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Rough Math on the Amazon / Barnes & Noble / Diamond Great Graphic Novel SNAFU-Sale

Scratching your head about the recent strange discounts at Amazon and Barnes & Noble?  (Graphic novels distributed by Diamond suddenly had list prices of $15, instead of their normal list price.  Many of these normally listed at $50-$100.  Can you say bargain hunt?)

Let’s do some cocktail napkin-style math on what this really means.

There’s two transactions going on here.  The bookstores (Amazon and Barnes & Noble) pay the distributor (Diamond) for books that have sold.  The distributor then pays the publisher (Avatar/Dark Horse/IDW/Marvel, etc.) for the book that sold.  Remember, bookstore sales aren’t like the direct market – the distributor and publisher aren’t paid until the book is sold, not when it ships to the store.

Diamond is likely getting the books from the publisher at a discount in the 55%-60% range.  For the purposes of keeping the math simple we’ll ignore that you can get listed on Amazon directly for 55% and say that Diamond is getting a 60% discount from the publishers.

This means on a $100 omnibus, Diamond pays the publisher $40 ($45 if it’s a 55% discount).

On a $50 hardcover collection/archive, Diamond will pay the publisher $20.

Now, all these heavily discounted books were getting listed at $15.  We are being led to believe (and it sounds credible to me) that somehow Diamond got their pricing list mixed up and all their product got priced at $15.

So if the store gets a 40% discount, that means they’re going to pay Diamond $9 for one of these books that Diamond apparently mispriced.

With me so far?  Here’s where the problem is.

For that $100 omnibus, here’s where Diamond stands:

Payment from the store (incoming money): $9

Payment due the publisher (outgoing money): $40

Money Diamond has to come up with to pay the publisher: $31

For that $50 archive, here’s where Diamond stands:

Payment from the store (incoming money): $9

Payment due the publisher (outgoing money): $20

Money Diamond has to come up with to pay the publisher: $11

It seems very unlikely that either Amazon or Barnes & Noble are going to be coughing up more than $9 per book if Diamond really did (inadvertently or otherwise) change the reported list price.  Having the buy buttons removed from Amazon for all of Diamond’s products is strongly reminiscent of Amazon pulling the buy buttons off Macmillan products during a dispute over the price of eBooks.  I suspect Diamond is demanding more money from Amazon and Amazon (who have already issued a lot of gift certificates trying to smooth things over with their customer base) is playing hardball.   This isn’t going to end well.

So, how much money is Diamond out?  That depends on how many books were shipped, and we all know a ton of books have been cancelled.  Initial indications is that while Barnes & Noble had less available for this weird glitch, they may be shipping more.  It’s also apparent that Diamond stands to lose a lot more on each omnibus that shipped, as opposed to each $50 archive.

Rich Johnston, who was as much a touch point for sales announcements as anyone, reported that he had a bit over 14,000 items purchased off his Amazon Associates link.  This is the only data point I’ve seen for how many books were ordered.  This is not to say all of them shipped, but that’s what was ordered.  The orders he reported also seemed heavily stacked towards omnibus editions, too.  There also seems to be anecdotal evidence that more $50 archives shipped than omnibuses.

Now, it’s important to remember that not everyone who went to Amazon after reading about it on Rich’s Bleeding Cool site was necessarily going to have hit one of his affiliate links, so they wouldn’t be tracked.  Likewise there were other websites talking about these sales and a ton of e-mail and Twitter chatter.

So based on those loss-per-book numbers, and using Rich’s affiliate program orders as a starting point, let’s run a few scenarios to make a WILD guess at how much money Diamond has lost.  (Well, unless they can get Amazon and/or Barnes & Noble to pitch in a little more money.)

