Hugh Howey

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

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Amazon Ups the Ante

When Amazon first spoke up about the stalled negotiations with Hachette, they proposed an author pool to support Hachette’s authors to be funded by both companies. Hachette refused.

According to a story breaking now, it appears Amazon has sweetened the deal by suggesting that Amazon and Hachette both forego all profits of any Hachette ebooks sold and allow that money to go directly to the author. 100% of it.

As a reader, I love this idea. Let my money go to the artists and come out of your pockets while the two of you duke it out.

It also sounds as if Hachette has been slow to negotiate at all. If all of this is true, it backs up everything we saw the last go around with Macmillan: Amazon getting the blame while publishers refuse to negotiate or use dirty tactics while hiding behind the outrage of their authors.

I really hope Hachette accepts this latest offer. If you want to encourage them to do so, sign our petition to Hachette, which asks them to stop fighting for low wages for authors and high prices for readers. Nearly 7,000 people have already signed.

C’mon, Hachette, do the right thing.

50 replies to “Amazon Ups the Ante”

According to the WSJ, Hachette “quickly rejected” it.
And it was “dismissed” by Roxana Robinson, the president of the Author’s Guild.

“Fuck you, writers.” That message is coming through loud and clear.

Ohhh, but what about all the NURTURING they do?! Vital!

I’m so disappointed that they rejected it, but not at all surprised. I’m shocked that some authors out there continue to write pro-Hachette screeds when they are blatantly treating authors so poorly.

Amazon should just proceed with the pool and distribute it evenly to all Hachette authors affected by the negotiations, writing checks monthly as per their business model. Maybe Colbert can show off his Amazon check on air.

I like how the “rival” letter is given one sentence in the most recent WSJ article, Amazon Dangles an Offer to Authors:

“There also has been a rival letter from self-published authors in support of Amazon.”

And a dissertation on Preston’s.

I was a surprised (!) reader of the Wool saga when I finally broke down and purchased a Kindle! It was right there when I was looking for stuff that Amazon might make a buck off (and it was a Trilogy! Ooh…)! At a discount… One of my ever best discounts! Heh, who wants to know how often I’ve bothered to react to being discounted… Well, up there! :P

But this book is so good I could almost forgive the author from sharing the universe with other writers!!!

Classy! And hilarious – trying to peel off the Hachette authors from their support of the mothership.

There isn’t a chance in h*ll Hachette will take the offer – now let’s go tell everyone that Amazon made it. Can it be posted as an addendum on your petition? Probably not, as people’s signatures would be affected.

But those of you who started the letter should publicize Amazon’s offer, as you are doing.

Sitting here chuckling.

Okay, back to writing.

Hachette’s first and only priority seems to be it’s bottom line.

If they were so concerned about authors and literature, we wouldn’t be here.

And what I detest the most about this is the apparent game of “keeping the masses ignorant while we plunder the riches”. And I’m not anti-publisher, I actually believe that they can serve a great role if they really wanted to. But the slides show the real picture and it’s not pretty.

I LOVE this move by Amazon. It basically puts Hachette in a position it can’t win. If they reject it, as they seem to have, then they look like a greedy corporation without a care for their hard working authors. If they accept it, then Amazon looks like a savior. It is a bold, calculated, and decisive move. Well played, Amazon. Well played.

That is at least a five on the Vetinari Scale.

(Vetinari scale goes from 10 to 1, lower is better. Only one man holds a #1 rating. If you don’t get this joke, do yourself a favor and Google “Lord Vetinari.”)

Hugh, As you might know, I have little love for the traditional publishing juggernauts and their increasingly antiquated business models. But I think you are ascribing too much virtue to this proposal by Amazon. Amazon is suggesting a move that won’t hurt Amazon much (because Hachette ebooks are a small percentage of Amazon’s business) and will hurt Hachette a lot (because Hachette ebooks are a big fraction of Hachette’s business). It plays well, but I doubt Amazon’s primary concern is the well-being of Hachette authors. It’s a PR move. They know that Hachette won’t agree to it. It makes Hachette look bad and puts pressure on them.

That’s my take, anyway. Who knows?

They previously offered a 50/50 split to fund a pool to support Hachette’s authors. Hachette declined. What has Hachette done? According to today’s news, they haven’t even been negotiating.

