Just a quick note to let everyone know I’ll be at Hastings Books & Music in the West Park Promenade in Billings, Montana this coming Saturday, July 26th from 3-5 PM. I’ll be signing books, passing out bookmarks and other goodies, and ready to chat about all things books and writing. Stop on by if you missed your chance to go to San Diego for ComiCon!
Oh, good grief. Another post about the spat between Amazon and Hachette. When is it going to end?
That’s a question I’ve seen more and more people asking and it’s a good one. The answer, though, is more complicated than you might think. To most people, the fight is between two companies: Amazon and Hachette. For Amazon, however, this is the first in a line-up of five which will be coming one after the other in the next year or two. Each of the Big 5 publishers (MacMillan, Simon & Schuster, Harper Collins, and Penguin-Random House — along with Hachette) is going to be taking their swings at the online retail giant as their contracts expire in the relatively near future. Because of the Department of Justice ruling against Apple and the settlements those publishers agreed to, they must negotiate their deals separately with Amazon, or any other ebook retailer, to avoid the appearance of any collusion which was what got them in the legal hot water in the first place. The judge set the publishers apart by six months each and first up happens to be Hachette. Harper Collins is on deck.
The other clock that’s ticking is the two-year ban on entering into contracts which restrict the retailer’s ability to discount ebooks. Hachette settled with the government in April of 2012, but it’s unclear exactly when that particular ban will end. Most of the speculations I’ve seen are later this year. Hachette has explicitly stated in its own materials to shareholders and investors that it wishes to “control ebook pricing”.
Now, if the negotiations were only about coop advertising costs and the price for the privilege of pre-order capabilities, do you really think it would have taken seven months and more to come to an agreement that was acceptable to both parties? I am doubtful to say the least. The evidence on hand points to a larger issue about pricing, discounting, and the slices of the pie that Amazon and Hachette receive from books.
With all of that as background, enter the authors who are published by Hachette and its subsidiaries. They are understandably upset when they see their books being treated differently than others in Amazon’s store. Preorder buttons disappear. Titles show delayed shipping dates. And prices are set to the publisher’s suggested retail with no discounting. All these things, I’m sure, impact the sales for those authors on Amazon. Ire against Amazon ensues with angry blog posts, calls for boycotts, and negative publicity accusing Amazon of hurting authors in its dispute with their publisher. Hachette and other organizations pile on with accusations of Amazon “putting authors in the middle” of the fight because of their actions.
Let’s set aside, for a moment, our feelings about books, literature, monopolies, large corporations, and the way publishers treat the majority of their authors. I know, that’s a lot of stuff to set aside, but please try. Amazon and Hachette are in a dispute regarding the sale of books that Hachette and its authors supply. Amazon wants to get an agreement in place it feels it can live with — not only for Hachette, but for the other publishers waiting in line — but Hachette, by all accounts and their own lack of denial, has dragged its feet in trying to get an agreement done. Amazon has taken steps to put economic pressure on Hachette to speed up the process, yet those steps coincidentally hurt authors and drag them into the dispute. To alleviate some of that injury, Amazon has twice offered to directly help the authors involved while the companies conduct their talks.
My question is this: What can Amazon do to pressure Hachette that won’t harm Hachette’s authors?
Seriously. Think about it for just a minute. Hachette supplies products to Amazon for sale. The two companies can’t agree on terms for the sale of those products. Should Amazon continue to sell those products without a contract in the hope that Hachette will eventually offer terms Amazon considers reasonable? Is that a smart way to conduct business?
Consider this: Say I have a super nifty widget I’m designing and you have a store that sells widgets. I contact you to sell my super nifty widget once I have it produced and ask you to promote it to your customers and get them to place orders for them ahead of time so I have a better idea how many to manufacture. You think my super nifty widget is, well, super nifty, so you agree and really hype it up to your customers, collecting a bunch of preorders. Now, delivery day has arrived, but since we never signed a contract, I decide to charge more for the super nifty widgets than we’d originally talked about. You have tons of customers anxious for my super nifty widget and they surely won’t be happy with a higher price, regardless of whether you tell them it’s my fault or not. What do you do? Buy the widgets at the higher price and take the loss, or tell me to forget it and refund all those preorders? Neither scenario is especially fun for you. You operated in good faith, but I felt no compunction to do the same.
Would Hachette do that to Amazon if it kept preorder buttons for Hachette’s upcoming titles? I have no idea, but neither does Amazon and it would be bad business for them to take that risk.
