Will Amazon destroy the publishing industry? History says no…
Throughout the Great Depression, department stores like Macy’s sold books at a massive discount. The bestselling Gone with the Wind became an early casualty in the 1930s price wars. Department stores priced the new novel at 89-cents, hoping to lure customers into stores—a sneaky loss leader strategy.
More recently, Amazon used eBooks the same way. They would sell digital books at a steep discount, but they would hook a generation of readers on the Kindle platform.
In the mid-1930s, New York State passed a Fair Trade Law that forced all booksellers to offer a new book at the same price. Gone with the Wind’s price had dipped to 89-cents at some stores.
When publishers set the new price at $3 (equivalent to $47 in 2011), Macy’s promptly returned 36,000 copies of the novel to Macmillan. The publisher grudgingly accepted the returns, telling the New York Times: “we believe … that, with the price of Gone with the Wind stabilized, its sale will go right on.”
So here we are in 2012. We still read Gone with the Wind and the publishing industry survived the Great Depression. We don’t have a Fair Trade Law anymore, but the major publishers negotiated an agency model for eBook prices—forcing eBook stores to sell new titles for the same price.
The Department of Justice is currently investigating that model. Both the agency model and the Fair Trade Law were temporary measures to navigate a difficult transition period for the publishing industry. The publishing industry survived department stores and the Great Depression. It will survive Amazon as well.