Amazon created a similar pool for Macmillan authors. There’s no reason to believe they aren’t sincere.

By Post Author

This would be a much bigger hit to Hachette, since an estimated half of piddly-ass royalties is way smaller than the entire wholesale price of the book. Especially when you consider that the only other datapoint we have on similar situations (MacMillan) indicates that Hachette probably hasn’t actually lost that many sales.

OTOH, it’s also a lot more to Amazon, since an estimated half of piddly-ass royalties is way smaller than discounted retail minus wholesale… and if it isn’t, it kinda gives the lie to the idea that Amazon is some kind of bloodsucker drawing the life out of Hachette and its authors. If the author makes more money than Amazon on the sale of a book, that might be a first in the history of retail bookselling.

At bottom, the proposal is cute PR, but mostly irrelevant. If they were able to agree on it, they’d probably be able to agree on a larger deal anyway.

The real point is this: Amazon will happily embrace joint financial incentives to reach an agreement. Hachette won’t. So who is standing in the way of an agreement then?

This whole thing keeps getting more and more riveting. I’m trying to look away (since I have an overdue book to finish), but I can’t! It seems as if it’s snowballing–as if something interesting is happening every day now.

The offer is really interesting. I’ve never seen a distributor or retailer in the book world do anything like that before.

It was virtually certain that Hachette would reject it, but I find it very interesting (i.e. telling) that they didn’t make a counter-proposal.

I also find it interesting that upon being turned down, Amazon came out with that “we call baloney” statement and stating that Hachette (in contrast to publishing pundits and the media portraying it as a plucky underdog) is part of a $10 billion global conglomerate with $100 million in annual revenue.

I think that throwing-down attitude in Amazon’s reaction, combined with the initial proposal, is an attempt to reframe the story in the media. The story has so far largely been portrayed as: Hachette, a pluckly underdog, is trying to protect its authors from Amazon, a ruthless predator.

The story Amazon told today is: Hachette part of a massively wealthy global conglomerate, is focused on protecting its profit margins rather than its authors, and has been recalcitrant and incompetent in negotiations.

I also think that Hachette making a petulant and not very articulate refusal of the proposal, and NOT making a counter-offer, makes them look weak. A savvy or innovative counter-offer would have been the smart reaction here, it would have made them look like a fellow player. Now they just look… pretty much the way Amazon has described them…

It also makes Hachette’s defenders look like dupes.

We went through this with Macmillan. Amazon was the one being bullied.

Same thing is happening again. And I don’t doubt for a moment that the publishers have a coordinated plan. There was a joint letter to Cote that practically spelled it out. I think it went like this: “So, we all hold out for agency, right? We try to diminish Amazon’s market share, no matter what? We merge, we get bigger, and we take this fucker down.”

“Oh, and no emails this time. No talking from here forward. That way, it’s not collusion.”

Penguin + Random House
HarperCollins + Harlequin
Hachette + Perseus
(HC & S&S were in merger talks 2 years ago. Look for S&S to team with someone within a year)

Hachette’s slides show a desire to increase size to gain leverage over book PRICING. Not margin, but pricing.

Amazon wants a $9.99 cap on e-books. They’ve always wanted this. It’s no secret. It’s consistent.

The Big 5 want $15.00 e-books. They’ve always wanted this. it’s no secret. It’s consistent.

I’m on Amazon’s side.

By Post Author

Like the last offer, this is somewhat akin to a hostage taker asking the friends or parents of the hostage to pay for the hostage’s food while the hostage is locked on the dungeon. Nothing generous or magnanimous here. If anything, this telegraphs to the other big 4 publishers that they’ll see their Amazon sales collapse if they enter into a similarly protracted contract negotiation. The publishers need Amazon more than Amazon needs the publishers. Do the publishers realize this?

Mark, you also believe that the 5 publishers were not guilty of colluding, and that it’s people’s “opinions” that they might have done something wrong.

By Post Author

I suspect Judge Cote’s 160 page opinion carries considerably more weight. I’m not much for reading judge’s opinions (watching paint dry is preferable) but hers was plain-spoken and quite thorough.

I thought her opinion was quite funny in places, too–I got the impression that by the end of the trial, she was praying to meet a responsible adult–just one! is there even ONE?–connected with this case.

