Amazon and Simon & Schuster Agree Terms

Simon & Schuster has agreed a multi-year deal with Amazon covering both e-books and print books. Business Insider reported that negotiations only took three weeks and were concluded two months before the original contract expired.

I’m confused, does this mean the end of literary culture or not? Someone needs to run up to Douglas Preston’s quaint writer shack to find out. (If you get lost, it’s at the back of his 400-acre estate).

It also begs a question: what exactly is Hachette holding out for? As everyone knows at this point, Hachette’s contract with Amazon expired in March and the two parties have been unable to agree a deal since.

The narrative being pushed by the media was that Amazon’s desired terms would harm Hachette and its authors, yet Simon & Schuster was able to agree a contract very quickly which CEO Carolyn Reidy called a “positive development.” She characterized the deal as “economically advantageous for both Simon & Schuster and its authors and maintains the author’s share of income generated from e-book sales.”

In a brief statement, Amazon noted “the agreement specifically creates a financial incentive for Simon & Schuster to deliver lower prices for readers.”

Exact terms haven’t been disclosed but it appears to be a modified version of agency – i.e. where Simon & Schuster sets retail prices, Amazon has certain discounting powers, and the publisher has various incentives not to price too high. In other words, both sides got some of what they wanted.

And the sky remains stubbornly in place.

Hachette, its proxies in the media, and pro-publisher groups like “Authors United” should be feeling pretty foolish right now. It’s harder now to depict Amazon as a rapacious bully which is using its market power to force terms on publishers that will squeeze them out of existence, turn writers into paupers, and end the literary world as we know it.

Maybe Douglas “I’m not taking sides” Preston will finally consider asking his publisher what the sticking point is and why Simon & Schuster is able to make a deal with the world’s biggest bookseller when Hachette has singularly failed to do so over the last ten months. Maybe he’ll consider the possibility that the problem doesn’t lie with Amazon, but with Hachette.

Of course, we don’t know the exact terms that have been agreed between Simon & Schuster and Amazon, nor do we know the particular points of disagreement between Hachette and Amazon. But this news clearly shows that a deal is possible, and that both parties can live with the terms.

It’s not just Simon & Schuster. German media is reporting that Bonnier has agreed a long-term deal with Amazon covering print and digital. Bonnier is a huge Swedish-based media conglomerate with a large publishing division operating across Europe. It had been involved in a Hachette-like dispute with Amazon Germany for the last few months, but announced yesterday that it was also able to agree terms.

I sincerely hope that these two announcements will bring Amazon and Hachette back to the negotiating table so they can hammer out a deal. Not least because we’ll (hopefully!) see the end of this orchestrated anti-Amazon PR campaign that Hachette’s proxies have been subjecting us to for months.

And perhaps next time everyone will employ a little more skepticism when the next moral panic is whipped up. Although I’m mindful of Santayana’s aphorism, “Those who cannot remember the past are condemned to repeat it.”

Because we’ve been here before.

The Day Publishing Stood Still

The removal of Macmillan’s buy buttons is always held up as the ne plus ultra of Amazon bullying. But the episode looks very different when examined in the light of the disclosures from the price-fixing trial.

For those who don’t remember: in February 2010, the publishing world held its breath as one of the Big 6 publishers, Macmillan, faced down the biggest player in the business, Amazon. At stake was the system under which e-books would be sold to readers.

Up to that point, e-books had been sold by Amazon under a wholesale model, which essentially meant that Amazon was a designated re-seller of Big 6 e-books, the publisher set the list price, and Amazon purchased them from the publisher at a discount of around 50%. Amazon was then free to sell the e-books at any price it chose to its customers. This was a pretty standard retail arrangement, and one that had been used for print books for decades.

But the largest publishers wanted a change.

Amazon had been aggressively discounting certain titles, many of them New York Times bestsellers, to $9.99 or less. This didn’t effect what publishers (or authors) were paid but the Big Six were aghast, complaining it devalued books in the minds of readers, cut into juicy hardback sales, and hastened the switch to digital – all of which they felt compelled to fight.

At the end of January 2010, Macmillan CEO John Sargent told Amazon that it would only let its digital catalog be sold by the world’s biggest bookseller if they switched to an agency model where publishers set the retail prices and Amazon would not be permitted to discount.

The way the official narrative goes, Amazon was enraged by the demand for agency and it removed all buy buttons from Macmillan books in a fit of pique designed to pressure the publisher into dropping its demand for agency.

The story then “leaked” to the New York Times on January 30 and received wide coverage in the rest of the media. Amazon was painted as a bully, Macmillan CEO John Sargent was called a hero, the Authors Guild issued a statement in support of Macmillan, traditionally published authors attacked Amazon, and we were treated to a tsunami of hysterical articles like this one which claimed that Amazon “hates you, and it hates publishers.”

The more things change, eh?

The difference with the Amazon-Macmillan dispute is that we now know what was going on behind the scenes, thanks to the disclosures which surfaced in the price-fixing trial. All the documents are online here, and you can go through them yourself, but the timeline is very clear. Here’s a quick summary of what actually happened:

20 January 2010: John Sargent tells Amazon’s Russ Grandinetti that Macmillan will offer Amazon the choice of an agency model and a wholesale model. Later that night Sargent meets Apple VP Eddie Cue for dinner and Cue tells Sargent that the Apple’s terms don’t allow Macmillan to offer Amazon a wholesale model.

21 January 2010: Sargent calls Grandinetti to tell him that the Apple contracts require Macmillan to only offer Amazon agency terms. Amazon had already received this same message from two other Big 6 publishers, Hachette and HarperCollins, and would receive similar notices from Penguin and Simon & Schuster over the next few days.

27 January 2010: The iPad launches, along with the iBookstore – which contains titles from Macmillan, HarperCollins, Hachette, Simon & Schuster, and Penguin, who have all signed agency deals with Apple.

28 January 2010: John Sargent flies to Seattle to give Amazon an ultimatum: sign agency with Macmillan or you won’t get any new releases for the first seven months. Negotiations break down. That night, Amazon removes buy buttons from Macmillan books.

31 January 2010: After intense media pressure, and realizing that five of the Big 6 publishers are all demanding identical agency terms, Amazon announces that it will capitulate, restore Macmillan’s buy buttons, and sign agency contracts – but not without complaining that this is bad for readers, and also filing a report with the FTC about possible collusion and price-fixing.

January 2011: Macmillan and Amazon agree to estimate lost sales during the dispute and compensate authors accordingly (and split the cost).

December 2011: The DOJ launches a price-fixing investigation into the events of January 2010 (as do regulatory authorities in Europe, Canada, and Australia).

February 2013: Macmillan settles with the DOJ, despite John Sargent claiming in December that the company was innocent and would fight the charges all the way.

July 2013: A federal court finds that Apple, Macmillan, Simon & Schuster, HarperCollins, Hachette, and Penguin colluded to raise the price of ebooks.

Let’s try and remember what really went on in January 2010 the next time that the publishing establishment – and its proxies in the media – wants us to completely freak out over Amazon.

David Gaughran

David Gaughran

Born in Ireland, he now lives in a little fishing village in Portugal, although this hasn’t increased the time spent outside. He writes novels under another name, has helped thousands of authors build a readership with his books, blogs, workshops, and courses, and has created marketing campaigns for some of the biggest self-publishers on the planet. Friend to all dogs.