Aug 21 2007
I love reader blogs and whenever one links to us, I go and check them out. Read for Pleasure began blogging this summer. She has an affinity for numbers, statistics, and, most importantly, books. RfP, as she is known in the commenting world, published a Used v. New article last week on her blog. It was an insightful column with interesting facts and insights. I asked whether I could reprint it at Dear Author and she graciously said yes.
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Amazon.com first started selling used books in 2002. It was a huge success. By 2004, 67% of used books sales were online–a higher percentage than any other product category. (Only 12.7% of new books sales were online.)
If your aggressive promotion of used book sales becomes popular among Amazon’s customers, this service will cut significantly into sales of new titles, directly harming authors and publishers.
April 9, 2002
Bezos in turn emailed Amazon’s used booksellers:
We’ve found that our used books business does not take business away from the sale of new books. In fact, the opposite has happened. Offering customers a lower-priced option causes them to visit our site more frequently, which in turn leads to higher sales of new books while encouraging customers to try authors and genres they may not have otherwise tried. In addition, when a customer sells used books, it gives them a budget to buy more new books.
April 14, 2002
In 2005, a group of economists studied Amazon’s sales data to see whether online used book sales were in fact cannibalizing new book sales. The answer was mostly no. Bezos’ email appears to be accurate.
If you like numbers
In 2004, only 3% of general-interest book sales were used. In-store used book sales are flat, but online used sales have climbed. Which means that used book sales used to be less than 3% of the book market.
The economic analysis found that of all used book sales on Amazon, only 16% replaced new book purchases. (That’s 16% of 3% of total book sales. Half a percent.)
The remaining 84% of used book sales apparently would not have occurred at Amazon’s new book prices.
In other words, 84% of used book sales represent an increase in readership.
Under status quo pricing, retailers (both new and used) should benefit from the used market, but publishers would lose money–$45.05 million out of publishers’ pockets (0.3% of publishers’ 2003 gross profits). However, the economists also found that publishers could compensate by raising new book prices slightly. Furthermore, they found that if publishers raised new-book prices by 10%, used book sales would increase by less than 1% (that’s 1% of 3% of the book market).
Hal Varian (a big name in economics) is a fan of the economic analysis. He points out that Amazon would lose money if their used book sales displaced too many of their new book sales:
According to the researchers’ calculations, Amazon earns, on average, $5.29 for a new book and about $2.94 on a used book. If each used sale displaced one new sale, this would be a less profitable proposition for Amazon.
Of course the balance of new/used isn’t as critical for Amazon as for publishers and authors, because Amazon makes some money on every book sale, including used. Basically Amazon has the same profit problem as publishers, but to a lesser degree.
The economists’ conclusions probably look callous to authors and publishers. They aren’t interested in where the losses happen; in their macro-scale view the publishers’ losses are more than offset by the consumers’ benefits (more competitive pricing, more products to choose from).
One weak point in their analysis is that the losses are accruing entirely to those who produce the books. If the analysis of pricing is accurate, that seems to say that the publishers can make up the loss relatively easily. I would like to see a new analysis in a couple of years, to see whether online used book sales are still climbing and whether publishers have adjusted successfully.
Some interesting author stances
I’m always intrigued with authors’ approach to this issue. Rosina Lippi doesn’t buy used books while the author’s still alive:
I don’t buy used books — if the book is in print, and the author is alive, I buy it new. that’s a solidarity thing and also just plain common sense. If we are to survive as scribblers, we’ve got to support each other.
Lippi doesn’t quite say “And you shouldn’t buy used either” (and she does support libraries), but the issue has come up a few times on her blog. She also tells a story of an evil (and stupid) used book seller who wants to kill the goose that lays the golden eggs.
Then there’s this article on Kay Hooper’s site, which comes out and says it.
Our careers, our lines, even our publishers, live and die by the numbers.
So please, where and when you can, save a writer. Buy a new book. We’ll all thank you for it. And that way, you’ll have more choices of books in the future.
Given how few people read, I tend to think that if the used book market increases readership, it’s hard to see that as a bad thing. As I said, I’d like to see another study in the next few years, on whether:
- online used book sales are still climbing, and
- publishers have adjusted successfully
If some future study demonstrated that online used book sales were seriously–and unfixably–detrimental to authors and publishers, and thus to readers, I might rethink the nuances of my relationships with new and used books. But I’m not inclined to condemn the secondary market in books, regardless of its downstream effects.
- Anindya Ghose, Michael D Smith, and Rahul Telang, Sep 2005, “Internet Exchanges for Used Books: An Empirical Analysis of Product Cannibalization and Welfare Impact“. Social Science Research Network.
- M.J. Rose, 16 April 2002, “Authors Question Author’s Guild“. Wired.
- Hal R Varian, 28 Jul 2005, “Reading Between the Lines of Used Book Sales“. The New York Times.
- Edward Wyatt, 29 Sep 2005, “Internet Grows as Factor in Used-Book Business“. The New York Times.
© Read for Pleasure, 2007, reprinted with permission.