The internet is seething over Amazon’s reported hardball tactics in negotiations with Hachette. Newspapers and blogs are filled with heated opinion pieces, decrying Amazon’s domination of the book business. Actual facts are thinner on the ground, however, and if history is any guide, we haven’t heard the full story. Here’s how it started.
This post is from 26 May 2014. It has not been updated except to clean up broken links but the comments remain open.
In a historical quirk of the trade, publishers and booksellers negotiate co-op deals at the same time as the general agreement to carry titles. (For those who don’t know, co-op is the industry term for preferred in-store placement, such as face-out instead of spine-out, position on end-caps, front tables, window displays, and so on.)
At publishers’ insistence, the same practice has continued in the online and e-book world, namely that negotiations regarding virtual co-op (e.g. high visibility spots on retailer sites) take place at the same time as discussions over general terms and publisher-retailer discounts.
There is a lot at stake in such negotiations – for both parties. Either side can lose millions and millions of dollars depending on what cost is agreed for co-op and what percentage discount off list price is agreed for the retailer. Negotiations can be particularly hard fought, as is often the case with large companies and huge sums of money. And the stakes are much higher since the price-fixing trial.
The Case Against Amazon
A friend of mine is published by Hachette. His latest came out this month so I’ve been aware of this dispute for while. We noticed some strange things happening with his Hachette book pages on Amazon – stuff that only appeared to be affecting his Hachette titles. A quick check confirmed that all Hachette books seemed to be affected, and, indeed, only Hachette books. At this point, Hachette hadn’t started contacting its authors or briefing the media, but it was clear there was some dispute between it and Amazon.
First, Amazon began displaying competing titles in a bar across the top of Hachette’s books’ pages. No doubt this exercise was intended to show the value of Amazon’s real estate. Next it was reported that Amazon had become inexplicably slow at fulfilling orders of Hachette books. Following that, it was claimed that Amazon had removed Hachette books from sale altogether.
The latter claim turned out to be overblown. Amazon has removed the purchase button from Hachette pre-orders and replaced it with a sign-up for a news alert when the book is orderable.
Pre-orders are a facility that Amazon extends to certain publishers. Except for the very biggest sellers, self-publishers don’t have access to this facility – probably because Amazon has (reasonable) doubts as to whether self-publishers en masse could deliver without issues. After all, Amazon is the customer-facing entity in the chain, the one that will be the target of the reader’s ire if the book is delayed.
And there are delays in the Amazon-Hachette connection right now. That much is clear. But who’s at fault? Hachette author Michael Sullivan revealed last week that there appears to be delays on both sides.
On April 29th, during a phone call with Amazon’s Author Central, the Amazon representative indicated they had more than a dozen purchase orders placed from April 21st – 24th which had not yet shipped. At that time, Hachette was indicating ship dates of May 2nd – May 10th. Hachette has continually assured us all orders were shipping “in a timely manner” and Amazon was to blame for placing small orders. We’ve asked for copies of the purchase orders and confirmation of the shipment dates from my publisher but have been told, “It is not information we would like to be shared with any third party at the current time.” Hachette would be foolish to delay orders while simultaneously accusing Amazon of doing exactly that, but perhaps their definition of “in a timely manner” is not the same as it was before the dispute.
It’s possible that Amazon is strong-arming Hachette. But it’s also possible that Amazon has removed the pre-order facility because it doesn’t currently have confidence that Hachette can deliver books on time. The simple fact is that we don’t know.
The dispute could center on any number of issues. It could be that Amazon is seeking huge percentage discounts which are making Hachette blanche. Or maybe the price of Amazon’s co-op has increased (fairly or unfairly) and Hachette is unwilling to pay. Or perhaps Hachette wishes to sell e-books under an agency-type model and retain control of retail pricing, and Amazon wants to sell Hachette’s e-books under a wholesale model and be free to discount at will. It might simply be the case that they are poles apart on the exact levels that Amazon will be permitted to discount.
We don’t know. And if we don’t know the exact nature of the dispute, we can’t pronounce judgments as to whether Amazon is being unfair or using their market power in anti-competitive ways. If the latter is true, Hachette has a remedy open to it: the courts.
Picking A Fight
But why Hachette and why now? The large publishers who were found to have illegally colluded with Apple to fix ebook prices are all currently subject to a court order to renegotiate their agreements with retailers. Hachette is one of those publishers.
To prevent the parties illegally acting in concert once more, Judge Cote ordered that retailer-publisher negotiations be staggered. Hachette is first up. It’s that simple.
Hachette is being portrayed as some helpless fawn. Several articles have speculated that Amazon is “going after” Hachette first because, compared to the rest of the large publishers, Hachette is small and weak.
Don’t buy it. Hachette might be the smallest of the “Big 5” on paper, but that’s only when you look at the American market. Hachette Book Group is owned by Lagardère Publishing – the biggest publisher in France and the second biggest in the UK. It has significant publishing interests across the rest of the world too, enough to make it the world’s second largest trade publisher overall.
Lagardère Publishing is itself part of Lagardère Group, a giant worldwide media company – magazines, radio, television, online, digital, and books – with annual revenue of approximately $10bn dollars.
Not so small anymore… which gets me thinking. I’m always skeptical when a story with precious few facts is reported in an uncritical and uniform way.
It’s almost like it’s the result of a very smart PR campaign. It’s almost like Hachette is part of a giant mass media conglomeration with billions of dollars of revenue and hundreds of outlets in which to push its message. It’s almost like Hachette is part of an international publishers’ association which has explicitly stated it will be flooding the media this year with stories intended to advance its interests.
If you doubt the ability of a PR campaign to radically shift attitudes and perceptions, I must point you towards the history of diamond engagement rings and the sudden shift in popularity of smoking among women. And if you want an example of journalists chasing each other’s tails and not bothering to check the facts of a hot story being reported by competitors, I urge you to read the post I wrote in January revealing that Hitler’s Mein Kampf was never a digital bestseller… until the media made it one with their inaccurate reporting.
Hachette isn’t the only large publisher with a vested interest in the current dispute. As mentioned above, the court mandated settlement in the price-fixing case set out a schedule by which publishers would renegotiate their deals with retailers. Penguin Random House, Simon & Schuster, Macmillan, and HarperCollins will all have to go through the same process – all staggered six months apart. All of them will be watching the outcome of Hachette’s negotiations closely. All of them are rooting for Hachette to “win.”
Who Owns The Media?
Publishers like to portray themselves as plucky little companies doing their best in a world dominated by heartless giants like Amazon. It’s good PR, but it’s far from true. I’ve covered Hachette’s media links above, but here are the rest:
- Simon & Schuster is owned by CBS Corp. which has revenue of over $14bn. CBS owns the most watched network in the US and its operations cover every field of media including cable, publishing, radio, and local TV.
- Penguin Random House is owned by two companies, Bertelsmann with a 51% share and Pearson a 49% share. Until 2003, Pearson owned the RTL Group – the largest commercial television and radio broadcaster in the EU – at which point it was sold to Bertelsmann, which still own the company. Bertelsmann is a giant media company with revenues of around $20bn and interests in more than 200 media companies worldwide, including 54 television stations, 29 radio stations, and the largest magazine publisher in Europe.
- Macmillan is the odd one out as its corporate parent (the Georg von Holtzbrinck Publishing Group) doesn’t have global media interests worth mentioning, aside from 50% of Die Ziet – the most widely read German weekly paper with an estimated readership of over 2 million.
- But HarperCollins picks up the slack by being a subsidiary of the media behemoth that is News Corp. – which owns huge chunks of the media market all across the world, including the US (Fox, the New York Post, the Wall Street Journal) and the UK (Sky, the Times, The Sun).
Suffice to say that it’s pretty easy for large publishers to get their message heard, and that’s without including the army of blogging authors and agents who often gravitate towards the same positions, as well as the horde of newspaper columnists desperate for a book deal.
Big Media Push
The last time I saw an anti-Amazon media push this big was in the run-up to the price-fixing trial. It seemed pretty clear to me that the large publishers were attempting to litigate the case in the court of public opinion because they had no chance in an actual court.
Don’t you think it’s interesting that a very similar spat between Barnes & Noble and Simon & Schuster generated little of the same negative attention? Authors like Hugh Howey had virtually zero B&N bookstore distribution (for the release of one of the hottest titles of the year), and this was accompanied by no widespread condemnation, just a general hope that both parties would amicably resolve their dispute.