I’ll ask again, from a purely business perspective, what can Amazon do that won’t harm Hachette’s authors?
How would those authors feel if Amazon simply removed all those books from their store? They are certainly within their rights to do so. There is no law in place anywhere that says you must sell my super nifty widget in your store. If you don’t like the price I want you to pay or sell my super nifty widget at, you can tell me to go fly a kite. Amazon did this once before with MacMillan when the publishers decided to enforce Apple’s pricing structure on Amazon. It was a PR nightmare for Amazon and the other publishers stood up and flexed their collective muscle to force Amazon to accept their terms. Thus began the DOJ investigation of the whole affair.
So, to any Hachette authors out there who happen to read this (ha! fat chance! if only I were so popular or influential!) or those of you just confused regarding what this mess is all about, take a second to ask yourself the question I posed and honestly examine what answers you come up with.
Maybe it’s also time to start asking Hachette: Why is it taking so long to work out a deal here? Do you really have your authors’ best interests in mind?
Here’s an excellent post by William Ockham on Joe Konrath’s blog outlining the history so far of the Amazon-Hachette dispute. It’s important for people to understand the pieces happening that haven’t been widely, if at all, reported in the major media. The Change.org petition I mentioned in my last post has garnered over 7,000 signatures so far from authors and readers alike. Amazon is by no means a saint in the business world, nor are they the devil they have been portrayed in the media more often than not. Presented in the post are the facts as we know them currently and some suppositions derived from them (apologies for the goofy formatting in spots):
Everybody’s talking about Amazon’s latest move in the Amazon-Hachette kerfuffle and the reactions have been pretty predictable. Lots of confirmation bias going around. While the public broadsides, grand offers, and nasty anonymous leaks are full of sound and fury, I’m fond of looking for the truth in the silence. What the companies aren’t saying is as important to understanding the situation as what they are saying. I’m not sure if anyone has noticed, but neither side has denied any of the specific factual claims the other has made. In fact, if we read between the lines, we can cut through the noise and see what’s really happening. I have learned* the best way to do that is to make a timeline. Our brains have a tendency to remember the order in which we learned a set of facts and it has a hard to reassembling the chronological order of how things actually happened. We should be continually re-evaluating our understanding of this situation based on new information.Recent statements from both sides have provided a lot more information about how this dispute got to this point. To avoid turning Joe’s blog into an academic article, I’m not going to footnote all of these events. If you want the source for a particular claim, just ask in the comments. My primary sources are the most recent Amazon-Hachette exchange and Michael J. Sullivan’s account of his interactions with Amazon and Hachette this year. If I have left off any significant events and gotten any of this wrong, please let me know if the comments. I’m far more interesting in getting this right than being right.Early Jan 2014Amazon makes the first move, sending an offer to Hachette. Based on Hachette leaks, we know that Amazon is offering a return to wholesale pricing.7 Feb 2014Amazon stops discounting Hachette titles.9 Mar 2014Amazon starts widespread reducing inventory of Hachette print titles. (Some folks noticed occasional short inventory of Hachette titles much earlier.)Mar 2014Amazon extends the Hachette contract into April.Mar-Apr 2014Sullivan and his business manager are in frequent contact with Hachette and Amazon. Neither Amazon or Hachette mention to Sullivan that they have no contract to sell his books on Amazon.Early April 2014Hachette responds to Amazon with counter-offer. Amazon rejects offer sometime in April.Mid-Apr 2014Hachette begins serious negotiations to buy the publishing arm of Perseus in a complex three-way deal with Ingram (which wanted the distribution half of Perseus).7 May 2014Sullivan and his business manager start reaching out to other Hachette-published authors.8 May 2014Hachette emails Sullivan’s business manager about the contacts with other authors.New York Times writer and Hachette transcriber David Streitfeld publishes story quoting Hachette about the shipping delays, but no other details.9 May 2014David Streitfeld “breaks the story”. Here is what he wrote:
Amazon’s secret campaign to discourage customers from buying books by Hachette, one of the big New York publishers, burst into the open on Friday.May 2014Hachette makes another offer to Amazon.23 May 2014Hachette finally reaches out to its authors with a letter from Michael Pietsch, CEO of Hachette Book Group (HBG).27 May 2014Amazon makes its first public statement about the dispute with a low-key posting buried in its forums. The Amazon statement includes an offer to join with Hachette to fund a hold-harmless pool of money for Hachette published authors.28 May 2014Hachette’s Investor Day publication reveals its strategic goal to gain control of its titles ebook prices. CEO Arnaud Nourry says the discounting of ebooks ends at the end of 2014. Nourry says he is traveling to the U.S. to negotiate the Amazon deal.4 Jun 2014Stephen Colbert makes an issue of the dispute on his show.5 Jun 2014Amazon counters Hachette’s May offer.20 Jun 2014More Hachette leaks to the NYT revealing Amazon’s negotiating positions.