  • Let’s say Rich accounted for 1/3 of all the sales and 10% of that shipped.
    • This gives us:
      • 42,000 books ordered, 4,200 shipped
        • If all were omnibuses ($31 shortfall * 4,200) Diamond’s out $130,200
        • If it were half omnibuses and half archives, Diamond’s out $88,200
  • Let’s say Rich is less important in the greater scheme of things and only accounts for 1/5 of all sales, but 10% still shipped.
    • This gives us:
      • 70,000 books ordered 7,000 shipped
        • If all were omnibuses ($31 shortfall * 7,000) Diamond’s out $217,000
        • If it were half omnibuses and half archives, Diamond’s out $147,000

You think the publisher’s are giving a lower discount than 60% (Marvel should be 55% or less, realistically), the shortfall grows.  You think more than 10% of the books shipped, the shortfall grows.  You think Rich’s Amazon numbers are less than 20% of the total orders this week, the shortfall grows.

This is all just a rough guess, to give you an idea what we’re talking about.  In VERY, VERY ROUGH numbers, I’d say Diamond’s looking at a shortfall of between $100K and $400K when it comes time to pay the publishers for books that were sold at an erroneous discount.

Click here to read Todd’s attempt at a webcomic.

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  1. Misconception #1: Accounts are invoiced when books ship. If you account is good, you have 90 days to pay the bill. If your credit is suspect, then 30 days. Big Book Store at The Mall has paid for all those books on the shelves.

    These books can be returned for CREDIT, not cash, to be applied to future orders. Stores returning books must pay store employees to process the return, and usually pay shipping.

    Misconception #2: The books already in the stores and websites were invoiced at COVER PRICE, not the $14.99 price.

    Returnable titles usually are sold to stores at around 45-48% off the cover price. Let’s say a website buys a lot of books, so Diamond gives them a 50% discount. So, Big Book Store pays Diamond $50 for a $100 hardcover of the Essential Showcase Secret Archive of the Glorious Gorgeous-Man.

    Big Book Store can then sell it for whatever price they want. (The Supreme Court said so.)

    So, the wrong price gets posted, probably from a bad file from Diamond. Lots of books get sold for $15. That hundred dollar book costs the Big Book Store $35 in loss. (They paid $50 for it, sold it for $15.) A $50 book costs the store $10.

    So, the publishers and Diamond did not lose any money, that was all Amazon and BN money. Will Diamond be encouraged to make amends to Amazon and BN if it was their mistake? Probably. (Both are big accounts, and Diamond wants to keep them happy.)

  2. Despite my own initial estimates posted on [which was partially based upon the bestsellers list], the truth is that Amazon, B&N or Diamond are not going to get hit too hard unless actually print more copies to honor all of the orders.

    This is because there probably wasn’t more than a couple of thousand copies of each title in inventory, if that many.

    The print runs of $75 and $100 books are limited based upon the initial order from the direct market plus past historical sales in the book market. Because of the high price point, sales velocity on these books are horrible. And most publishers have a print run expecting to sellout within 18-24 month timeframe.

    For example, if the Bendis Daredevil Omnibus V1 sold 2,000 copies in the direct market and 2,200 copies in the book market in the 1st month and an average of 50 copies per month for 24 months [in both markets and this is a made-up number as opposed to based upon fact], then Marvel probably printed around 5,400 copies of the Bendis Daredevil Omnibus V2 if not less.

    And if you look at Rich Johnston’s postings, the actual orders shipped were very low [single and double digits] vs. orders.

  3. I think the 10% of orders shipping is absurdly high, especially for the higher priced stuff. The numbers Johnston posted from his affiliate account indicate something like 4 books shipping out of over 5000 orders, less than 0.1%.

  4. And it’s equally absurd to think that Sunday orders were filled at the same level as Saturday orders. If you found out about this through Rich, you were at the tail end of when orders were filled. Sounds like the fill rates and Barnes & Noble aren’t too bad, either.

    It may well not be a $400K problem, but $100K isn’t an absurd number.

  5. One more assumption you’re making: that these books are all sold on a returnable basis. If they’re going through Diamond, they may or may not be.

    This affects cash flow– if the books were already paid for by Diamond and just sitting in Diamond’s warehouse not moving, even a fire sale price that gets some cash in may be an improvement over white elephants gathering dust from Diamond’s POV.

  6. I’m told by someone in a position to know that Amazon _is_ returnable, but they hardly ever return anything. Which would be part of their frequent reorder/inventory management system, most likely.


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