By contrast, Amazon was universally painted as a bully when it removed Macmillan’s buy buttons in a comparable spat in 2010. And we now know that, at the time, Macmillan was part of an illegal conspiracy to force the Agency Agreement on Amazon and artificially inflate the price of e-books (along with Hachette).
That history should caution everyone before leaping to judgment this time, but huge corporations spend millions on PR because they know that if you repeat the same message over and over, people will begin to believe it – regardless of the facts.
While I hope that the dispute gets resolved quickly – for the sake of the authors affected – I’m keeping an open mind as to who’s really at fault here.
Given Hachette’s history, I recommend doing the same.
BigAl, thank you for your insight. I think it is spot on: the problem is with society as a whole, not Amazon specifically. Basically, it sucks that wages and salaries vary so much. It doesn’t seem fair that people endowed with higher-level skills, or at least a greater propensity for acquiring them, are paid so much more in white-collar work than those not so endowed in blue-collar work like warehouse jobs. I also think you are right that the Amazon warehouse jobs are good jobs for those whose have the skills and physical fitness for, and interest in, them. I say this especially based on 4 out of 5 stars aggregate rating of the jobs on Indeed.com by former holders of the jobs: http://www.indeed.com/cmp/Amazon-Warehouse/reviews?start=20. Also, this video I found on youtube well indicates this I believe: http://www.youtube.com/watch?v=ln1gwUBnhBU.
David, wonderful article. I wonder, though, what you make of the complaints about working conditions in Amazon’s warehouses? For example, there is this recent article (among others):
http://www.eastbayexpress.com/oakland/the-dark-side-of-amazon/Content?oid=4079909
Are Amazon authors and 3rd-party sellers–even Amazon customers–profiting from sweated labor? What do you think? Have you looked into this?
Jarvis, I’m not David, but I’ll reply. (I’ll confess upfront that I just scanned the article to see if I spotted anything that hasn’t been in all the others like it I’ve read. If there was, I didn’t see it.) Have you ever worked in fast food at minimum wage? I have and it is hard work. In fact, many of the things they talk about in that article remind me of the experience. Is there a legitimate complaint there (talking specifically about the warehouses)? Possibly. But what all of these articles lack is a comparison between the working conditions, pay, and benefits for those working in an Amazon warehouse compared to the same type of work for another company. I think if they did, it would show that *if* there is a problem, it is with society and big business as a whole, not Amazon specifically. In fact, what little further research I’ve done has led me to believe that on balance, the warehouse workers in Amazon’s warehouses are doing better than the average.
BigAl, thank you for your insight. I think it is spot on: the problem is with society as a whole, not Amazon specifically. Basically, it sucks that wages and salaries vary so much. It doesn’t seem fair that people endowed with higher-level skills, or at least a greater propensity for acquiring them, are paid so much more in white-collar work than those not so endowed in blue-collar work like warehouse jobs. I also think you are right that the Amazon warehouse jobs are good jobs for those whose have the skills and physical fitness for, and interest in, them. I say this especially based on 4 out of 5 stars aggregate rating of the jobs on Indeed.com by former holders of the jobs: http://www.indeed.com/cmp/Amazon-Warehouse/reviews?start=20. Also, this video I found on youtube well indicates this I believe: http://www.youtube.com/watch?v=ln1gwUBnhBU.
While I admit I didn’t read every comment here, I find it funny that I don’t see more mentioned about the fact that often with the lower price there’s more sales. I know that I purchase more books now than I ever have. There are many reasons but much of it comes down to convenience. I was getting to the point that there was hardly a spare place in my home for more books. My husband and children are very thankful for my eReader since it has drastically reduced the number of books cluttering every available space. As a consumer, I also think it’s worth noting that a BIG chunk of my previous book purchases came from used book stores. All those sales did not benefit the author at all. While it’s been years since I had Economics 101, I still remember the ideas and graphs regarding supply and demand as well as figuring out ideal price points. I just wonder how can MORE people reading and MORE people purchasing books be bad. As a consumer, I get to decide what I spend my money on and where I spend it.
Remember when Britain said all Irish are drunks? Now you say al Hachette authors are deluded.
Where do I say that?
I assume that you, David, and Courtney publish books that are purely straight text. Try formatting books that involve complicated tables, illustrations of all kinds, mathematical formulae, and all the other elaborate elements that go into many scholarly books, and you’ll find that this is far more demanding and time-consuming than what you are used to doing. Trade book publishing is much more simple and straightforward than scholarly publishing. Reflowing straight text is easy compared with reflowing tables, symbols, etc.
So you accept your argument doesn’t hold for trade publishing (the subject under discussion)?
Yes, I’m much more inclined to accept ebook publishing as cheaper for trade publishing. Trade publishing in general involves lower costs than scholarly publishing, whether in print or ebook form.
It would appear from his bio that David has never actually worked in a publishing house. Thus I would urge people reading this blog to be wary of his claims about the costs of publishing ebooks. He evidently has never witnessed first hand what it costs a publisher to implement an xml workflow, which is needed only because of ebooks, not print publication. That is just one ongoing cost that David fails to acknowledge. There are others.
I’ve never claimed to work in a publishing house. I do, however, publish my own books, and have several friends and family who have worked in all sorts of publishing houses, big and small. I’ve also been studying the industry for years, and participating in it as a writer. Anyone can read what I’ve written and judge my arguments on their own merits. I note that you haven’t attempt to refute any of my points, except your claim regarding XML workflows.
Here’s the thing. I’ve published eight separate e-book titles now, and have gone through the formatting process on numerous additional occasions to update end-matter etc. I take care of the formatting process myself. I hand-code the HTML for all of my e-books, and don’t take any of the shortcuts that publishers use to automatically generate EPUB or MOBI files. I do this because it’s the only way of ensuring that your e-book will be properly formatted on all devices and apps – and my formatting is a hell of a lot better than what I see in many traditionally published titles.
Even though I take extra time in formatting and testing my e-book files, the process is still extremely quick. If I ever wanted to outsource it, it is extremely cheap to do so. If any given publisher has a difficult, slow, or expensive process for formatting e-books, readers shouldn’t be forced to pay for that inefficiency.
Try again.
I do have an XML workflow for my books, which I implemented my own damned self. It’s not that expensive, and mine actually does real work–e.g., not only outputs print but outputs vendor-customized epub files. This is a cost that pays for itself if you do it right, because the vendor-customized files sell more copies. And I’m one person who publishes two books a year, so when I imagine that cost spread over thousands of books, I’m left scratching my head.
1. I am so glad I am an indie author.
2. Amazon isn’t hurting the author, the traditional publisher is. If they truly cared about the author, they’d increase their mediocre royalty from 2 -to 12% to something a person could live on. At Amazon we get either 35% or 70% of ALL sales depending on what we have our book priced at.
3. I write full time. Thanks to Amazon I was able to give up my day job to write full time. (Historical Fiction/Romance). If it weren’t for Amazon, I’d still be ‘dreaming’ of being an author.
4. I DO get pre-order links from Amazon on all my books. I also get them from Create Space and ACX/Audible. :o)
5. If the reader wants a book and Amazon doesn’t have it, they can order from B&N or their local bookstore.
6. If the argument is that I should boycott Amazon because it’s being ‘mean’ to Hatchette, then should I also boycott B&N because they refuse to put indie titles on their bookshelves? Didn’t think so.
Thanks David! Loved your article. Very informative.
I understand that many people are choosing the side of Amazon because they are indie publishers and people who would not be able to get published by a large company can get published there but I think people are looking at this from a one sided point of view. What Amazon is doing is not only effecting the company but effecting the writers as well. All writers write because they love it and they want people to see their works. Yes as a reader you want to be able to read as much as you want but because of the economy it isn’t easy to purchase things that aren’t a need. Amazon gives into the persons desire to read but as a writer it is important to support fellow writers. Don’t choose the side hurting the writer just based on the fact they are easier to get your work out there. It is better to support the writers because there might be one day you find yourself in a situation and need other writer’s support. Hachette and Amazon need to find a way to work it out but while they don’t let it effect the writers.
Reblogged this on Apps Lotus's Blog.