These two companies need to settle this thing now so we can all get back to work. This is way too distracting! Like everyone else, I’m flabbergasted by the media bias towards Amazon here. This whole thing is such a car wreck, hard to look away. Yeeesh!

This is from Seattle Times.

It claims Preston said the following:

“Hachette would never accept something like this,” Preston said of Amazon’s proposal, saying it would violate writers’ contracts. “It seems to me like an attempt to divide authors from publishers. It seems like a negotiating ploy rather than a serious attempt to bring the two sides together.”

…

Three days after posting the petition, Preston said he received an email discussing the e-book sales offer from Russell Grandinetti, an executive at Amazon, followed by a phone call. In a “cordial” conversation, Grandinetti asked him what he thought about the proposal, Preston said.

“My message was, look, we’re not against Amazon, and we’re not for Hachette — all we’re asking is for you both to settle this problem without hurting authors,” Preston said.

Preston said accepting the offer would be a “moral and ethical violation,” as well as a contractual one. If he received $9.99 a sale on a digital book, he would make millions in a few months at the expense of his publisher, he said.

“That’s money that’s owed to them because they already gave me an advance, which I’m trying to earn back,” Preston said of Hachette. “It would be financially devastating to Hachette and really not affect Amazon at all.”

No need to pick this apart, it really speaks volumes on its own.

Preston is a great writer and he may be a great guy, but this???? But then again, with a publisher… no make that a $10 billion conglomerate peering over your shoulder, what’s a guy to do?

Amazon: Hey Doug, we’ve got an idea to help authors. What do you think of it?

Douglas Preston: Oh my GOD, Amazon, NO! All we’re asking is for you to help authors!

Amazon: Whu…? We’re offering the authors a payment equal to 100% royalties. How is that not helping?

Douglas Preston: Why won’t you just THINK OF THE POOR AUTHORS?

I found this move by Amazon fascinating! One thing it says to me is that since Amazon can return Hachette books to “normal” within a few days, Amazon is the party behind the delayed shipments, taking down the pre-order buttons, etc (I’ve seen debate on other sites that all of this might be caused by Hachette). To me that means Amazon is the one who drew Authors into the middle of this negotiation. I’m not saying they didn’t have a right to do this as a negotiation tactic — as has been pointed out many times, business is business. But because of that, I don’t see this offer as being altruistic to Hachette authors — if Amazon truly wanted to remove authors from the middle of this debate and not see them harmed, they’d go back to treating their books the way they treat every other publisher’s books.

As far as negotiation tactics go, I don’t think anyone saw this coming. It’s a novel idea and seems designed to sway the PR side of things. Which seems to suggest that Amazon is concerned over the way PR has gone for them. While there’s been a lot of media against them, I wouldn’t have thought it would be enough to make Amazon concerned.

The really important part of Amazon’s proposal is the revelation that there has been NO real negotiations with Hachette. By all rights, Amazon should not stopped at removing preorder buttons and purchasing hardcovers as needed, they should have removed the buy buttons as well as ceased ordering any hardcovers. They have no contract with Hachette. They have had no contract with Hachette for FOUR months. That’s not the usual course, continuing to sell a product when you have no contract with the supplier. Amazon continued with the old, expired contract since March hoping (naively, it seems) that Hachette would decide to negotiate in good faith.

Not only are they not negotiating, they’re trotting out their authors with their sad stories in an attempt to paint Amazon in a bad light. Hachette doesn’t want just any contract, they want a no-discount agency contract. Hachette’s cartel buddies expect for them to hold out for nothing less. Hachette is delaying until September, when they are once again eligible to sign agency contracts. However, since Judge Cote likely sees this delaying tactic for what it is, an end-run around her order for the publishers to stagger contract negotiations, she is probably very displeased. If Hachette ends up in front of her again (they probably will), it will be an ugly affair.

“Hachette is delaying until September, when they are once again eligible to sign agency contracts.”

I was reading some comments on Konrath’s blog last night with a similar theory, and I find it pretty persuasive in light of yesterday’s statements. Amazon complained about Hachette heel-dragging and being non-responsive for =6 months= now, past expiration -and- past extension of the previous distribution deal. Even for a publisher, that seems like odd behavior. And even in Hachette’s angry rebuttal–even in their OWN version of events–it’s clear they’ve been heel-dragging and unresponsive. So their creating this whole mess as a giant STALL until the court order expires in September… has become a persuasive theory about what’s really going on here.

