Other the past few months, many authors have been writing to me all in a fluster over a controversy that apparently has arisen between Amazon and Lightning Source. I wanted to address this controversy because, frankly, I think a lot of people are having a knee-jerk reaction to what I think is basically an ethical issue, and I would like to show what I think might be a more ‘holistic’ response to it.

First of all, you need to know a bit about the parties involved and what is going on. Before we do that, let’s take a quick look at the flow that is involved in the production of any product, including your book:

1) It starts with the creator
2) It goes to the publisher
3) Then it goes to the manufacturer
4) Then to the distributor
5) Then to the retailer
6) Then to the consumer

STEPS 1 & 2: When you are truly self-publishing a book, YOU are also the publisher (so steps 1 and 2 are combined). But if you are going through a subsidiary press (such as iUniverse, Balboa Press or Create Space), you are not 100% ’self published.’ On the one hand, you ARE self-published in that you don’t need a publishing deal and you retain all rights to your work. On the other hand, you are NOT self-published in that your subsidiary publisher is entitled to (usually) around 50% of your royalties as long as you print through them.

STEP 3: In printing, the ‘manufacturer’ is the printer. The publisher (even if that means you) then sends the book to the printer. Either we get a quantity of books printed in advance, or we use a “print on demand” (POD) service. Back when I first started out in the published world (and also when I ran a record company), you typically have to order 1000-2000 copies of your book (or record/CD) in order to get a decent price. Then, you always ran the risk of your publication sitting around collecting dust because you couldn’t move 2000 copies. Since the rise of POD in the publishing industry, that risk and investment has been removed for self-publishing authors. Lightning Source is one such POD service, certainly the most known in the world, and the one I use and recommend to my clients. Instead of having to buy 2000 copies of your book and the ship them to distributors, they print them ONLY when you have a customer for them (whether wholesale or retail), so you only pay for what you know you are going to sell.

STEP 4: The next step is to send the books to a distributor who then sells the books to retail shops. Of course, this saves the publisher a heck of a lot of time and energy, so the distributor is one of the most important pieces of the sales puzzle. Distributors typically buy your product between 50-60% off the retail price (55% is the most common), so they can sell it on to retails shops, and the retail shops can make a profit. That means if your book is selling for $10, they will pay around $4.50 for your book. From that price, you deduct your printing costs (I spoke about this in another article – Click HERE if you’d like to read it), and that is your profit.

Now what is so cool about Lightning Source is that they will also distribute your book for you via Ingram Book Company. Mind you, that does NOT mean that retail shops will necessarily BUY your book. It just means that they can supply them with your book if they order it.

STEP 5: The next step is the retailer. The retailer is the ’shop’, whether online or on the ground, that sells your book to the customer. Typically, in my experience, retailers in the book and record industry buy your product for between 35-45% off the retail price. That means they will pay about $6.00 for a $10 book, which means the distributor makes about $1.50 per book sold, and the retailer makes about $4.00. However, as we all know, retailers like to be able to have a good profit margin so they can LOWER the price, to be able to entice customers to buy your product OR to get RID of a product that isn’t selling (let’s hope that doesn’t happen to OUR books!). Back when I was a retailer, I often had to sell “dead stock” at cost or even BELOW the price I paid for it. It’s the only way to keep cash flow going. So retailers take a risk every time they buy something. They want to know they can sell it.

STEP 6: The last step, of course, is the customer. The customer likes to get a good deal on a product. That’s why, if you give your distributor a good discount in the first place, the retailer will have the freedom to lower his price and get more people to buy your book.

SO WHAT’S WRONG WITH THIS PICTURE?

The thing that confuses me is how Amazon fits into this picture. Now I have a close connection to Amazon in that much of my business depends upon it, as I work with authors. And as a customer, I have also found them to be both reliable and convenient. Authors love to see their books on Amazon because they can reach a wider audience much more quickly than they could by going only through traditional distribution routes to retail shops. All in all, Amazon is a great asset for us authors.

But here’s where things are a bit hazy. According to their entry on Wikipedia, they are it is often called the world’s largest online retailer. Most of us associate Amazon with books, but they have really expanded and now sell just about everything.