Great post
http://tshirtlegend.com/
What I’ve never understood is why wouldn’t it be the Agency model for ebooks? If anything Amazon has controlled the market rather then leaving it free. By signing a contract with them for ebook sales they take 30% of the sale and the publisher gets 70%….but only if it sales for $9.99 or less. If the owner of that work wants to sell it higher they get a lot less money. They’d have to sell an ebook for over twice as much to make anymore money then they would selling it at $9.99 Amazon’s artificial roadblock. I understand the wholesale model where you buy so many and sale them. You bought them if you sale enough of them at a profit you can discount the rest and still make money. Amazon doesn’t buy ebooks at wholesale, they sell them without owning them so how do they get to alter or change the price of something they do not own?
Amazon’s sliding royalties scale means that it’s a false market. Keeping ebooks under $9.99 might sound like it’s good for the consumer but it also devalues printed books. Why spend $30 on a hardback if the ebook is under $10? Publishers who tried selling for $12.99 or $14.99 ended up sacrificing more of their ebook profits to Amazon so they could protect the value of the printed work. Amazon got to make more money and spin the PR so it makes it look like they were trying to keep the prices down for the consumer. Now they are after a bigger slice of the pie.
If they said will give you X amount of money for 1000 ebooks to sale. They could sale or give away 1000 ebooks and the publisher or owners get X. Instead it’s you have a product we will sale it for you but we will dictate it’s value. Do you really want to do business with them? Yes they might have the most customers and you might make more sales but at what cost? I’ve also wondered are there checks and balances in place for ebook sales. If Amazon sells 20 copies of an ebook what’s preventing them from only reporting 15, 14, or…? now multiply that by thousands
I tried not to comment on all this, but couldn’t help it, and linked to here as one source: Amazon and Hachette- Godzilla vs. Mothra
http://daletphillips.blogspot.com/2014/05/amazon-and-hachette-godzilla-vs-mothra.html
Couple of clarifications:
1. Hachette’s shipping times to Amazon cannot be an issue in Amazon’s timely fulfillment of books to its customers, as Amazon can source all of Hachette’s books from a variety of major wholesalers and have them the next day or even sometimes the same day.
2. Amazon introduced different rules for co-op than had existed previously in the book industry. This is that it requires a co-op fee simply to display books on its website. This differs from, say Barnes & Noble, for which a publisher will pay co-op to get a special display position. A publisher can buy marketing programs from Amazon, as well, but typically these are in addition to the co-op percentage that it requires publishers to pay as a cost of doing business with them.
While Amazon can make whatever requirements it wishes regarding the suppliers it will work with, the consternation you’re seeing among their supplier community is that those requirements have steadily escalated along with Amazon’s market power. At some point, push-back was inevitable. Ten years ago, publishers all loved Amazon. It isn’t publishers that have changed.
Reblogged this on Pio Pio Books and commented:
another interesting one by my friend David….this was RT by Stephen Fry actually yesterday!
David, this is an outstanding piece of work, and you are quite correct in reserving judgement before the facts are in. I personally believe the REAL reason for this dispute is something far different from what anyone involved is claiming. The allegations swirling around this are as vague as they are for good reason – the truth lies elsewhere, and each side has its own reasons not to reveal it.
Alternatively it could be something crushingly banal like:
Amazon has told Hachette agency is dead and they have to move to wholesale, but Hachette is not getting 70% under a wholesale model where Amazon discounts and has to swallow all the discount. And Amazon is saying “Don’t worry, we plan to discount lots, it will work out great for you.” And Hachette is running for the hills.
The Beast of Bezos is no author’s friend. They want to eat the world, and the publishers are the only people with clout that are even remotely on our side. If they were out of the way, the Beast would make it impossible for anyone to make a living writing fiction — like most IT types, they think content providers should work for free, or for prestige, or anything that doesn’t make them shell out cash.
There should be a government regulator squinting in hostile fashion behind every Amazon exec, starting with the Beast, holding them with a choke-chain.
Reblogged this on David Pandolfe and commented:
An insightful analysis of the ongoing Amazon/Hachette dispute from writer David Gaughran’s blog.
Outside of the ‘he said, she said’ part of this debate… I will add only one thing.
Where would any author here be without Amazon in 2014?
The article conveniently ignores the salient fact that Amazon has been known to engage in such heavy-handed tactics in relation to publishers of all types and sizes, like the university press that I headed that Amazon tried to force to use its POD vendor on threat of de-listing all of our titles from its web site. With that history, why should any of us believe Amazon isn’t just using such tactics again? If Amazon is getting bad press, it has no one to blame but itself.
I found your analysis fascinating but the lack of public facts in a private contractual dispute makes it hard to make a reasoned argument.
However I find it hard to believe a behemoth like Amazon which pays the uk government under £10m of tax on billions of sales could be guilty of any corporate dodgy dealings?
Two things on Amazon and tax:
1. Corporation tax is levied on profits, not sales. Amazon reinvests most cash it makes in expansion, thus not much actual profit left and little to tax.
2. I suspect Amazon uses certain corporate structures to massively reduce its tax bill. Most international tech companies do the same. The two most popular are known as the Double Irish and the Dutch Sandwich (and it’s why so many tech companies have their European HQs in Dublin). These corporate structures were pioneered by Apple in the 1980s. I’m not giving Amazon a pass on that at all, but it’s tough to get worked up about them *specifically* when so many are at it. And if we were going to start boycotting the companies involved, we’d have to pretty much stop using the internet. But I don’t like it one bit. And I think governments need to close this (widely used) loophole immediately. Because of it many large corporations have effective tax rates of around 1%. More on that here: http://en.wikipedia.org/wiki/Double_Irish_arrangement
I don’t know what corporate structures the large, multinational publishers use. But I do know that Harlequin used similar structures to totally screw over a huge group of writers with their e-book royalty rates. More on that here: http://www.thepassivevoice.com/05/2014/appeals-court-reinstates-lawsuit-against-harlequin/
What a novel idea–getting all the facts before making a decision (I say that tongue-in-check, because so often it doesn’t happen).
Reblogged this on Tim C. Taylor and commented:
Very interesting tale of what really goes on in the book industry, and of how much internet chatter may actually be influenced by hidden PR campaigns.
Reblogged this on Deirdre Dee Coaching and commented:
Interesting reading as a family member is published by Hachette
Reblogged this on Casey's Blogorama Now with more Taxi-bells! and commented:
Ann excellent take off the ongoing spat in the publishing world.
Reblogged this on Rosie Reast Writer and commented:
If you like me have seen conversations about this issue with confusion. I hope that this will help clear up some of that confusion.
This is a very thorough article. I especially love the sarcasm here “It’s almost like it’s the result of a very smart PR campaign. It’s almost like Hachette is part of a giant mass media conglomeration with billions of dollars of revenue and hundreds of outlets in which to push its message. It’s almost like Hachette is part of an international publishers’ association which has explicitly stated it will be flooding the media this year with stories intended to advance its interests.”
Reblogged this on Balls Deep and crying like a baby… and commented:
An excellent look at the Amazon/Hachette squabble that the media is feeding to the publishing community at large. My personal view is that, considering that Hachette (and all the Big 5 “traditional” publishers) really have nothing good to say about any self-published or independently-published author until they’ve proven they’re “winners” and can be brought in to write in the limited marketing segments that the Big 5 loves to tout, I’m on Amazon’s side in this one. Unless it comes out that Jeff Bezos has been burning kittens on peoples’ lawns in his spare time, I think his current business model still had the independent author playing a big part.
I first noticed this new battle when I went to audible to get a book and it wasn’t available, 15 minutes or so later, maybe up to a full day, when I read about this. My first thought when I read Hachette and Amazon were feuding again was this is the 2010 issue part 2. The Hachette is once again trying to raise the prices of ebooks that I’m interested above a fair market value, which I define as the same or less than the price of a trade paperback book. There is absolutely NO reason that an ebook should cost the customer the same amount as a hard cover book, when the same title is available in soft cover, to think otherwise means I despise you and think you have no clue of simple logic, that you have no respect for me.
Whatever the facts might be, and who is and who isn’t to blame, Amazon.com has sold more copies of my novel than any other commercial outlet. They know how to bring customers to the title like no other.
Reblogged this on Raunchy Reads and commented:
Found this to be interesting…
Reblogged this on One Elle Alison.
this is an extremely helpful summary – I admit to some confusion as to what all the hubbub was about. thanks for clarifying the narrative here
Reblogged this on The Real Life Stories from a Fantasy Writer.
