What Is Amazon Supposed to Do?

*Sigh*

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.

Photo courtesy of FreeStockxchange

Photo courtesy of FreeStockxchange

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?

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About Alan Tucker

Writer, Dad, Graphic Designer, Soccer Coach … not necessarily in that order!

Posted on July 14, 2014, in Books/Writing and tagged , , , . Bookmark the permalink. 8 Comments.

  1. I ran out of any patience with Hachette at all when I found out the distribution contract between them and Amazon most likely ended in April — after a one-month extension. No kidding Amazon isn’t allowing pre-orders or keeping inventory in the warehouses. They have no contract to do so!

    Little facts like that, such as your main point, really cut through all the hand-wringing.

  2. lynnkelleyauthor

    Excellent post, Alan. Shared it. 🙂

  3. I followed your link here from Konrath’s blog.
    Very enlightening stuff, thanks for taking the time to inform. If only this song were being sung by the Pattersons and NYT editors… Well I guess the public would grow smart and the inevitable literature revolution would happen quicker.

  4. You make many clear and excellent points here, Alan. One more voice of reason can never equal too many. If what a ginormous mega-corporation is doing (taking advantage of tax breaks, declining to stock goods they have no contract to sell, etc) is the kind of step I would take to protect MY business, The size of the operation is not what makes an action unethical.

    If on the other hand what the big business does is something I’d be ashamed to tell my children I’d done (brag about record profits gained by cutting suppliers’ shares to half what they’d been IN CONTRACTS I ALREADY SIGNED, as big publishing companies did to their authors with e-book royalties, or offer contract terms that can destroy a supplier’s ability to survive in the business, as publishers do more and more with their increasingly ridiculous non-compete clauses), then I have a big problem, and I’d have the same problem if the perpetrator were a tiny mom-and-pop bookstore.

    Yep, interesting times.

    • Thank you, Bridget. I agree wholeheartedly. What really steams me is organizations like the Authors’ Guild, which should be complaining about things like terrible contract terms, etc., instead opine about the evil Amazon. Authors’ Guild is a misnomer if I’ve ever seen one.

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