Amazon vs. Hachette. Who do I want to win?
I’ve been asked this question by both readers and fellow writers ever since the whole mess started. The blogosphere has been alive with one story after another, all attempting to decipher what the contract negotiations between the two mean. Most have very little data and are written with an agenda. I would classify the majority as propaganda. Facts are few. Theories are plentiful. I’ve watched and read and mostly refrained from commenting.
The facts that are known provide just enough for one to form an opinion. Not surprising anyone, some of the best come from a select few;
From William Ockham:
“If you want to understand what a party is doing in a negotiation, a good place to start is with their public statements. In this case, we know exactly what Hachette was planning to do in this negotiation because they published their strategy. In a letter to the federal court in the ebook antitrust case, believe it or not. When the proposed final judgment for Apple was announced, it included a provision that prohibited Apple from entering into agreements that would limit its ability to offer retail discounts. The Big 5 legacy publishers got together an wrote a whiny letter to the court objecting that this violated the terms of their settlement (the court rejected this argument because, well, it was stupid). Here’s what the Big 5 said:
“Each Settling Defendant entered into a carefully negotiated consent decree with Plaintiffs. For the original three Settling Defendants, the negotiations with Plaintiffs lasted nearly one year. Although the DOJ initially sought to include a five-year prohibition against the agency model—identical to Section Ill.C in the Proposed Order—the final consent decrees permit the use of the agency model while also expressly allowing for retailer discounting for a period of two years. Once that “cooling off’ period has run, each Settling Defendant may negotiate unilaterally with e-book retailers to enter into any distribution arrangement, including an agency model.”
Let me translate that from legalese to English. The Big 5 are saying that as soon as the two year “cooling off” period is over, they want to get rid of retail discounting. Literally their only objection to the Apple settlement is that it will leave one ebook retailer who must maintain the ability to discount. The Big 5 have been waiting for two years for a chance to get rid of retail discounting. And take special note of that word “unilaterally”. That means that the Big 5 each have to negotiate independently with their retailers. Those “original three Settling Defendants” are reaching the end of their “cooling off” period in September. They are negotiating new contracts with retailers right now. Unilaterally. Which means only one of them (at a time) can try to impose their preferred “no discounting” policy on retailers. One of them has to go first.
I have a clue as to which of one of the three is doing it. The only time a single one of the Big 5 tried to negotiate a no-discounting agency agreement with Amazon, Amazon removed the “buy” buttons from their books (that was MacMillan in January 2010). So, I think it is pretty safe to assume that Hachette is the one trying it now.”
From Hugh Howey:
“Today, a different sort of war is being waged: a war of ideas and ideals. On one side, you have people who think not everyone should be published and that readers need help knowing what to read. This group also thinks that the book is the thing, not the story. Confabulating their love of the written word with the vessel they are accustomed to receiving it in, any change in how stories are delivered is seen as a threat to their cherished way of life.
The other side believes the opposite. Every voice has a right to be heard, even if we can’t control how many people pay attention. Every reader should have the freedom to choose, including the choice to go to a curated source. This group believes that the story is the thing, whether it is spoken, on a screen, in a book, or on a website.”
From David Gaughran:
“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.”
From David Vandergriff (Passive Guy):
“… traditional publishing and indie authors live in two different worlds. The business concerns, the view of the future, the willingness and ability to change, the attitude toward Amazon and the self-image of the two groups are widely divergent.
To the extent that the other panelists were representative of tradpub as a whole, PG concludes they’re terrified of Amazon. They believe that Amazon’s commitment to low prices is simply not consistent with their survival and they’re desperate to keep prices up. The idea of changing the way they operate to thrive a lower-price world is not on anyone’s radar. Neither is the concept of making up revenue and profits with higher volume.
PG prefers a simpler world:
1. Write a great book
2. Hire a great editor and cover designer
3. Put it up on Amazon
4. Tell people about it
5. Repeat a few times and quit your day job.”
All of this is great analysis and I agree with 99% of it. The question I have is how will this all end?