Reblogged this on Benpalsinfo.
good
UPDATE: Amazon responds.
Reblogged this on Rika's Musings and commented:
Know the Hachette and Amazon drama that’s been on everyone’s mind, blog, site, tv, dusty car door…well, here’s another take on the showdown.
-Rika Ashton
(aka Keeping it Critical)
Nice puff job for Amazon. Thing is, I’ve dealt with them as an indie publisher, and they are anything but sweet and cuddly. Jeff Bezos lies and manipulates with the best of them, and when you try to get a problem with one of your books resolved, half the time you wind up with a canned e-mail that is too close to being one-fingered. Look at their history of dropping the titles of erotica authors who don’t meet their standards and guidelines, even though those standards and guidelines are so vague as to be meaningless. We built Kindle, and now they won’t even carry many of our books.
Amazon has been slapping authors around for years, so I’m really amazed at how easily you’re willing to defend them and paint the big-boy publishers as the villains in this. The reality of the business is, you don’t have to publish through Amazon or even allow them exclusivity, which is what the company wants. All the better to dictate its terms to everyone when its ready.
I shifted my e-books to Smashwords, who offer Agency pricing, and I make certain people know they can buy my books in places other than Amazon, if they so choose. I dislike monopolies and bullies, and Amazon is already the latter while aiming to be the former, as well.
nice story.. and long article.. good to read in this beautiful day in my town. Myself do not interest to debate,, I just want the true.. that’s it
Thank you for your good research into the publishing world. very helpful.
Reblogged this on DV Berkom Books and commented:
An interesting take on Amazon/Hachette negotiations. As is usual, not going off half-cocked on something with precious few factoids available appears to be the way to go…
I agree. Amazon is not a monopoly. http://jabrambarneck.com/2014/05/27/amazon-is-not-a-monopoly/
Reblogged this on WHAT THE HELL and commented:
The flip side of the Amazon/Hachette conflict, outlining some of the complex issues at play. Even if you’re inclined to hate on AMZN, give it a read to fully understand what’s going on. Lots of comments too.
Reblogged this on The Improbable Author and commented:
Amazon is my major distributor and very much the hand that feeds me, so I’m unlikely to bite them regardless. But I’d been uneasy regarding the news I’d seen lately. This post gives me faith, though. It’s hard to decide which major international corporation to root for, but I’m going to give Amazon the benefit of the doubt in the face of these slanted and uninformative articles I’ve seen slung about, until I get harder evidence against them anyway. Go, Boss!
Interesting, thanks.
This is a nice, calm addition to a discussion that has mostly been a shouting match. As someone with 7 ebooks in the Kindle store, I should point out that if Amazon ever wants to really cash in on self-publishing, all they need to do is start charging KDP authors a nickel every time they click the link to look at their sales figures. 🙂
I’m glad I finally found a piece on this situation that takes a non-biased approach to discussing what’s going on. I’ll be sharing this around to a few very outspoken Amazon critics in my personal circle of influence.
Reblogged this on Max Gordon | mizmaxgordon and commented:
Amazon isn’t the bully this time.
All parties will be trying to get the best deal for themselves. Period.
All parties will use any available strategy to make the deal sweeter for them.
While Amazon will try and get the most from publishers, publishers will try and get the most from their authors. Authors will try and get the most from their purchasers (whether trad or indie route).
Everyone is out for themselves and it feels rare that anyone in this industry tries to create mutually viable businesses for all involved. It’s dull, bunch of greedy geeks without the balls to become gangsters or stock brokers.
In a recent meeting with the above publisher when probed on why they had been failing one year and succeeding the next, high royalty rates on ebooks and low advances (because of the ‘troubled’ markets) were the answer.
Hachette will be leading the fray for the Publishers Association, they won’t be operating alone.
Frankly in trad days books were just piles of paper with ink that had perceived value.
In these ‘modern’ times it’s paper and computer files with perceived value that are foisted on the public. Once in a while a meme breaks through the noise. But mostly it’s just tired repetitive ideas, themes and content that are ‘sold’ to the reader.
Snake oil in pseudo-intellectual clothing run by white collar cartels.
Yawn.
I would have liked, in the comparison of company sizes, to have seen a similar figure for Amazon. I’ve seen a total figure of about $60Bn, and they do a lot of other internet sales and delivery of goods. Can the total revenue of Amazon be usefully compared to that of CBS.
And is self-publishing really an answer? There are so many different jobs in the chain between writing the manuscript and the reader setting down with a good book: are we forgetting Adam Smith’s pin factory?
I know that I wouldn’t want to negotiate with Amazon for my tiny share of any market.
Hi Wolf. Amazon’s annual revenue last year was $74bn (worldwide). It’s definitely bigger than CBS or Bertelsmann, but it’s not the David v Goliath mismatch it’s often painted to be.
As for self-publishing, I’m not sure what the question is. I self-publish my work and make a living from it, along with hundreds (possibly thousands) of others. Adam Smith’s pin factory doesn’t really apply as I outsource editing, typesetting, cover design etc. And I make four times the royalties on my own so it’s working out very well indeed.
Reblogged this on Angela Booth: WordPress and commented:
So sad. Billion-dollar publishing conglomerates being bullied by big bad Amazon…
Reblogged this on The Brotherhood of Dwarves and commented:
Three sides to every story:
One of these days, the dinosaurs (that would be the Big 5) are going to wake up and realize that if they don’t evolve, extinction is their next destination. I’m so fascinated that they continue to fight for a business model that has already been pronounced terminal. The longer they stubbornly cling to what was, the less likely they are to survive in the marketplace that will be.
The real key for authors is to wake and face the new reality. When digital crushed the music industry the only artists who survived did so one of two ways (or both): they toured and/or they controlled the rights to their music. Since we’re not likely to get paid for touring, owning rights is critical. Every Hachette authors who is complaining now must also own up to the fact they sold their pound of flesh for that advance and all that great support Hachette gives them. Now they’re seeing the dark side of signing away rights.
Absolutely no control over their career.
This.
Well said. Publishers have brainwashed authors for years.
I wonder if these publisher-retailer spats will start becoming a factor in whether writers sign (or pursue) trade deals. This feels like the first of many such dust ups, and I guess we’ll see it replicated in other markets across the world too.
It certainly makes a trade deal less attractive to me, but in a slightly different sense: namely, I’m not sure I can partner with someone with such a radically different view of the business. It would probably drive me potty.
I’m an author. But I liken authors to gazelles around a water hole, who all sprint at the sound of a twig snapping from 500 meters away.
We’re a bunch of frightened herd animals who operate on instinct and follow what others are doing. There is very little bravery, and very little original thought.
As long as publishers validate authors–even if they are secretly planning to eat them–a percentage of authors will willingly sign away their eternal rights, then blame retailers for the things their publishers are responsible for.
Such is the fate of the artist. Doomed to be exploited.
I hope I’m wrong. But I see too much that shows I’m not.
I only buy paper books, and I’ve noticed some interesting things about my purchases. If you buy a book from Amazon, and the very last page has a notice in the lower right corner that says, “Made in the USA, Lexington, KY,” followed by a date, that book was printed by Amazon (they also print in California). If you buy a book from anybody else, and the very last page has a notice that says, “Made in the USA, Charleston, SC,” followed by a date, that book was printed by CreateSpace, the Amazon subsidiary that gets a large share of the Indie trade (including mine)..
This state of affairs applies, no matter who or where the publisher of record is. Now, there’s never been any requirement that a publisher must also run a press, but in the old days, the printer the publisher used was also named on the title page or copyright page. Not so for Amazon.
Thanks for this well-balanced take on things. It’s good to see an antidote to all the anti-Amazon rhetoric that gets spewed every time a story like this hits the news. Obviously they’re not perfect but nor is Hachette an underdog – a huge company like that has plenty of clout to fight their own battles.
As an ex-bookseller I’ve seen plenty of instances where these large publishers have been all too happy to take support from physical bookshops in favour of Amazon, so I don’t have a lot of sympathy for them if they then find themselves backed into a corner because they’ve let Amazon decimate all opposition. If that is even what’s happening, of course.
This is a key point. Publishers gave Barnes & Noble tremendous support in their quest to put every indie bookstore out of business in the 90s (even going as far as to break the law and give B&N sweetheart deals – something which they denied, were sued for, and lost… sound familiar?).
