Hugh Howey

Bestselling author of Wool and other books. Currently sailing around the world.

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Amazon and Hachette Go to War

Several of my friends are caught up in this battle between Hachette and Amazon. My heart goes out to them and to the readers who are impacted by this. The same thing happened to me last year as Simon & Schuster and B&N couldn’t agree on co-op money (the dollars spent to ensure high visibility placement of books in stores). While on book tour for WOOL, you couldn’t find the title in 99% of Barnes & Noble stores. It was a crushing feeling. And now it’s happening again.

What I find fascinating is the increased coverage this time around. The NYT and Publishers Weekly have published scathing reports accusing Amazon of being a bully. I would have loved some of that directed at B&N last year. You see, Barnes & Noble was holding authors and readers hostage in order to wring more cash out of publishers, because they are having a hard time making that money by actually selling books. They got a pass for this. What is Amazon up to?

The best guess is that e-book discounting is at the heart of the negotiations. Amazon wants the ability to discount e-books as low as it likes, even losing money on the titles if they choose. The publisher (and author) get their full cut, but Amazon takes a beating. This is likely to out-compete other e-book distributors and to continue the adoption of e-books. Publishers want to keep e-book prices as high as possible. In dealing with my own publishers, I have learned that most of this pressure comes from brick and mortar bookstores, who are left out of the e-book revolution. (The PW article backs this up).

Bookstores threaten to not carry a publisher’s books if they price the e-book too low. Publishers demand that Amazon charge more for their e-books or limit the discounting, even though it doesn’t impact how much publishers or authors earn. So what you have is a company fighting for lower prices for customers, while keeping the pay for publishers and authors the same, and they are evil. While B&N holds publishers hostage just to rake in more cash to present customers not with what bookstore employees wish to highlight, but what they are paid to highlight. The backwardness of this PR war are baffling to me. Until you look at where it originates: PW is a weekly rag for bookstores. The NYT made their stance known when they stopped including the e-book bestsellers in their Sunday Book Review. The masses get their info from the traditional machine, and so they side with mafia tactics on the one hand and cry out against a distributor trying to keep their prices down.

The real losers are the authors and readers, of course. I hope this gets resolved soon. It’ll be a great day when publishers realize they stand to lose a lot by allowing bookstores to dictate their business decisions. Especially when it’s the large chains that put so many mom and pop joints out of business over the past decades.

37 replies to “Amazon and Hachette Go to War”

I guess I don’t get how this can even be a legal issue. If Amazon is paying the publishers and distributors their agreed upon price, how can they even pretend that they should have say over whether Amazon takes a loss at resale? Amazon is fulfilling it’s contractual obligations. If they want to lose money on their end as part of a calculated business strategy to increase market share, why would any outside party think they should have a say in that?

The whole situation is ironic because the legacy publishing system, if that’s what you want to call it, created the need for a company like Amazon to exist with the way they released and priced books in the past. If Amazon has become a monster that threatens their continued business, who do they have to blame besides themselves? If they’d treated authors and readers fairly from day one, got into the online retail game before it was too late, and stopped trying to act like the literary equivalent of the Mafia, they wouldn’t have Amazon to compete with at this point.

“Amazon is a bully” is starting to be a tired excuse for the publishing companies to use in any context. So long as Amazon is fulfilling its legal obligations, that is.

It’s beginning to sound a lot like a three year old yelling “Johnny won’t play fair with me!”.

I saw a comment elsewhere that pointed out more of the double-standards: When bookstores refuse to carry Amazon-published books, they are celebrated as champions. What about those authors? I guess they don’t deserve our sympathy since they signed with Amazon in the first place? How interesting is that? Practically every bookstore in the country punishes those authors in order to spite Amazon, and the NYT and PW have never taken those bookstores to task for refusing to stock those books.

By Post Author

AND… in addition to your point, Hugh…

The decision to carry any books, or price books within an individual business (within legal boundaries of course) should be the decision of that individual business.

The bookstores can carry what they want, and Amazon can do the same.

Yes, the authors are affected, and that isn’t “right” … but those authors could be marketing their own books and selling them themselves, too. But because Amazon and other bookstores offer a valued distribution channel, authors choose to use those distribution channels instead.

So, the bookstore, or Amazon, controls the “rules” (again, within legal boundaries) of that channel.

