Boris is out as editor the Spectator (resigned)…

…and in as Shadow Higher Education Secretary.

Looks like his admission that he voting Cameron out of naked self-interest has done him no harm at all.

Suddenly Education Questions in the House may become worth watching although, unlike the Beeb, I’m not sure I’d consider Higher Education Secretary a front bench job as he’ll still be number two to ‘Two Brains’ Willetts.

Oh dear, it seems the publishing world has got itself in rather a snit over the prospect of Waterstone’s proposed takeover of the Ottakar’s chain, as Simon Jenkins notes here:

“Waterstone’s, once “the beautiful place”, was this week referred to the Competition Commission for trying to gobble up the now more saintly Ottakar’s. At its heels were all the relevant high priests - the Society of Authors, the Publishers Association, Michael Holroyd, Alan Bennett and old curiosity shopkeepers everywhere.â€?

Aside from noting that the Publishers Association has a truly abysmal website, what’s piqued my interest here are some of the ‘Book trade issues’ listed as concerns by the Society of Authors in their statement about the proposed takeover, specifically these items:

“(a) the worrying long-term implications of Amazon and Google’s drive to digitalise all books;

(c) the sale of books by publishers at ever higher discounts, resulting in much reduced royalties to writers. In particular, we are concerned that publishers are selling new titles to direct mail retailers (e.g. The Book People and book clubs) too soon after first publication at dramatically reduced prices, thereby damaging bookshop sales and authors’ royalties;

(d) the rapid expansion of the second-hand book market and, notably, the sale of second-hand books alongside the promotion of corresponding new ones (e.g. by Amazon). We are worried that sales of new books may be being damaged;

(f) the need to make the warranties and indemnities given by authors to publishers (e.g. against libel) less onerous;�

Of the four, only the matter of second-hand books alongside the promotion of corresponding new ones seems to have much in the way of merit. The situation here is that authors receive royalties on sales of new books but not when they are sold second hand, which is by and large as it should be. In the past, this was rather a non-issue; but for the odd independent bookseller who maintained a stock of both new and second-hand books, the markets for new and second-hand books were clearly delineated and operated separately to the extent that there were, by and large, not visible seen to be competing with each other overmuch.

With the advent of online bookselling, and particularly Amazon, where one is routinely offered the option of either a new or second-hand copy, even on brand new releases, authors have quite naturally come to the view that somewhere in this practice they’re going to get bilked – anytime someone orders a second-hand copy rather than a new one, in fact, in which case one assumes that Amazon still turn a profit on the transaction by taking a slice of second-hand sales in return for advertising their availability, but the author get nothing.

The response of some authors to this situation – according to the Grumpy Old Bookman, last February – has been to suggest that authors should also be paid royalties on second-hand sales, a suggestion the article rightly dismisses as being absurd and unworkable. In fact, as far as I can see, the ‘solution’ to this issue is a matter of contract. If authors and/or publishing companies are concerned that Amazon’s practice of advertising second-hand copies alongside new books is having an adverse effect on sales of new copies – and therefore royalties paid to authors – then they should be seeking to negotiate contractual terms in supply contracts with Amazon and other online booksellers who’ve adopted this practice, which place restrictions on this kind of advertising. It’s certainly not unreasonable for publishers to seek terms which afford them a degree of exclusivity for a limited period from date of publication and put Amazon in the position of making a commercial decision as to whether to agree to those terms or not.

On the assertion that heavy discounting by booksellers damages “bookshop sales and authors’ royalties� I may be guilty of either failing to understand how book retailing operates or of economic illiteracy – in which case I fully expect to be pulled up short should Tim Worstall and/or Chris Dillow spot this article – but this seems to be not so much a genuine commercial concern as an expression of a desire to return to the days of the cosy little cartel that was the Net Book Agreement.

Unless I’m very much mistaken, book retailing and particularly discounting should function in the marketplace in pretty much the same way as in any other form of retailing.

The ability of the big players (Amazon, Waterstone, Borders et al) to offer discounts on the publishers recommended retail price is based on the usual combination of their ability to negotiate a lower unit price on purchases from suppliers by buying in bulk on popular titles plus their trading off margins for turnover – just the usual swings and roundabouts of the marketplace; you make a little less profit per unit sold but you recoup (and hopefully exceed) what you lose on margins by increasing sales.

As far as those authors whose books are amongst those that the retailer chooses to discount, they actually bear only a portion of the ‘risk’ associated with this practice. Royalties are, if I am understanding things correctly, paid to authors on the basis of a net book price which excludes retail margins and, therefore, only ‘lose’ on royalties to the extent that the retailer is able to depress the unit price at which they purchase their book from the publisher which, in turn, is based on the retailers capacity to bulk purchase the item. And, of course, the same trade-off between margins and sales revenue applies to royalties paid to the author – if a 10% reduction in royalties per unit generates a 25%-30% increase in sales then the author makes a net gain overall.

What the Society of Authors appears to be suggesting here is not that discounting is a problem for author’s whose books are selected for the retailers discount lists but rather that this practice is unfair to those authors who don’t make the list; to which I’d expect the free marketer to give a brief response along the lines of – “Tough. That’s how markets work�.