Publishers must think people have extremely short memories if they will believe the guff that they love indie bookstores and want to support them. If it wasn’t illegal in the US to give sweetheart deals to B&N today, publishers would be doing that and screwing over the indie bookstores (just like they do in the UK where it is legal, and give sweetheart deals to supermarkets like Tesco).
Amazon is a huge, money-making corporation. The large publishers are huge, money-making corporations. The only difference is that the large publishers pretend to be on the side of the little guy. It’s just PR.
Well quite. I am in the UK and they are still doing exactly that. Of course the people who really suffer are the authors, and the book-buying public too, who deserve more choice and innovation from the industry.
When I lived in Seattle, one of my jobs had me walking though a less-than-safe neighborhood late at night. I did my best to deter muggers, walking like I was mean, tough and ready to eat them from breakfast. But better still would have been to walk with someone who actually was mean, tough, ready to eat muggers for breakfast.
That’s how I feel about this A v. H dispute.
* Amazon pays me half the royalties that Apple pays for one of my ebooks and less than Apple for all the others. They are taking money that in a free and competitive market would be mine. They are behaving like a bully and a mugger and should be regarded as such.
* In contrast, Hachette poses no threat to me. It takes no money from my pockets. My ebooks are so unique, I doubt they have a single one that competes. And even if one did, we’d be competing on a level playing field. I’d take some sales from them. They’d take some from me. Hachette isn’t an ebook retailer, so it can’t alter how my ebooks are sold. It can’t dictate my prices or what royalties I get. It can only compete in a most distant way. In many ways, it’s more an ally than a competitor.
http://www.amazon.com/gp/search/ref=sr_adv_b/?search-alias=stripbooks&unfiltered=1&field-publisher=inkling+books&node=&field-p_n_condition-type=&field-feature_browse-bin=618073011&field-subject=
——-
Unfortunately, for all the bile it directs against the media, this article is too differential to authority figures: “To prevent the parties illegally acting in concert once more, Judge Cote ordered that retailer-publisher negotiations be staggered. Hachette is first up. It’s that simple.”
No it isn’t. Rule one is law is not to believe what anyone says, not the lawyers and certainly not the judge. Look for the truth and you will often find it elsewhere. If the court wanted to prevent these major publishers from working together, it’d force them to negotiate separately, in secrecy and at the same time. The only imaginable purpose for serial negotiations is to benefit Amazon. Why?
1. Negotiating at the same time would prevent leaks between publishers in the tight-knit world of Manhattan publishing. Negotiating serially almost certainly means that Hachette’s terms will leak to the next in line, etc. That’s the very collusion this court claims to oppose.
2. Negotiating serially means that Amazon gets to bully each publisher in turn rather than all at once. That is critical. Amazon’s already getting a lot of flack for the mess this dispute has created. If popular books from ALL the major publishers were difficult to get at the same time, the public would not only be outraged, it’d clearly place the guilt on Amazon.
Also, this remark from the article shows something less than wise: “It’s almost like Hachette is part of a giant mass media conglomeration with billions of dollars of revenue and hundreds of outlets in which to push its message.”
“Bravo for Hachette,”! I say. As someone who is not ” part of a giant mass media conglomeration,” I’m delighted to have one on my side, working to cripple a company that utterly dominates ebook sales in the U.S. At 70%, that is over three times the market share of its closest competitor. It’s like being accompanied in that night time walk by a Navy SEAL team, armed and uniformed. A Good Thing.
I’ve started noticing something recently. It’s people who think good and evil is determined by power factors. If Hachette can just be shown to be powerful, this article assumes, then it becomes a bad guy.
Not so. Right and wrong aren’t decided that way. One of the most interesting events in the D-Day invasion came when an unfortunate German officer looked out as the sun was coming up and saw what was merely the leading edge of a 100-mile long fleet of ships in the invasion fleet. On his field phone, he described it as thousands of ships. Shortly afterward, allied warships began to pound his position. Does that predominance of the Allies over that little group of Germans mean that we should take a more even-handed approach toward that battle?
Not at all. It’s great that the Allies landed with such air superiority, that only two German aircraft dared to overfly the beaches on the first day. Unfortunately, some today seem to think otherwise. They think that all one needs to do is show that one party in a dispute is large make it into something evil. That is the essential point of the article. It’s where it gets this dispute wrong.
It is great for authors and small publishers that Amazon is running headlong into the media forces that major publishers can marshall, as detailed in the article. A few years back I realized that Amazon’s attempts to bully, directly or though the DOJ, had the potential to backfire. Amazon, located in distant Seattle, has almost no influence on the press in this country. The major publishers do in a host of ways. That, I suspected, could prove Amazon’s undoing. Drawing a parallel to my mugging analogy, this like being accompanied in my walk by a platoon of uniformed, armed SEALs. It is a good thing. Not being a fool, I like it.
Editing Lily’s Ride made me realized something important. Just after the Civil War, there was the distinct possibility that poor blacks and whites would form a common cause to get better schools and more honest government. My co-author, Albion Tourgée was living in NC at the time and witnessing just that.
But wealthy planters and the vile-as-ever Democratic party managed to split off the poor whites. How did they do that? By stirring up envy that some freed slaves might do better than whites and by feeding white hatred of blacks. There’s a disturbingly large slice of the population, people I call the ‘little haters,’ who get duped by that trick.
In this Amazon dispute, some authors seemed to be driven by their envy and hatred of large publishers, negative attitudes that are so great they seem unable to see that they have a lot in common with large publishers. Both are fighting Amazon’s bullying and they should find common cause with them.
The fact that Hachette is large and has a host of media connections is good for authors and small publishers. Don’t stand around with your hands in your pockets. Support them. They can’t hurt you. Amazon can.
Uh, like negotiating at the same time back in 2010 kept publishers from asking for the same supposedly-secret concessions that other publishers were getting from Amazon, right after they got them? Seems like if negotiating at the same time was a panacea, Amazon wouldn’t have had cause to complain to the FTC about the way those secrets kept leaking from one publisher to another.
They’re staggered not so the details can’t leak, but so that the publishers can’t all gang up and demand the same thing at the same time. If a publisher wants to go back to agency pricing and higher prices, and can talk Amazon into it, then so be it, but their e-books are going to be that much more expensive than all the other publishers’ until the other publishers catch up. Perhaps those other publishers might even decide not to go with agency pricing at all in order to scoop that competitive advantage. Random House made out like a bandit during the year it could let Amazon price its books lower than everyone else’s.
Nice shill piece.
Great work, David.
The court of public opinion relies on emotional appeals when factual ones don’t support a particular viewpoint. Hachette knows Amazon doesn’t disclose its private dealings in public, so they can release whatever info they want to–info that serves their goals–and Amazon won’t counter it.
Rather than explain what the fight is really about, and I too believe it is agency pricing, Hachette is whining, and subtly encouraging authors to whine, so readers also whine.
I’d bet that when the facts do come out–that Hachette is trying to raise ebook prices yet again–the revisionists and apologetics will still spin it as the poor, heroic publisher trying to break a big, bad monopoly, even though authors and customers suffer.
Makes me shake my head.
I think a lot of it springs from fear. Change is generally scary to most, and radical, paradigm-shifting change like we are seeing in publishing is bound to drive people a little potty. It’s only natural, particularly if you are personally invested in the status quo that’s being upended by a bunch of noisy upstarts.
IMO, a lot of the fear surrounding Amazon is based on a misunderstanding of its business model. People worry that Amazon will turn Full Evil on the day they decide they want to make a profit, and that will involve putting the squeeze in all directions and turning us all into some kind of indentured workers.
But, really, if Amazon ever wants to cash out, all it has to do is stop aggressively expanding for a quarter or two and it will be swimming in billions.
I agree about the emotional tactic in manipulating public opinion. However, I doubt the public cares. A PR campaign to demonize Amazon has to face the fact that the public has a very high opinion of Amazon, while they don’t know Hachette from the Man In The Moon.
How do we know they like Amazon? They keep clicking and buying stuff. More and more every year. For the last several years, there has been a constant stream of articles very critical of Amazon. In that same time, the public has kept on buying.
How do we know who is winning the image war? Follow the money.
I’ve actually been tracking consumer sentiment and Amazon for a little while, to see if these media storms put any dent in same, and there is no visible effect whatsoever. If anything, over the last two years, customer sentiment towards Amazon has improved.
