Of finances and prices and more

It seems appropriate that coming on the heels of my post about visiting the local Barnes & Noble, I read an article this morning about how B&N has adjusted its profit and loss statements for the last three years. According to the report I read (and, when I find the cite again, I’ll post it), B&N now claims it didn’t lose as much as first reported in 2010 and 2012. Instead, according to the report, B&N basically said that purchasing directly from publishers instead of from wholesalers messed up its accounting procedures and it took this long to get accurate reports. Considering how many concerns I have about this statement, it doesn’t surprise me that investors didn’t buy it either, even though the report increased BN’s profit for 2012. In fact, BN’s stock fell after the announcement. That most definitely is not a vote of confidence for the bookseller.

As I said, I have some concerns about this report and the reason BN gave for not being able to give accurate figures for what basically amounts to a three year period. First of all, why would buying directly from a publisher instead of a wholesaler cause accounting problems? It is still basically a system of X-number of units in, Y-number of units sold and Z-number of units returned. Sure, there might have been some tweaking of software to allow for new vendor information, etc., but if it takes three years to identify that and implement the changes, there are much bigger issues at hand.

Then I have to ask how this restating of profits and losses will impact the authors of those books that were so difficult to track by B&N. If you’ve been reading MGC for any length of time, you know what most of us here think about BookScan, that oh so not wonderful way too many publishers use for tracking book sales. Will there be an adjustment to their arcane formula so the authors whose books weren’t counted to begin with get credit for those that were actually sold? Somehow I doubt it.

But what gets me is the idea that it is easier to keep track of sales of books bought from wholesalers than it is of books bought directly from the publisher. I’ll admit I’m no math genius. In fact, most days I’m number challenged. I blame the “new math” and then the “new new math” that hit when I was in elementary school. By changing teaching techniques and attitudes three times in three years during my formative school years, it did nothing but confuse the heck out of me and make me throw my hands up in the air and ask why I should bother learning it when it would just change again in a year. But that’s getting off-topic.

Still, my math-challenged mind aside, it shouldn’t matter where B&N buys its books from. At least not for accounting purposes. It should all come down to simply knowing how many books come into a distribution center and how many go to which store. Then you figure out how many of those books are sold — not difficult since your inventory should be computerized and each book has a bar code that is scanned when it is sold. Next, input the number of books returned after purchase, also easy thanks to those handy dandy scans and computers. Finally, how many books are returned to the publisher or whomever. As I said earlier, it may take tweaking the accounting and tracking program some, but that isn’t all that difficult.

Then I have to ask myself what the impact of BN buying from a wholesaler vs. direct from the publisher has on the cost to the consumer. This is something I have no data on. But it would seem to me that it would increase the cost to the public. I could be wrong and I freely admit it. However, logic seems to say that I’m not. I know I can go down to the farmers market and buy fresh fruit and vegetables cheaper than if I go to the store to buy them. Why? Because I’m not paying for the middle man and for the middle man’s overhead. Whether that applies to the BN situation or not, I don’t know. It’s just another of the questions this report raised that makes me wonder.

BN has also reported that it will continue to close more stores than it will be opening, at least for the near future. To put numbers to that, BN plans to close 15 – 20 stores this next year while opening only 5. From the report, BN basically feels it is in the best geographical locations now and doesn’t plan to expand into new areas. I do agree that BN needs to quit opening a mega store at every mall. Yet I find myself hoping that BN will consider going back to smaller stores, stores that reflect the company’s roots.

But that wasn’t the only thing to catch my eye this morning as I was looking for something to blog about. I’ve done my best to ignore the outraged howls on Facebook and other social media sites about how the evil that is Amazon is once again trying to destroy indie bookstores. If you aren’t aware of what I’m talking about, Amazon has deeply discounted some books, Dan Brown’s latest is an example. But, after seeing how the American Booksellers Association, as well as others, have written to President Obama decrying Amazon, I have to call out the Amazon haters again.

Let me start by reiterating — again — that I do not think Amazon is pure good. Far from it. However, to try to place the entire blame on Amazon for all the ills in the publishing industry and for the demise of the small bookstore is ridiculous. As for this particular issue, the deep discounts of certain books, Amazon didn’t start this. It is Amazon’s response to Overstock deeply discounting books in their inventory. It is no different from a price war between service stations or grocery stores. What really bothers me is how those who have fixated on Amazon being the Big Evil so obviously overlook the causation of this particular price cut.

But then, so many of them forget that the small, indie bookstores were already well on their way out before Amazon was on the scene. They were the victims of the large chain bookstores, the Barnes & Nobles and Borders as well as others. Amazon simply sped up a trend that had already taken root. Has Amazon hurt the big chains? Sure. But so have the business practices of those companies simply because they did not adapt and adjust to meet changing demands and changing technologies.

I have no problem blaming Amazon when they truly are to blame. But for those who want to condemn Amazon, I say this. You hurt your own arguments when they are valid by blaming Amazon for everything, especially when it is so easy to google the cause and effect for price cuts.

I leave it to you guys now with a quick apology for the disjointed post. I’m in the final stretch on the current work in progress and my brain is focused on that and not much else. So, what are your thoughts about the BN situation or even about the current condemnation of Amazon?