In essence, what the Society of Authors is trying to suggest is that by favouring popular books/authors with discounts, the market will act to restrict consumer choice because, over time, the market will narrow down only to those authors/title that it knows it can sell. However, as Simon Jenkins also points out, since the end of the Net Book Agreement, this has anything but the case:

“What happened [after the demise of the Net Book Agreement] was instructive. Book sales soared 50% in a decade, and publishing revenue rose by 10% in real terms. This was despite unprecedented competition from electronic and other media. Margins were squeezed, but the number of titles published did not collapse. They rocketed from under 70,000 to 160,000 today, including 12,000 new novels. Britain publishes twice as many titles per head as America, and seven times as many as France. Despite periodic culling, British publishers breed books like rabbits.�

If anything, what shines through here is just the usual intellectual snobbery of the British literary set which holds that books should be published because they are somehow ‘important’ and have ‘literary merit’, even if they are likely to be of interest to no more than a dozen people, including the author’s family, and hang the commercial consequences.

Although by no means the biggest fan of markets and market forces, this is not a view with which I have much in the way of sympathy – books rejected by publishers as ‘uncommercial’ have always been able to make into print in the past, that’s what ‘vanity publishing’ (where the author pays their own printing costs and often does their own marketing) has looked after and, today, with the possibilities offers by the Internet, there is even less excuse for authors to complain of the supposedly malign influence of the market on their ability to sell their work. There is an obvious parallel here with popular music, where artists who may have struggled and failed to secure a recording contract with one of the corporate giants of music industry have responded by selling their work directly to the public, taking advantage of opportunities afforded by advancing technology. There seems to me little reason why authors and independent publishers cannot do the same – if something is good and of interest it will sell, if not then it won’t; it’s a simple enough equation to work with.

The whole issue of warranties and indemnities to publishers is inextricably bound up with the iniquities of British libel laws in which defendants are forced to operate under a presumption of guilt and prove their innocence which their accuser need only make the claim that they have been libelled and are required to prove nothing and in which the publisher may be held liable for the misdeeds of the author.

Instead of complaining about publishers insisting on indemnities to protect themselves from the consequence of such litigation, the Society of Authors would be better served by campaigning for changes to the law on defamation, which would see the burden of proof more equitably distributed between the defendant and the plaintiff.

The last point, on the presumed threat of “Amazon and Google’s drive to digitalise all booksâ€? is, in some ways, the most interesting of all these issues as, again, it is one predicated on efforts to swing the marketplace in favour of the author and to the detriment of the customer.

Again, there is a clear parallel with the music industry and the impact that music downloads has had in that particular marketplace.

If we sidestep the issue of ‘piracy’ and ‘copyright theft’ that currently dominates this debate due to amount of time and resources that industry giants have been spending over the last few years in pushing for the whole framework of copyright law to be re-written entirely in their favour, one of the key effects that MP3’s and other types of music downloads have had has been to develop and new breed of ‘informed consumer’.

Yes, there are ‘pirates’ out there who will take something for nothing at every opportunity but it remains the case that, at least until the iPod and iTunes opened up the market in legal music downloads, one of the main reasons that many people downloaded music from sites like Napster was to ‘try before they buy’ – it was noticeable that during the height of the media/legal storm over Napster, artists who came out in favour of the site/system almost invariably saw CD sales increase over the following weeks/months.

Napster and its descendents; Grokster, Kazaa, etc; have helped create a far more discerning marketplace for music, one in which customers have taken to reviewing albums online before deciding whether to shell out the hard earned cash on a CD. It’s now much more difficult for the music industry to shift either singles which consist of a catchy A-side, a filler track for a b-side and a couple of dull A-side remixes or, indeed, albums which consist of a couple of decent singles and a load of second-rate filler. It is no real surprise to find that, since music downloads became commonplace, it’s the market for singles chart-led pop that’s suffered a fall in sales while markets which have traditionally been album-led (Rock) or have a strong niche following (Country and Western) have stayed strong and even improved sales over time. If download music has had one clear effect on the marketplace, it’s that it’s created a market in which quality counts more than ever when it comes to generating sales.

Its seems likely, to me at least, that Amazon and Google moving into digitizing books will have markedly the same effect on the retail market for books, although in simple terms its impact on physical sales will be less than it has been when it comes to music for the simple reason that technology has yet to produce anything to remotely match the simply utility of a book as a means of reading, where CDs are now readily replaceable with portable MP3 players and other digital media.

eBooks still have a hell of a long way to go before the match the simplicity and utility of dear old medium of the processed dead-tree and for that reason people will go on buying books just as they have before, even if Amazon’s entire catalogue becomes available for viewing online. What will change however, it that over time customers will become more careful in checking out exactly why they’re getting for their money before they hand over their cash. Instead of relying on the publisher’s paid for blurb on the back cover, they’ll be logging on to sample a chapter or two before coming to the decision as to whether to make their purchase – as with pretty much everything else, the free exchange of information and opinion afforded by the Internet will end up being good for the consumer by helping them to make informed purchasing choices, if not quite so good for the publisher who’ll no longer be able to rely so much on back cover hype for generating sales.

And that, ultimately, is what will destroy the Society of Authors complaint about discounting ‘distorting the market’. If a book is good enough and interesting enough then people will talk about, with blog about it and, rapidly, word will get around – word of mouth recommendations from someone who’s opinion you trust still carry far more weight with most people than any amount of advertising copy or artificially generated hype.

And that, ultimately, is a good thing. Good for consumers but also good for authors who can expect to do well, even if they haven’t yet accrued the reputation necessary to make the discount list, as long as their work is good enough.

I’ll finish there and await my hammering from Tim and Chris if I’ve got the economics wrong here - once they’ve finished with David Cameron…