Thanks for the great article, David. I tend to agree with every part of it. Also, at the end of the day, isn’t it Amazon’s choice on what books they sell in their store? I mean, they are a business. They sell products that benefit them and their customers. They’re not a charity, so they don’t have to sell anything they don’t want to. I guess I can’t understand the public outcry over a company selling what it wants to. Isn’t that what companies do?
The outraged articles I’ve read confused me when the authors got involved in it all. In traditional publishing, the publisher publishes the book. It’s their job to play nice with the book store and get those books on sale, which kind of puts a dent in every argument the authors have. If the author isn’t happy with their placement in Amazon, they need to complain to their publisher about it because, unlike indies, they don’t work directly with the book store. I can’t imagine an author storming into WH Smith twenty years ago and demanding to know why their book isn’t in stock. They’d ask their publisher. Since traditional publishing hasn’t changed in that respect, then why are authors crying bully at Amazon? Shouldn’t they be crying WTF? to their publisher instead? But looking at the data, I don’t think it’s an Amazon dispute at all.
I’m now a hybrid author, which I’m enjoying so far. But if my publisher has a problem with Amazon on my traditional books, it would have nothing to do with me. I’d be disappointed, but I’d see it as a dispute between two massive corporations. I really wouldn’t get involved in it because it’s out of my control on those books. I see my indie books as mine to control, but my traditional books belong to my publisher, so I let them do what they feel they need to do with those. I’d only get involved if it happened on my indie books.
Here’s where I don’t think Amazon is doing ANYTHING bad to anyone. As an indie, you could get pre-orders on your books on Amazon. Or at least, I managed it by using a Nielsen ISBN. However, I’ve noticed that my pre-order link has changed to ’email me when it’s available’. I think this is a clear sign that it’s a change in the Amazon site rather than an attack on Hatchette. This was available for pre-order a few months ago: http://www.amazon.com/gp/product/1908822295. I haven’t (as an indie) had a dispute with Amazon. I just used a Nielsen ISBN to register the book. Amazon kindly put it on pre-order for me, and it was nice for a while. It’s not on pre-order now, so I assume that Amazon just updated their system since they’ve been updating a lot of things for us all lately.
I suspect that Amazon just updated their ISBN information for the UK side of things (since Nielsen is the UK ISBN provider) and EVERY book on pre-order got the same treatment. At least, that’s how it looks on my indie books, so I think it is just a change that applies to everyone.
Hatchette may have a dispute with Amazon, I don’t know. But I think it’s pretty clear that Amazon didn’t single out Hatchette pre-orders. I’m not published by Hatchette, and my indie pre-order button disappeared at the same time.
Reblogged this on I Picked Up a Pen One Day….
Great post, David. Thanks for researching it and writing it. As a small publisher myself, I find it’s very easy to want to come down hard on Amazon, so I appreciate the measured reporting here. A couple of points, though. Shouldn’t Hachette’s status as a big publisher and its history with Amazon count toward something where Amazon’s confidence in their being able to deliver their product is concerned? It’s fairly common for publishers to ship their books a little late, and what you generally see is canceled back orders, not disengaging the capacity to preorder. So this does feel punitive to me. Where the B&N comparison is concerned, it’s pretty obvious why it was less of a big deal. B&N is small beans compared to Amazon. The publisher I used to work with (imprint of Perseus) saw about 60-70% of its sales from Amazon alone. Right now my little press sees 90% of ebook sales coming from Kindle. B&N has a major returns issue, and Nook sales are negligible, so it’s just not the same. Publishers basically see Amazon as the mafia. When I recently negotiated terms for traditional distribution with Ingram Publisher Services they made it clear that there was no negotiating with Amazon. It was a take-it-or-leave-it situation for me as a small press. So the bigger publishers are seen as championing the industry at large—and Amazon is no friend to publishers.
Finally, a reasoned explanation of the kerfluffle. Thank you.
Yet another good reason to self-publish. 🙂
Thanks for the dose of realz. It’s good to step back and consider the bigger picture.
I will say that, while I don’t know what Hachette’s doing, I do know some of the things Amazon is doing. For instance, they priced Cinthia Ritchie’s novel, Dolls Behaving Badly, at over $50 last week. Now it’s not available at all, except for Kindle. Until I hear something that’s equally low-blow about Hachette, I’m not inclined to give Amazon much benefit of the doubt.
That said, all will be revealed at some point…
Have to be careful as to who “they” is when discussing offerings on Amazon. Amazon is sort of an e-mall… Amazon itself plus others who operate storefronts within Amazon’s e-mall. If you follow author forums, you will periodically see some author asking why they find instances of their books being offered at ridiculously high price on Amazon (in addition to the regular regularly priced instances). General conclusion has been that is some mix of third party’s algorithms resulting in strange offerings or some third party gambling that someone will foolishly order from them (immediately after which the third party purchases a copy at regular price, sends it to buyer, keeping the difference in prices as profit)
So, someone having offered at such a price doesn’t automatically prove it was Amazon. Could have been… or could have been someone looking to make a quick buck on the current Amazon-Hachette excitement. Now if you have a screenshot, documenting who was actually making the offer….
In this case, though I don’t have a screenshot, it was indeed Amazon and not a third party. Moreover, the fact that Amazon does not now offer the book at all except for Kindle is an indication that this is part of the strategic game.
This all seems like a pissing contest to me, of which the author suffers the most. Another reason I’m glad I’m self published: I can mostly avoid these sorts of office politics.
It does, and authors do suffer the most. I wonder if this will be a factor in authors’ decisions on whether to go with a Big 5 publisher or self-pub/go with a small press to avoid these firefights. I suspect it’s the first of many.
It’s not even the first. Simon & Schuster and B&N basically had the same fight last year, but without the same volume of shouting from the sidelines.
http://www.nytimes.com/2013/03/23/books/barnes-noble-simon-schuster-dispute-said-to-hurt-sales.html?_r=0
Hello David, My understanding is that when Amazon sell below cost the author doesn’t get paid.
Hi Brendan. That’s not remotely true. The author gets paid the exact same amount whether Amazon discounts or not. Here’s how it works:
The publisher sets a list price for the book. Amazon can then sell the book at any price it likes, but it must remit a fixed percentage of the list price (not the retail price) to the publisher. In other words, Amazon swallows any discount above and beyond what’s agreed with the retailer.
An example: HarperCollins sets a list price of $14.99. Amazon must give HarperCollins 70% of $14.99 ($10.49) for each copy sold, regardless of what price it’s sold at. So if Amazon sell it for $9.99, it is making a 50c loss per copy. If they choose to sell it at $12.99, they are making $2.50 per copy sold. Even if they sell it at 99c, they must still give HarperCollins $10.49 (and HarperCollins must give its author the percentage in the contract, usually 25% of what they get off retailers).
On thing that makes me laugh is when authors are sad when Amazon decides to reduce the discount it makes (for the customer) on the list price. Isn’t the list price supposed to be the selling price ? If not, what’s the use of setting a list price and discount percentage rather than a net price ($10.49 in, the David’s example)?
This is what I find so extraordinary about this, in terms of hearing writers claim that Amazon is raising their prices (and all the subsequent fallout from this, including less sales for the writer), when in fact all that Amazon is doing is discounting *less*.
Publishers and tradpub authors want to keep the list price at $14.99 so that Amazon can eat the loss when Amazon discounts to $9.99 instead of having the publisher move the list price to $9.99 and getting a smaller return ($6.99 vs $10.49). I just can’t wrap my head around it. If publishers/authors want a list price of $9.99 then set the bloody list price at $9.99, and if Amazon discounts, then the increased sales are just gravy for them instead of being a key part of a publisher’s marketing/business plan and something they feel they can subsequently leverage in some sort of public blame game.
Thanks for the post, David.
> The author gets paid the exact same amount whether Amazon discounts or not.
There is an exception to this rule. If Amazon is price-matching a discount offered elsewhere, they will pay a percentage of the discounted price, not the retail price. And if the discounted price is less than $2.99, they will pay only 30% of that discounted price.
Pretty sure that’s not the case with e-books. I know that some distribution contracts allow the retailer to pay the publisher a percentage of the retail price, so that when the retailer puts it on sale, the publisher and the author gets correspondingly less money. (Kind of like agency pricing, but without the price control clause.)