13 comments

  1. I am not an apologist for Barnes and Noble — but I used to make a good living in the IT field. I started as a hardware geek and got involved with programming because it fascinated me. One of my first big jobs as a consultant was identifying a glitch in IBM software (one of the premier companies — cough, cough — in the field) in one of its flagship applications that improperly accounted for changes in costs for inventory items. Without getting technical, this was a fundamental flaw — and it took three years to find — and a new auditor, a new comptroller and new programmers. The larger a company is, the longer some accounting screw-ups can go unnoticed.

    As for condemning Amazon — I’m an indie writer and yes, Amazon does somethings I don’t like, but the good far outweighs the bad. I recently signed a contract with a dead tree publisher for several book. One of the problems I had with the contract was that I’ve become a big fan of a monthly royalty check and there was nothing in the contract about frequency of royalty payments. We worked out the issue where when my co-author (who is also the publisher) gets a royalty check, I get one shortly thereafter.

    I was the first co-author to complain about his contract terms — and it was solely because I do business with Amazon and I read MGC, Sarah Hoyt and Kris Rusch avidly, Okay, maybe “solely” wasn’t my best word choice there…

    1. Oh, I know it can take ages to locate a fundamental flaw, especially if your programmers test things and change code without telling your QA folks. However, from the couple of reports I’ve read, this is more one of those situations where BN just didn’t get the job done. New parameters should have been put in and weren’t and this made it “:more difficult” to report on books purchased directly from publishers than from the wholesalers.

      I am surprised to hear anyone is offering a contract that doesn’t have at least some language in it about when royalty reports and payments will be made. Glad you got that corrected.

  2. My nasty, suspicious mind can’t help going to the “C” place. (Crooked, corrupt — take your pick.) My belief is that there should have been a totally transparent, ACCURATE accounting of books sold long before microcomputers came into the picture, and the only reason the situation is otherwise is that someone has a vested interest in its remaining foggy, murky, or whatever. And that, as with other entertainment media (i.e., the cinema and popular music), the only reason that the miscreants haven’t been hauled off to prison is that somebody, somewhere has the appropriate politicians in his pocket.

    Yeah, it’s nuts to believe that right out of the box. Yeah, it’s paranoid — with all the usual codicils about them really being out to get you. But none of that will stop me from staying well away from the whole mess and doing everything I can to deal only with honest (as far as I can determine their honesty) merchants. Transparency in the accounting for money is high on the list of criteria for honesty.

    M

    1. Oh, I have the same suspicions. Except the reason folks haven’t been carted off is that they authors, the ultimate victims here, have been convinced that if they rock the boat by doing something as heinous as exercise their right to an accounting. How else to you justify the fact publishers still get away with using something like BookScan for reporting and agents let them get away with it? It may not be technically criminal — okay, I’m laughing too as I type that — but it is lazy and negligent and more and more authors are getting tired of getting the short end of the stick and are starting to look for other outlets for their work.

  3. I can understand why switching to direct purchases could result in B&N restating its earnings. Corporate accounting is not simple and can often result in after the fact adjustments. That’s not to say that B&N is trying to make things look better than they actually are.

    What I’ve found interesting is comparing Amazon’s merchant selling program (selling real products through their site) to the Kindle publishing program. The Kindle publishing web site is far more primitive and much harder to use than the regular seller’s account. It’s as if somebody decided since it’s publishing they can skimp on the support and information provided to the seller (author).

    1. Oh, I know there are often adjustments to earnings statements. It was just the three year period involved and the lame excuse for it. I also thought it interesting that their investors didn’t get all excited by the new figures. Quite the contrary, considering the drop in their price yesterday.

      As for the merchant program v. KDP, I’ll give that time. Amazon has had a lot more time refining the other side of their system and they are still working out the bugs and trying to figure out exactly where to go with KDP. Of course, I’d like a bit more support but it is still miles ahead of the other platforms as is their interface. At least that’s how it seems to me.

  4. I’ll admit it, I’m in a warped mental place at the moment, so I’m sitting back with my popcorn watching the hand waving and listening to the shrieks of “Darth Bezos, evil Amazon, CIA conspiracy, save us someone!” with malicious glee. As someone over at the Passive Voice put it yesterday, if these folks would put half as much energy into trying to improve their sales models and to luring customers back to their stores as they do into cursing The Store That Shall Not Be Named, they wouldn’t be in as much of a fix. I’m not a rabid fan of Amazon, but geeez guys.

    As for B&N, well, nothing much surprises me about their financial statements any more. Unless they were to show a 3rd quarter profit, that is.

    1. So you’re the one sitting in the back row just behind me laughing with me as I read all the teeth gnashing posts ;-p

  5. The more I learn about the business practices of publishers, book wholesalers, and bookstores, the more surprised I am that someone didn’t take them out long before Jeff Bezos was even born.

    1. I know. It also makes me wonder about what sort of “gentleman’s agreement” (read, hand shake under the table) they had with one another to keep each other in line. Why else convince authors they’d be blacklisted by everyone and forever if they ever demanded an audit.

      1. How else be able to convince authors that they are able to blacklist them by everyone and forever?

        Yeah, maybe a consensus between a small restricted pool of people who move between companies, and are the only ones who get hired for certain positions rather than an actual agreement between the organizations themselves, but it still smells.

      2. The testimony I read in the Apple case (I didn’t read all of it) gave me the impression that this was far from the first time those guys have been in collusion. It was way too smooth for it to have been their first time around that particular block.

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