“However, since Judge Cote likely sees this delaying tactic for what it is, an end-run around her order for the publishers to stagger contract negotiations, she is probably very displeased. If Hachette ends up in front of her again (they probably will), it will be an ugly affair.”

Do we have information or evidence that the court is monitoring the situation? (I’m not challenging, I’m asking. Were there checkpoints established in the settlement? Or has the court moved on to other cases and forgotten all about this settlement?)

That is ridiculous! A big publishing house will never agree to that. It’s even less profitable for them. Actually, there’s no profit in this at all for them. Why would they agree to this? It would be like punishment for them.

Why would Hachette agree to this – to back up all the posturing they have done about how much they care about authors. But of course they have declined the offer – because in reality what they care most about is their own profits and bottom-line.

Good God, will I ever get any work done?

This Amazon – Hachette war is just too riveting. Now it seems as if Hachette is not negotiating at all. This can only mean they are waiting to be able to push Agency again once their time is up.

I can’t blame Amazon for removing pre-order buttons and not restocking Hachette books, if Hachette has not even contacted them about renegotiating their contract.

Push has come to shove and neither side is going to budge.

*gets out popcorn*

There’s a larger message Amazon is sending Hachette here. Look at what they actually said:

1) They are willing to give up all revenue from Hachette’s books.
2) They are calling Hachette’s bluff about Amazon “hurting authors” in a way that publicly gives Amazon the moral high ground.
3) They are able and ready to make a site-wide change affecting all Hachette titles within 72 hours.

It’s smart bet that the 72-hour clock is ticking right now.

Expect to see all Hachette titles disappear from Amazon shortly. And the most ironic part? Because of all the media exaggeration to date about Amazon “boycotting” Hachette titles, the boy can’t cry wolf again.

So Amazon has already paid the price in bad PR for what they are now about to do.

I think Amazon should just make a big announcement that Hachette refuses to deal despite repeated attempts on Amazon’s part, and refuses to enter into a plan to assist authors, and so they have no choice but to stop selling H books…then take down all the buy buttons for Hachette books. Period.

Plenty of other books to buy and read. Very few readers will probably even notice.

Mir, how dramatic that would be. I can see it now. “We have been operating without a contract too long. In three days all hachette titles will be removed until a new contract is in place. Meanwhile because hachette has rejected two proposals to contribute funds to compensate authors for their losses during this debacle, amazon alone will offer funds to any hatchette authors who apply. We do not expect to hear from the million dollar earners who publicly spurned our previous offers, so more funds will be available for the mid list and debut authors. Authors should not be punished for their publishers incompetence. We are giving 3 days notice so Hachette can upload its books to KDP. We will offer technical assistance with KDP

The last offer was so tactically brilliant it makes you think something else is indeed coming.

I don’t want that to happen, TK.

Because it would be so interesting, I’d spend the next month RIVETED to the situation, reading everything I could find, instead of working.

I need this situation to get LESS itneresting, not more so! I need to look away and concentrate on MY life more….

Ha! Exactly!

Only fiction writers could dream it up . . . except after that last curve ball, I wouldn’t put it past Bezos.

I will admit to having fantasized it down to the details of how he distributes the money — from his own funds — while warning the next publisher up to bat that he can’t keep compensating authors who suffer because of publisher incompetence or (even HE) will go broke (ROFL) so the next publisher better not call his bluff.

Here’s what I learned from Shatzkin — even though he never actually said this: Publishers are banking on the fact that Amazon would never ‘hurt its customers’ that way, so it will never pull Hachette titles.

But you can’t keep selling books for a publisher without a contract. You just can’t.

It just occurred to me there’s a pattern here. If Amazon does anything to hurt Hachette, it isn’t really Hachette being hurt, it’s the customers and authors. How long is that going to work?

This is why Amazon is practically powerless in these negotiations. They can’t harm Hachette without harming authors. It’s a PR nightmare. Hachette has ringed itself with innocents. They are happy to punt the current deal down the road for all of time, or until they can regroup with their colluders and fight for agency again.

By Post Author

Laura, the first thing I thought when I saw the news on Publisher’s Marketplace was, “The publishers complain nobody can compete with Amazon because they are too big and strong. Really, the problem is that Amazon is too smart for them.”