I spoke to someone involved on the Hachette side of the negotiations, who is under orders not to discuss them and asked not to be named. This person said that Amazon has been demanding payments for a range of services, including the pre-order button, personalized recommendations and a dedicated employee at Amazon for Hachette books. This is similar to so-called co-op arrangements with traditional retailers, like paying Barnes & Noble for placing a book in the front of the store.
Amazon “is very inventive about what we’d call standard service,” this person said. “They’re teasing out all these layers and saying, ‘If you want that service, you’ll have to pay for it.’ In the end, it’s very hard to know what you’d be paying. Hachette has refused, and so bit by bit, they’ve been taking away these services, like the pre-order button, to teach Hachette a lesson.”24 Jun 2014Hachette closes Perseus deal.1 Jul 2014The New York Public Library hosts a hastily put together public forum stacked with 5 Hachette shills balanced by the inestimable David Vandagriff (affectionately known as Passive Guy by his internet friends).
8 Jul 2014Amazon’s “100% of ebooks receipts offer” becomes public.
What does the timeline tell us?1. Hachette did not negotiate in good faith before the end of the contract.
They didn’t negotiate at all. Amazon and Hachette agree on this crucial point. The first Hachette offer was in April. Amazon says the original contract ran out in March and Hachette hasn’t denied it. In my view, the party that makes no attempt to negotiate during the term of the original contract is the instigator of the stand-off.
2. Hachette knew for months that their authors were being harmed and they did nothing.Sullivan noticed that the usual Amazon discounts on his titles were gone on February 7. He saw the inventory issues on March 9. He let Hachette know about both issues. At that point Hachette had let their contract expire without so much as a counter-offer.3. We can’t know for sure, but it looks like Sullivan was the catalyst for the issues becoming public.Look closely at the timeline.4. Hachette was able to pull off a complex, multi-million dollar acquisition of a smaller publisher, but unwilling to fund either of Amazon’s offers to help the affected authors.
The publishing half of Perseus was estimated to have revenues in the $100 million range. That’s a pretty big deal in the publishing world.5. Since the dispute became public, Hachette has essentially abandoned the negotiations in favor of a concerted public relations campaign.Hachette’s last offer was in May around the time the affair became public. Amazon sent them another offer on June 5. Hachette has orchestrated a high-profile publicity campaign with big name authors, a popular TV host, and the publishing industry press taking up Hachette’s cause. Hachette has even enlisted the New York Times to play stenographer for them.
6. Hachette has a powerful incentive to drag this out.To achieve its goal, Hachette needs to delay the final agreement until late 2014 or early 2015. That is the earliest time they will be able to conclude an agreement with Amazon that restricts Amazon’s ability to discount ebooks. Moreover, developments in Apple’s ongoing appeal could substantially impact Hachette’s negotiating position. An Apple loss or settlement would make reaching an agency deal (with no discounting) almost impossible because Amazon is not going to agree to let Apple underprice them on ebooks.*I learned to make timelines like this from Marcy Wheeler, who is so smart Barry Eisler named a character in his John Rain series after her.Joe sez: All great points and conclusions, William.As per your call that the NYT has become Hachette’s stenographer, what appears to be a level-headed post in the NYT today gets several things wrong. It mentions Amazon offers 35% e-royalties compared to legacy publishing’s 25%, but doesn’t mention that’s gross, not net. It doesn’t mention the letter signed by over 7000 people–authors and readers–supporting Amazon. It assumes this battle is about Amazon taking money from Hachette, but misses the whole point that Hachette wants to control ebook prices. And it ends on a note of paranoia.There is fear here. It’s somewhat odd, considering the record profits publishers are making and boasting about, but when you think about the long run the fear is warranted. Publishers once ruled the roost. They had the key to the gate, and control over price and distribution. Readers and writers were at their mercy.And now, suddenly, we’re not.Publishers and their pundits (I’m looking at you Mike Shatzkin and Digital Book Word) refuse to believe or even acknowledge the data on www.AuthorEarnings.com, and most of them believe that ebook sales are plateauing. In fact, they are continuing to grow at a rapid pace, because of indies. But no survey or data collection shows how big the self-pub shadow industry is, so the legacy world remains clueless as to many sales they are actually losing.This is a slippery slope, because more and more authors are figuring it out.Readers want ebooks, and they want to shop on Amazon. Most writers, even those who cling to their legacy masters with Stockholm Syndrome allegiance, know the royalty difference between what their publishers pays them and what they can get on their own. As bookstores close (hello Barnes & Noble) and the paper midlist becomes unsustainable, even those steadfast legacy authors are going to have to self-publish. Publishing will be relegated to managing backlists (at least until authors begin hiring lawyers) and their major bestsellers, who are eventually going to leave as paper sales become a niche market.No matter whose side you’re on in this current dispute, the future is already written. Hachette and the Big 5 won’t be able to sustain their business model; protecting their paper oligopoly. And the mistakes they’re making right now are only bringing this future to bear even faster.