So Amazon is a ‘retailer’ (Step 5 in the model above) BUT for some strange reason, when it comes to purchasing power, they are not paying the same price for the books they sell as other retailers. In fact, they are paying the price that wholesalers/distributors pay for your book (Step 4). That means they are buying books at an average of 15% LESS than other retailers. This means they have a tremendous advantage in that they can seriously undercut your High Street book shop.

But wait… there’s more…

As many of you know, Amazon also now has a subsidiary press called Create Space. This means they are also now operating at Step 2 of the model above (I’m not sure who their printer is). This means they are now getting that extra 50% of your end profits when you publish through them. Now, fair enough, I can fully understand that Amazon saw the opportunity to profit from the self-publishing boon. It’s called free enterprise. I have no argument with that, as it totally makes sense.

However, here’s the problem…

Recently, word on the street is that Amazon is started a new policy of listing books that come from Lightning Source and other POD suppliers as being “Out of Stock” with sometimes an estimated 1-3 week delivery status! Lightning Source are aware of this, and say that they are ‘continuing to look into the issue and are evaluation our options to address it.”

Of course, this makes no sense whatsoever because when you use a POD service there’s no such THING as being ‘out of stock’. Your digital file is always ready to be printed and is in fact printed as soon as the POD service gets the order.

Some authors have been writing to me in a panic over this, and asking my opinion if I think they should switch from being 100% self-published to going with Create Space, because then they would be assured to be listed as “in stock” (as Amazon will ONLY guarantee this status for their own subsidiary press).

Here’s my answer:

Absolutely NOT!

Why? Partially from a practical level, and partially from an ethical one.

The practical argument: First of all, in my experience, authors who publish through Create Space appear ONLY on the US Amazon site (Amazon dot com) until they reach a certain sales status. I learned this the HARD way when a client of mine launched last year with me, and a couple of weeks before launch we realised she did not appear on the Canadian or UK sites. Now let me assure you, the Canadian and UK mind-body-spirit markets are nothing to ignore! Many of my clients sell as many books in Canada as they do in America, taking them rapidly up to #1 in Canada as Canada has 10% of the population of the US. These are very important markets for spiritual and self-help authors.

The ethical argument: Secondly, I have major issues about the ethics of this situation. Amazon is trying to wear 3 different ‘hats’ here: the publisher (Step 2), the distributor (Step 4) and the retailer (Step 5) in the sales chain. Each of these ’steps’ has ethical obligation to be equitable to their customers, whoever they may be. And the break in this system is the conflict of interest they have between Step 2 and Step 4, which gives them an unfair advantage at Step 5. First of all, I have no idea how Amazon managed to gain the status of a distributor in the first place when they are not distributing to anyone; they are retailing directly to the public. But that aside, if Amazon are playing the role of a distributor to other publishers, it seems incredible that they would treat these publishers—who are their customers—any differently from their OWN publishing company. The two hats have to remain separate; otherwise, what we are verging on is a violation of anti-monopoly trade laws. In fact, I wouldn’t be at all surprised if we hear about a litigation in the near future.

So what do we do?

One blogger’s suggestion was to go with BOTH Create Space and Lightning Source, so as to ensure your book is shown as ‘in stock’ on Amazon all the time. Well, I’m sorry, but I refuse to succumb to the bullying.

My personal solution is two-fold:

1) Use your power of the pen to write about this in as many places as you can so Amazon starts to feel the heat and
2) Education your audience about the situation. In other words, when you do a launch or publicise your book TELL your readers that it might say ‘out of stock’ on Amazon, and that it is simply not true.

Authors should be able to set up their own publishing companies and be treated like any other company. I am a believer in FREE enterprise, which means that big businesses must not be allowed to bully the small business owner out of their own enterprise. Small business owners are the life-blood of the world, and nearly all of our current economy AND environmental problems are due to our current dependency upon big businesses in general.

I love Amazon and I have no desire to ‘take them down’. But as consumers, and self-publishers, let’s at least hold them accountable for their behaviour by not reacting to such unethical bullying strategies.

All power to the self-published author!

Lynn Serafinn, MAED, CPCC

Lynn’s Books

The Garden of the Soul: lessons from four flowers that unearth the Self (2009)

The 7 Graces of Marketing: how to heal humanity and the planet by changing the way we sell Coming December 2011.

To contact Lynn for coaching, campaign management or media appearances, please fill in the form at http://spiritauthors.com/contact.

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