitalist terms. More specifically, it sounds like he is saying that freedom of expression and profitability are at odds in the marketplace.

His use of the word "monopoly" for what is really a copyright speaks volumes. His comment that any action he takes to increase his profitability with publishers results in calls from the press is, I think, a little disingenuous. Can any publisher afford to overlook the purchasing power of a company like B&N? Certainly not, and he knows it.

If Riggio can't make B&N profitable enough for investors without deep discounts from publishers, and if publishers can't publish books profitably at terms that will satisfy B&N (or even Ingram, for that matter), what can happen but that the diversity of published works will decrease, and even the shelves on the latest B&N superstore will start to look a little bare?

Personally, I have never understood why books have to be pre-priced in the first place. By printing the price on the cover publishers automatically limit the profitability of any book. If the book were not pre-priced, then the room for "profitability" increases at all levels, and (theoretically, anyway) does away with any complaints that one party enjoys better terms than another.

Nicki Leone, Book Buyer
Bristol Books, Wilmington, North Carolina

Holt responds: Just one question. Am I right that your last paragraph describes the concept of "net pricing," which usually makes independent booksellers shudder because it gives the big-volume chain stores so much leverage in undercutting independents' prices?

Nicki Leone answers: I suppose so, although in my experience, net-priced books usually have a no-returns policy associated with them. I don't think the bookselling industry could survive in its current form with an across-the-board no-returns policy. Good point. It is an interesting time to be in the book business, because the prevailing business model (which let's admit, has been in place since around 1930) is under pressure from so many directions - electronic media, print on demand technology, e-commerce - not to mention shrinking traditional markets (like our store!), and an explosion of available titles marketed through non-traditional routes. I wouldn't be surprised to see something major change in the industry to cope. But truthfully, these things go in cycles and in this kind of an economy we can all get a little bleak!

I was really taken with Riggio's complaint that a copyright acted as a de facto monopoly, and his complaint against the press for "sensationalizing" practices that he sees as just good business practices from a CEO (and investors') point of view. Booksellers fill a lot of roles - as retailers they need to make a profit, something that is increasingly hard to do when the reading public demands infinite choices instantaneously accessible in an organized way.

And yet we see ourselves as guardians of free speech, champions of culture and diversity, defenders and supporters of artistic creativity. (Not to mention a community resource!) Why, in this country, this concept is so diametrically opposed to financial solvency is beyond me, but it must be, or Riggio wouldn't equate a copyright with a monopoly. A monopoly, after all, is an acknowledgement of a restraint of trade, and a copyright is legal insurance of artistic diversity. I find the confusion between the two terms as stated in the NYT article to be alarming, to say the least.


Dear Holt Uncensored:

Re traveling through airports & reading "suspicious books": Travelers could always do what I did when I went on vacation. I loaded eight e-books onto my trusty little beat-up Palm IIc handheld instead. Looking back at this list now, I see these are all titles that I'm certain would have raised the eyebrows of the paranoid if I'd carried hard copies. heh heh heh...See for yourself:

Death By Holy Orders
The Coming Anarchy
Antrax (a fantasy novel by Terry Brooks)
Deathbird Stories
The U.S. Bill of Rights
Catatrophe
Fatal Voyage
American Empire: Blood & Iron

Colleen Lindsay


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