But with the Kindle e-books, Amazon was paying the full wholesale price even when it priced the books below it. Hence, the authors should still have gotten their full percentage of the wholesale price no matter even if Amazon gave the book away free.
I expect someone with more direct knowledge will correct me if I’m wrong.
I spoke to a savvy friend who listens to all news in a very critical way and she sensed the demonization card being played here against Amazon. I think you can see the reach and power of the conglomerates in this story. It puts me in mind of the movie, The Godfather, when Marlo Brando speaks about getting the papers to plant stories about corrupt cops.
This is a very clear analysis and takes into account that there is a lot of money on the table when you are negotiating deals regarding pricing and coop. It is definitely not going to be Marquess of Queensberry rules. For those who think news is about objectivity and facts I recommend The Central Park Five documentary about how a media frenzy and law enforcement ruined several young men’s lives.
Thanks, David, for putting together this analysis. Great job.
If I were to make a snap judgment, I would come down hard on Amazon’s side simply because we know how hard big publishers work to give all their money to the authors who make their existence possible.
I won’t – because the facts will come out eventually, and I might look like an idiot (no biggie) – but from the point of view of someone writing a novel which will be published via the Amazon side of things, rather than submitted to an agent… – Amazon is on my side, and the publishers aren’t.
Or rather, Amazon seems to offer the more desirable option, and it isn’t a Byzantine system with multiple gatekeepers between me and potential readers. I think I’m too old to wait for traditional publishing – it simply takes too long.
What makes your independent books valuable is higher priced publisher’s books. Once the publisher are gone and there is only Amazon left and they decided to cut your royalty rate to 20% because they can you will take it because it’s better than nothing.
First of all, even if that did happen, it would still be an improvement on the royalty rates publishers pay (25% of net, which is really 17.5% of list price, and actually 14.9% of list price after your agents’ cut).
Second, I don’t think the publishers are going anywhere. They are sitting on mountains of valuable content that they have locked down in contracts for a very long time. Even if they stopped signing new writers tomorrow, they could still monetize that content for a long time to come. I think publishers’ market share will fall quite a bit though (and it has already), which will have all sorts of knock-on effects for them.
Third, Amazon has been the prime mover in creating a market for authors to reach readers directly – without needing a publisher – which has enabled hundreds (and possibly thousands) of authors like me to earn a living from book sales for the very first time.
Fourth, even if your nightmare scenario came to pass and Amazon decided to cash in on its dominance and slash royalty rates, I don’t see that as Game Over. Most independent authors (like myself) are taking steps to ensure our continued independence in the future – from any retailer or publisher – by building our own platforms and mailing lists. If Amazon did what you predict, we would have many more options than to accept whatever rates they offer.
Fifth, if Amazon did want to cash in, they wouldn’t have to slash royalty rates. All they would need to do is to stop aggressively expanding for a quarter or two and they would be swimming in billions and billions of dollars. If you look at their financial statements, they reinvest every penny they make into expansion. They generate huge revenue each quarter, and plough it back into expanding selection/products in existing markets, as well as opening up new ones. All they would need to do is pause that effort, or scale it back, and profits would soar. No need to slash royalty rates – especially when that would create a huge opening for another company to move into their space.
That’s pure FUD, and you know it.
Reblogged this on Burning the Root and commented:
Who to believe — Amazon or Hachette.. some facts here
One small factual correction. Under the terms of their settlements, each publisher becomes free from U.S. DoJ supervision of their contracts with ebook retailers two years after they settled. Hachette, HarperCollins, and Simon & Schuster all settled in September 2012. Penguin (now part of RHP) settled in May 2013. MacMillan settled in August 2013. The six month staggering affects only Apple contracts and is part of the Apple judgment which is still under appeal.
In theory, Hachette, HarperCollins, and S&S are all eligible to renegotiate their contracts for the fall. Clearly, Hachette is doing something different.
Ah, thank you for that William.
There were many hysterical responses to the Amazon-Hachette dispute, and I didn’t go through them as they were all cut from the same cloth (and space was at a premium).
Scott Turow’s was worth highlighting. In the Washington Post, he was complaining that Amazon had stopped discounting one of his books, and were now selling it at full price, and that sales have dropped as a result: http://wapo.st/1nLrLXk
This is particularly hilarious because Turow regularly complains that Amazon’s discounting is destroying the industry. Does he want them to discount or not? He really should make his mind up.
I find it amusing that the Washington Post ran this when you consider that Jeff Bezos owns it.
Well, yeah, if he has his own paper run a piece ragging on Amazon, it looks more like he’s really not imposing editorial bias. Kind of like how when you see one and two star reviews on an Amazon book, you know it’s not just the author and his friends astroturfing.
I was extremely heartened to see WaPo run numerous, critical pieces on this story.
As a contrast, look at the WSJ’s coverage of the price-fixing trial.
Turow never responds to anyone. But talks out the side of his mouth about everything for all authors. He hates Amazon but he cashes the checks from them. He was worthless as president of the mis-named Authors Guild.
Worse than worthless – giving out self-serving advice which actively damaged careers.
Always get facts before judging – thanks once again for doing the homework.
Yep, what she said ^–thanks David.
Doing what homework this article is as much speculation as the others. He says in the article “We don’t know. And if we don’t know the exact nature of the dispute, we can’t pronounce judgments as to whether Amazon is being unfair or using their market power in anti-competitive ways. ” this is just more PR from the other side.
Speculation on my part, but since Hachette is first in a line of negotiations with five large publishers it would seem to make business sense for Amazon to hold a firm line to try to get the best deal possible. Any concessions Amazon made with the smallest of the five would seem to weaken their subsequent negotiations with the larger publishers. It’s very possible that even if Amazon was being unreasonable/tough in isolation this could make sense in view of the negotiations to come.
True. And, conversely, Hachette is under huge pressure from the other large publishers to hold a firm line as they believe the result of these negotiations will set a precedent for their talks when the time comes. There’s a lot at stake.
While I agree with this article, there is I think one question it is high time we ask
“artificially increase the retail price of e-books”
Isn’t selling ebooks at a loss like artificially decreasing the retail price of e-books, especially if you are the biggest player in town? And if it is, wouldn’t it be normal the Department of Justice had some interest in this?
I do think there has been an insane amount of Manichean logic in this particular case. As a matter of fact, I have found this whole debate a proof that idiocracy is ruling the world (it’s either black OR white, there is no scale of grey), as if we all turned into idiots unable to make an educated opinion — and I do also think that the lawsuit has been led in the most incompetent way by Judge Cote, as it was all about a Manichean logic, which you can clearly notice if you actually care about this lawsuit and study how things happened.
First of all, under the terms of the settlement, Amazon is not permitted to sell e-books at a loss across their whole list. In other words, they can sell a particular title of Stephen King’s at a loss if they wish, but they have to swallow that discount and make it up on other titles from the same publisher so that – as a whole – they aren’t selling that publisher’s titles at a loss.
And the lawsuit wasn’t “led” by Judge Cote. She presided over it. And if she was truly incompetent than Apple’s going to have a very easy time in the appeal (and the publishers would never have agreed to settle).
This meme about the “bias” or “incompetence” of Judge Cote is one put about by the large publishers and their supporters. It fails to recognize that this was an open-and-shut case. It also fails to recognize that the publishers’ actions (and Apple’s actions) have led to similar antitrust investigations in jurisdictions all over the world – which Judge Cote has nothing to do with – and which have led to similar outcomes.
I cannot find the reference about Amazon being constrained on prices. Is this in one of the court decisions?
I would be fascinated to know what “selling e-books at a loss” actually means. I am not being facetious here, but surely it must be fairly hard to sell a product that has practically zero production costs at a loss. Bearing in mind that books are already created in electronic form before printing, the cost of conversion must be minimal. Yet if we take a random example from Amazon, the cost of the bestseller “Divergent” is $6.02 for the Kindle version and $5.69 for the paperback (cheaper!!). That means someone is making a pile of money somewhere. It is much like the swindle that is iTunes…
Hi Nick, I can break it down for you. E-books from the large publishers tend to have the following split: 30% of the list price goes to the retailer, 17.5% to the author, and 52.5% to the publisher.
Before the e-book price-fixing trial, Amazon wasn’t allowed to discount books beyond a certain amount. Now they have more freedom to discount – but that doesn’t affect what the publisher or author receives – they still receive a fixed percentage of the price the publisher sets, regardless of what price it actually sells at.