Life isn’t fair sometimes. It’s a fact of the business world.

Amazon isn’t a bully, Jeff Bezos just figured out how to use books as a loss leader for a bigger business focused on the customer (generally, Amazon isn’t perfect nor is any other business)… and he also figured out the “future” of those books before the publishing industry did.

This asks for one of those authors, to go to those bookstores, like they are shopping as normal consumer. Then they approach one of workers and tell their name and they are an author of such and such book and he is offering them to sign a few of the copies of their books, that they have in store.

Then see the reaction of clients in store unfold.

To be honest, this practice of these bookstores can be considered criminal. if they can keep up with the advances of technology, it is their problem, not amazon.

I tend to translate that excuse as “Amazon is better at bullying than we are!”
As Hugh pointed out, these are the same companies that had no qualms about squashing any mom and pop stores that got in their way.

You know, my head tilted askew and I couldn’t help but say “what?” when I read the original article. They even asserted that the publisher’s would have to pay the authors less???? Simply, the publishers don’t want their hard copy books to compete with the e-books. What better motivation for the avid reader to buy an e-reader if the e-books become more affordable? If the e-book is only discounted 3 or 4 dollars, then I might as well get the book from the bookstore.
I always wondered how much more the publishers made with e-books. The costs for the covers, editing, formatting, etc. can’t be different for a hard cover or an e-book except for the paper and distribution. Wouldn’t the profit margin for them be bigger with an e-book?
How can some indie publishers (Entangled Publishing) be so successful with a different business model (paying authors more, using social media) and the big publishers bitch and moan about how they can’t change. The publishing houses have become the post offices, we want them but they don’t have the volume to maintain all the locations. Do the post office people tell people to stop paying their bills online?
I am feeling sorry for the authors, as they are the ones who face the brunt of these politics.

I took the simple approach and simply stopped buying any books from Barnes & Noble. Amazon carries everything I want, they support authors (both indie & traditional), they aid authors in promoting their work AND they “push” what readers want to buy based on sales not display funds from publishers.

I easily spend $2,000 a year on books (hardcover &ebooks) and probably well over $5,000 with Amazon as I buy a lot of other stuff like games, electronics, etc from them. Amazon tracks what I buy and their recommendations on my screen are based on my own shopping practices, not money their received from someone else to push something I have no interest in buying.

Great insight on this story, Hugh. And it’s also interesting how quickly the Legacy mouthpieces ran with another “Evil Amazon” story, complete with quotes on how awful they are, without even pausing to consider the other side of the story. My favorite so far was from the AG vice-prez who called Zon a “repressive regime.”

Seriously? The AG wants to throw stones about repressing authors? Funny.

All in all, sounds like this story could be a Snickers commercial: “The possible danger of getting caught in between distribution scuffles from BigPub’s nearsighted obsession to protect print; just another reason to skip Tradpub and go indie.”

Amazon tends to not make a profit. They plow almost all of their extra revenue into building their business. This helps them in countries where profits are taxed. I don’t think that is unfair really.If people think that is bad then have the government change their tax system to something like a value added tax

Please note I am not saying somebody should or shouldn’t do this, just pointing out the Amazon has a strategy that happens to minimize taxes – it is not a result of some unfair business practice or political favoritism. The whole discussion of whether it is better to go with the Wall Street quarterly earnings mentality or what type of tax policy a country should have are much bigger debates.

Sales taxes are a different issue and like Hugh says in the US they pay in most states now. I suspect that is part of why they are pushing out more warehouses and faster distribution in the US…they figure “why not, we are already paying the sales tax”.

Excellent article. As both a traditionally published and independent author, I have experienced firsthand the repressive practices of BN. Now that BN’s finances have become more desperate, so have their business practices. We are in a harrowing transition phase, but at some point BN will cease to be a significant influencer in this market. Hopefully, alliances of independent booksellers (as well as big box distributors) will mature to establish a new ecosystem more friendly to content creators. Amazon has been a great boon to independent authors on many fronts, but nobody benefits from a monopoly.

I beg to disagree. Amazon is not fighting for lower prices. They are fighting for market share to wipe out the rest of the competition by selling bestselling books, at or below cost, which no other company can afford to do. Just liked they changed royalty rates on audible, other royalties will change too as soon as there is less competition.