It’s important to note that these negotiations are more than just Amazon and Hachette banging out a new contract. The other publishers all know that whatever Hachette gets will be what they most likely will get as well. Both sides want different things and I don’t mean agency vs. retail pricing.
Amazon wants to build its customer base and grow its company. They do so by have enormous inventory, low pricing, and above all great customer service. Hachette, and the other publishers, are simply trying to secure their survival.
But this fight is really one sided. It has to do with leverage. One of the participants gave theirs away.
Hachette account for around 1% of Amazons annual book sales. In 2012 they published 800 adult books, 200 young adult/children’s books, and 300 audio books. They have a few big-name authors (James Patterson, David Baldacci, Michael Connelly, Nicholas Sparks, etc.) that account for the majority of their sales.
Hachette moves, depending on where you read it, around 80% of its books through Amazon. More than any other retail channel by far.
In short; Hachette needs Amazon. Amazon doesn’t necessarily need Hachette.
But that’s strictly from a monetary viewpoint. Why are they fighting at all? One reason; Amazon customers want Hachette’s books. For that simple reason Jeff Bezos wants Hachette’s books. (Notice I said books, not Hachette) At this point I feel Bezos views Hachette much like indie authors do, as unnecessary middlemen.
A few facts;
-the disruption taking place in the publishing industry will continue regardless of whatever deal is struck. Neither party involved can stop that now. The rate of this disruption will continue to accelerate.
-Amazon has historically focused on the customer in every aspect of its business. It will do what it feels is best for the customer, even at a loss, in the belief that it pays off down the road.
-Jeff Bezos looks seven years down that road. “At Amazon we like things to work in 5 to 7 years.”
-Hachette believes that in order to survive they must have agency pricing. Furthermore they need it yesterday. They can’t afford to wait.
-Hachette’s authors are under contract. The only way to access them is; A) Deal with Hachette, B) Buy out their contracts, or C) wait them out and offer them better terms when their current contracts are up.
So how does Amazon get the authors that their customers want while ridding itself of the unnecessary middleman in 5 to 7 years?
-Give them their agency pricing and let them kill themselves off slowly?
-Demand retail and cut them loose while simultaneously offering their authors better terms (which will scare the hell out of the remaining publishers)?
-Drag out the negotiation while applying leverage in the form that we’ve already seen, knowing that they can win a war of attrition?
-Find a middle ground and allow the publishers to fade away?
So, back to the question I’ve been getting. The better question would be this;
Would I rather win as a reader or as an indie author?
Let’s say that somehow Hachette finds a way to leverage agency pricing on Amazon. This means ebooks by Hachette return to their high prices and the company keeps its massive overhead and New York digs. That means that if I want a Hachette authors work I’ll have to pay 3-4 times the cost to get it. So as a reader I loose. (Actually Hachette looses as well as I won’t pay that price anymore, but they are apparently too stupid to realize this yet) This will drive me to seek out their books in the used book store or simply not at all. Either way, from a readers point-of-view I loose. So do Hachette’s authors,( whom I consider POW’s) but they made their bed, and due to their asinine statements of late I have little sympathy for them.
As an indie author, and I’d have to become a selfish asshole indie author, this would be a win. Readers like lower prices (who knew!?) and as long as Hachette is driving them away with their high prices this means more of them are seeking out indie books. Some of those books are my books. I sold a few thousand of them last month so I’m pretty comfortable saying this.
But I don’t want Hachette to “win”. Yes, it may help me a little as an indie author, but as a reader I want books to be more accessible to everyone. That’s a win for everybody in my book. Besides, I don’t consider myself competing with other authors for readers time. I consider Netflix and PlayStation and Football season and YouTube more of a competitor than I do other authors.
So the answer to the question is both. When I have my business hat on I side with Hachette, when I have my reader hat on I side with Amazon.
But I wear my reader hat a lot more often.