Publishers don’t like this because they want to keep the price of e-books high.
Might as well ask if selling TVs at a loss is artificially decreasing the retail price of TVs when Best Buy or Wal-Mart does it in a weekly sales circular. Loss leaders are an old, old, old sales tactic that have probably been used ever since there was advertising to begin with. Amazon did it up on a grand scale, but it was never attempting to sell ALL e-books at ridiculous discounts. Just the newest and hottest ones, and not even all of those. People who bought e-book versions of older books, which were out in paperback now, had to pay more than wholesale, and that’s where Amazon made its profit. In the end, people bought more older books than new ones.
That’s why the legal restriction David notes is a little silly—Amazon never WAS selling books at a discount across their whole list. It’s as if I told you not to drive 300 miles per hour. You probably weren’t driving 300 miles per hour already, nor were you likely to even if I hadn’t told you not to.
Exactly.
I see a price as artificial when someone other than the retailer is setting the price. In the price collusion case, suppliers set prices for the retailer that the retailer didn’t want. When a retailer chooses to lower a price, he is doing it himself. It’s not artificial.
Other examples of artificial prices are price controls set by government.
News flash… price is artificial even when the retailer is setting the price. It doesn’t matter who sets the price- the value of the book is whatever the market will bear.
Nick Quaintmere – It’s a commonly held fallacy that physical books cost a great deal more than ebooks to produce. The printing aspect contributes only about 8% of the total. The vast majority of costs derive from the work and labor hours involved in producing the text – editing, typesetting, etc – and these are involved, of course, in both physical and ebooks. Thus – it is more than possible to sell ebooks at a loss.
There’s a useful visual explanation here: http://www.davidderrico.com/wp-content/uploads/2010/09/book_profits2.png
Interestingly, Donald, your comment (and the helpful little graphic attached) actually support what I said. As you point out 8% of the production costs involve printing, which in itself is not insignificant. The “labor hours involved in producing the text – editing, typesetting, etc” are of course quite a major component. My point, of course, that these have already been done (these days electronically) for the print edition before the e-edition is produced. As the print ready copy has already been produced for the print edition, none of this is required to create the e-book. One click and you’re done. That’s a slight oversimplification, I realise. There may be additional indexing issues, but it is a fraction of the work.
Hi Donald. It’s not a fallacy whatsoever. Even if that graph you produced is accurate, it completely fails to take account of the ongoing costs associated with print such as storage, distribution, and (crucially) returns. With e-books, all costs are fixed costs. There are no real ongoing costs.
And as Nick pointed out, the cost of typesetting, printing, and binding a print book is far more than the cost of formatting an e-book. So the fixed costs in print are higher, then there are a whole bunch of ongoing costs associated with print that aren’t a factor in digital.
It’s far cheaper to make an e-book, unless you have some horrendous inefficiencies in your system.
It appears you are presuming that an ebook is a sort of bonus format that happens after all the work on the physical is complete. That’s not the case. A publisher publishes with all formats in mind, and spreads the costs accordingly. Naturally, the entirety of a publisher’s costs – labour, etc – are spread across all sales (including ebook). Also, many ebooks are formatted differently (with added material, links, etc), and there is work involved in that. The fact is many sales that until recently would have been in paperback or hardback are now being made in ebook (at generally lower prices). Whatever reduction of cost – which, I maintain, is not nearly as great as many believe – is reflected by the reduction in money coming in.
The storage costs, you’re right, are less with electronic versions. The author royalty is higher (not high enough, of course) to reflect that. And ebooks are often priced lower than physical too.
My point is that it’s important to realise that ebooks are not made for free, which appears to be what many think. It worries me that the perceived value of the book (and hence what people are prepared to pay) is diminishing because of this. Is a book really worth the same as a cup of coffee?
(To be clear – this isn’t my chart. Also, I don’t know what you mean by ‘your system’.)
Donald, I’m not assuming that at all. I publish both print books and e-books and I understand how the process works and how a traditional publisher’s workflow differs from mine.
E-books are cheaper, easier, and quicker to produce. That’s inarguable. Let me break it down.
A publisher acquires a manuscript from an author/agent, and they generally work on both editions simultaneously until the process is split into a print-ready file and a file which needs to be converted to the various e-book formats, and links inserted etc. So the following costs are pretty much identical for print and digital
Acquisition costs, editorial/proofing, cover design (with slight tweaking for print/digital).
When the e-book is split away, the only real cost is:
Formatting (which is a trivial operation that I can do in a couple of hours – I code the HTML myself for all my e-books).
There is a time-cost to uploading and attaching metadata, but again this is a trivial process that takes me an hour or so for all the various retailers where I sell my work.
For the print version, you also have these costs:
Typesetting, printing/binding, storage, distribution, returns.
If the book is successful, you have to go back to the printer, and incur another round of printing costs, storage costs, distribution costs. If the book is unsuccessful, you have to deal with returns, and possibly remaindering/pulping etc.
Either way, there are *ongoing costs* with the print edition that aren’t incurred by the digital edition – no matter how successful or unsuccessful it is.
So print has more fixed costs and more ongoing costs. Therefore, print is more expensive to produce.
As to the question about what a book is “worth” – you are confusing price and value which are two different things. I wrote about that here: https://davidgaughran.com/2014/06/09/whos-afraid-of-very-cheap-books/
And I don’t accept your additional point about the cost of fighting piracy. This is a whole other can of worms, but I think publishers are completely wasting their money in attempting to fight piracy. And readers shouldn’t have to pay for publisher inefficiencies.
I was going to respond again to Donald, but you rather stole my thunder … and far more convincingly than I would have put it! 😀
I should also add that many of the major publishers employ someone to combat ebook piracy too, which is an ebook-specific cost.
As far as ebook piracy is concerned, that point is only valid to an extremely limited extent. Publishers (I’m talking about the big boys here) don’t employee one person for every book (not that I’m implying that that’s what you meant) but rather a team that covers their whole catalogue. Spread across the costs of all the titles produced, this is such a piffling sum it is hardly worth the mention.
I can only reiterate: The fact is many sales that until recently would have been in paperback or hardback are now being made in ebook (at generally lower prices). An ebook is not accounted for in a vacuum.
I’m not entirely sure what your position is on this point. I am for ebook prices that are very slightly lower than the current physical edition. Are you suggesting they should be free (or nearly so)? What happens if, say, in fifty years’ time the market is (say) 90% ebook – would you have higher prices then?
As a reader, my position is simple: e-books should be significantly cheaper than print editions, because it’s a digital product with less fixed costs and none of the ongoing costs associated with a physical product. As a consumer I expect to pay less for a digital object that I only license rather than purchase, and that has no re-sale value – and that goes for digital books, music, movies or anything else.
If we are talking about Hachette specifically, they are entitled to charge whatever they like for the books they publish. However, they are not entitled to engage in an illegal conspiracy to collude and force a system on retailers where Hachette controls the price of the transaction between the retailer and the consumer.
I think the ebook market will reach 80%-90% much, much quicker than fifty years, and that doesn’t change my answer whatsoever.
And you know what’s funny? The $3.99/$4.99 price that many self-publishers sell at isn’t radically cheap in historical terms, it’s actually perfectly aligned with paperback prices (adjusted for inflation) from the 1930s right the way up to the 1990s when the first big wave of consolidation in publishing started and prices started to rise. More on that here: https://davidgaughran.com/2012/11/05/self-publishers-arent-killing-the-industry-theyre-saving-it/
By the way, we had the same arguments about paperbacks not being real books, and paperbacks will never take over, and paperbacks shouldn’t be so cheap, and no serious author would release in paperback etc. back then.
I think the point is simple. If the production costs are lower, why wouldn’t the price be lower by a corresponding margin? Clearly production costs are not all of what is in the price of a book, but in cases where publishers are selling print and e-versions for more or less the same price, it is not the authors who are getting the windfall created by the lower production costs. If the production costs amount to 10% (roughly) of the cost and these do not apply to the ebook version, why am I paying the same price? The graphic you linked to explains perfectly: because the publishers are taking a larger chunk for themselves. If your graphic is accurate then the publisher profit on ebooks is 50%. So why are you prepared to subsidise this by paying “slightly lower” prices for ebooks?