Yes, let’s rail against a company for what they MIGHT do while celebrating publishers for the horrible royalty rates they pay now and the higher prices they collude with one another to pass along to their consumers.

Genius.

By Post Author

@Steven … so what?

Smart authors, who build their writing business, will market themselves (and of course, their books) and build connections with their readers via email, social media etc…

They will treat their business as a business.

That way, IF Amazon does anything like you say, they will be prepared to use the next distribution tool for their books that comes along.

And they will have their book rights, won’t have to settle, etc…

Publishers stand to lose a lot when they let anyone else dictate their business decisions. It is not true, as some comments assert, that Amazon or any other business entity has some sort of legal right to charge whatever they want for a publisher’s books. Publishers and Amazon have contracts, and those contracts set terms. Read Brad Stone’s book and find out how manufacturers in other industries have dealt with Amazon’s pricing policies. Look at how Apple enforces a narrow band of pricing across every distributor of its hardware.

Publishers were extremely shortsighted in the 1990s when Amazon arrived and ceded way too much pricing latitude to Amazon. As a result the retail display space for books–the place where folks actually encounter books and make buying decisions–was decimated. Publishers did a whole lot to destroy retail bookselling by doing nothing to put a floor under the price of their products. Amazon doesn’t discount books because it’s a charity. It discounts books to gain customers for a wide range of products and services. Amazon built its customer base on the failure of publishers to see the chess board in front of them. One of those services Amazon provides is publishing services for authors. Amazon makes a lot more from selling the works of authors published on the Amazon platform than authors published by houses. But selling the works of traditionally published authors delivers the customers necessary for sales of Amazon published works. And electronics. And diapers. And toys. And everything.

Is Amazon evil? Spare me. This is business as usual. Just, please, don’t parrot the Jeff Bezos talking points, like: Amazon is “fighting for lower prices for customers.” Amazon is fighting for customers. Their lifeblood. The only way they can keep their massive infrastructure working. (Talk about overhead!) A company can only remain unprofitable as long as it is growing something that shareholders see as more worthwhile in the long run. That is customers, not low prices.

Well, some corrections in assumptions made here should be corrected. First and most importantly, prices that Amazon charges impact authors directly. Here’s why:
First, Amazon is entitled to charge whatever it wants for books.
Second, ebooks are especially open to a variety of prices and Amazon proves that by charging quite a few different prices for the same ebook over time.
Third, Amazon pays all publishers 70% of whatever it collects by selling the ebook unlike the print book where they pay publishers around 50% of the cover price regardless of what they sell it for.
Fourth. The publisher pays the author 25% of whatever it collects from Amazon. So the breakdown is something like this:
Amazon makes 30% of the selling price, the publisher makes (after giving the author his or her 25% share) 52.5% and the author makes 17.5%. So if Amazon sells at a lower price, then everyone gets the same percentage of that lower price. And of course the same the other way around. Just thought I had to clear that all up.
Jerry

Sorry, Jerry, point #2 is correct and the rest are incorrect. Amazon is not “entitled” to set whatever price it wants; it is “allowed to by contract.” Contracts govern that, not some abstract “entitlement.” Commercial publishers are not paid 70% of whatever it collects. Again that is set by contract, it is a ,lot less than 70%, and it is (at least for larger publishers) paid on the publisher’s list price. An author’s share is set individually by contract and can vary with a number of factors. Some authors are paid on net, some are paid on list. It is not true that if Amazon sells for less, “everyone gets the same percentage at that lower price.”

Sorry Dean, I do this for a living. I have audited and do audit just about every major house and quite a few smaller houses in the country and although houses and Amazon do indeed work by contract they are without exception as far as I have seen all set at 70% of net dollars received for all ebook sales. And with some very minor exceptions all authors receive 25% of net receipts from the publishers and yes that is also under contract. Some blockbuster authors can and do get better term, some were able to get a royalty based on cover price but no more.

“Amazon is evil for extorting authors?” What nonsense. Amazon and Hachette are simply big businesses bargaining with each other. Is Amazon asking for prices that are too low? Is Hachette asking for prices that are too high? Do we even know what each is asking for? If not, why in the world should we assume Amazon is being unreasonable, and not Hachette?

Maybe if we have more data we could weigh in and moralize about which big business is more righteous. Till then…whatever.

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