A petition was created last night/this morning on Change.org to help clear some of the air surrounding the Amazon vs. Hachette dispute and Amazon vs. the Big Publishers in general. Here’s the link so you can read it in full and sign if you feel it’s appropriate for you. I signed it to show support for my readers and also in support of letting all sides of this story see some light of day, not just the Hachette side.
I watched an hour and a half video last night from the New York Public Library regarding this increasingly nasty dispute. One of the participants (the man next to the moderator on the left side) writes The Passive Voice blog and expressed some of his opinions in finer detail in a post here (since the moderator kept feeling the need to cut him off). Because I’m sure most of you don’t have that much free time lying around, I’ll hit some of the high/low lights here:
James Patterson referred to himself at first as a wounded gazelle, then amended it to simply gazelle. (That gazelle pulls in approximately $90 million per year through his publishing enterprises)
A lawyer repeatedly called the Department of Justice “silly” and “stupid” for its ruling against the Big 5 publishers when they tried to fix ebook pricing.
The same lawyer also said that, “Lower prices are not always better for consumers [readers].”
The agent/moderator claimed that many important works (largely non-fiction) would never get published without traditional publishing bankrolling those projects.
A medium sized publisher claimed his company had published works they knew wouldn’t see a return for “twenty or thirty years” simply because they felt the work was important to present to the world.
Another lawyer/author claimed Amazon’s search engine was pay based and was unclear where he uncovered that information.
A university professor insinuated that self-published works aren’t edited.
Patterson finished by equating Amazon’s actions to book burning.
Fear was the watchword for the discussion. Fear of Amazon. Fear of monopolies. Fear of loss of revenue and livelihood. I understand these fears, especially the last one as I encounter it nearly every day. But these are mostly fears of a possible future, one which may never come to pass. Where is the fear or anger at what already exists? Big Publishing has operated as a monopoly (an oligopoly technically) for decades. If they were competitors, don’t you think one or more of them would try offering better terms to their writers in order to attract the better ones to their company? Yet this is not the case. Author contracts are nearly identical between all of the major publishers. Rights are signed away for life plus 70 years. Authors receive advances of $5000 or less for work that has often taken months or years to complete. And they are paid twice a year from an antiquated and inscrutable accounting system that allows bookstores to return unsold books in the thousands.
Now, Amazon — and indeed Barnes & Noble, Kobo, Apple, and others — has created a way for authors to publish their work and receive fair payment for that work. Readers now get to decide whether a book is worthy of their attention or not, rather than a handful of suits in a Manhattan high rise. This new technology has big publishing running scared, just like the photography and music industries before them, and they are doing everything they can to hold on to the business model that has brought them comfort and joy for many, many years.
I feel bad for the Hachette authors who are now caught in the crossfire of this dispute — which is likely only the first of several by the way. They have no control over how their publisher handles its business, so they lash out at Amazon instead. In most cases, I’m sure, those authors were simply thrilled to have a publisher take on their books. Terms of the contract weren’t negotiable, by and large, so they simply signed and celebrated. I might have been one of them if I’d been offered that choice several years ago.
It’s time, however, for authors to stop being treated like indentured slaves. Embrace freedom and independence. Yes, the unknown can be frightening, but it’s only unknown if you make the choice to remain ignorant.
To the thousands of readers who have enjoyed my work, I thank you from the bottom of my heart. You too, have won independence through this revolution in publishing. Works that would have never seen the light of day years ago because the publishers didn’t know how to market them are available in the thousands. There are more worlds to discover out there than ever before. So, go forth and read to your heart’s content and relish your independence.