Well, the “problem” with Amazon, I have always thought, it that it’s a competitive, innovative, and efficient company run by shrewd business people… in an industry where all these qualities are virtually unknown (and even frowned on). Even years after the other businesses in the book world realized Amazon is a game-changing player that threatens their existence, those qualities are still largely unknown (and even frowned on) by the traditional publishing world. Amazon is a 21st century business in an mid-20th century industry. (In “The Battle for $9.99” about the collusive price-fixing case, one of the things that come sup several times is Apple thought the publishing CEOs were idiots (the court case introduced internal Apple correspondence). One wonders what Amazon thinks of them.

Honestly, we wouldn’t be in this mess if journalism had done its job. Where the checks and balances of journalism broke down was in the self-interests of the journalists themselves. They are either owned by publishers, work with publishers, or dearly want to be beloved by publishers. That leaves absolutely no one to talk about the criminal activities and bumblings of the Big 6 (now 5).

By Post Author

I think an additional factor–probably the primary factor–is that no one outside of publishing understands it OR is very interested in it. And since these are complicated stories and situations, that means most media coverage is poor. Compared to politics and banking and Hollywood celebrities, there’s not much audience, money, or mileage in journalists learning his stuff well and reporting it in analytical detail.

Some perspective from a reader unconnected with publishing….

I wonder if its occurred to the Big 5 that relatively few readers are willing to pay more than $10 for an e-book. Heck, unless its one of my favorite authors, or the next book in a series I like, I won’t even pay $10 for an e-book…there are too many interesting books priced much cheaper (like Hugh, for example, or Ramez Naam).

Anything with a price over $10 either gets pushed to the bottom of my reading list or checked out from the library. Or to put it another way….I’ve got 30+ e-books on my reading list which sell for less than $5 on Amazon….so why would I buy a more expensive book when I’ve got cheaper books I also want to read.

I think publishers are forgetting how much competition there is among authors now….if your book is priced too high it doesn’t get bought (or read).

I think that when we look at various statements coming out of publishing–and also look at the panelists on the live-streaming NYPL panel last week–we do NOT see the realization that few readers are willing to pay more than $10 for an ebook, consider that price gouging, and will instead choose lower-priced books by the same authors (backlist), or other authors whose books they enjoy, or new authors recommended to them–or go to the library.

In “The Battle for $9.99” Apple wanted to cap the price-fixing ceiling at $12.99. Amazon had told the publishers there was price-resistance above $9.99. Apple was now predicting there would be price resistance above $12.99. The publishers didn’t listen, and conclusion of the deal stalled because they wanted higher prices. Apple, which wanted the deal signed and in effect before the iPad launched soon (so it had a deadline) finally counter-proposed that all hardcover books priced at $28 (the standard hc price at the time) or lower would have an ebook edition price cap of $12.99; any book priced higher than $28 could be priced up to $14.99 in the ebook edition. The publishers agreed, the deal was signed, and the price-fixing scheme rolled into play…

And the court case introduced a message from a CEO to his staff, after he signed that deal, instructing them to start raising hardcover prices above $28.

Well, if by “people” you mean writers, I don’t think so.There are nearly 7000 signatures on the letter you circulated, whereas there are only a few hundred on the letter Preston circulated. Is that an anomaly, or does it represent something?

If you mean “media,” well, yes. But parroting Hachette’s soundbytes and framing a conglomerate as an underdog makes a better story for all the reporters who don’t know much about publishing and have to keep delivering copy and commenting in front of cameras.

IF you mean readers… I’d say definitely not. My friends, nearly all of whom are readers, objected to the way new book prices rose in 2011 and stopped buying higher-priced ebooks. I was at a party with a lot of readers last weekend, and I floated the prospect of higher prices–and everyone there was very resistant. These are people with salaries and dispoable incomes who enjoy reading new bestsellers, but they’re against price-gouging. They’re also informed consumers, and they started talking about the fact that an ebook has no physical format, doesn’t involve paper, printing, warehouses, shipping, and that like other formerly physical products they now buy in digital format, ebook prices should be LOWER than paper prices, not equal to or higher than.

Readers aren’t paying attention to this–but they’ll pay attention if they think books are overpriced, and all indications I’ve seen are that they’re against ebook price hikes and price-gouging.

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