Amazon vs. Hachette, vs. Writers, vs. Readers

by Doc Coleman on July 9, 2014 · 6 comments

in Rants

There is a big kerfuffle going on in writer’s circles. Actually, it isn’t so much going on as it is going on and on and on… It is one of those arguments that won’t seem to die. This is what usually happens when people are arguing back and forth between two choices that aren’t right for the question. It is like asking what should we have for breakfast and arguing back and forth between tennis shoes and a feeling of vague disappointment. Neither one answers the question, and they aren’t really opposing choices in their own right. But people will continue to argue, and will deny the fact that the question itself may not be the right question. This case is no exception.

So, where did this mess start?

Once upon a timeI guess the whole thing starts with Amazon. You remember Amazon, right? Big conglomerate that sells everything to everyone, unless you’re in the wrong country in which case they’ll fight really hard to keep you from being able to buy what you’re looking for. Well, they got started by selling books, and over the years they’ve made quite a lot of profit by selling books that other booksellers (and publishers) had written off as a bad debt. That part wasn’t so bad, although there was some questionable stuff there from time to time.

The problem that starts our little drama happened over the past few years. Amazon, despite being highly diversified, has suffered some setbacks in profitability lately. Wait. That’s an awfully vague way of putting it. Let me rephrase. Amazon is still making a profit, but they’re making considerably less profit than they were a few years ago. This has got Amazon’s stockholders up in arms, and Amazon desperate to squeeze out more profits without actually doing any more work. Because that is what you do in corporate America, apparently.

So what does Amazon do? They pick one of their big publishers, Hachette, and tell them that they’re making too much profit. They tell Hachette that from now on, their costs are going to go up, and a chunk of profit from each sale that used to go to the publisher, will now go to Amazon.

Needless to say, Hachette wasn’t very thrilled by this idea. They sued Amazon, and that is where the whole kerfuffle started. Well, not so much started as exploded.

So what is everyone up in arms about?

Well, they’re arguing about if Amazon or Hachette is protecting the interests of the writers.

Yeah. Really.

There is a lot of venom and righteousness going on, but they’re still missing the point. Neither Amazon nor Hachette are looking out for the authors.

Let’s face it. They’re both corporations. They look after their own profit and do their best to screw over their business partners to eke out the biggest advantage.

Neither of them are looking after writers or readers.

It’s really like a particularly odd poker game.

The readers are the only players coming to the table with money, but you’re not allowed to play with cash. You have to buy chips.

The writers are the only players who come to the table with chips, but they’re not allowed to sell chips at their full value. They can sell their chips to Hachette, or to Amazon, but they can’t sell chips to the players directly. They can sell their chips to Hachette for one tenth of the face value and get paid up front, but everything they get paid comes out of their eventual winnings in the game. Or they can sell chips to Amazon for three times the exchange rate, but they only get paid when Amazon sells a chip to a reader.

Readers can buy chips from Amazon or Hachette. Amazon can buy their chips from Hachette or from the writers. You would think that Hachette would sell directly to the readers and cut out Amazon, but they like to sell large blocks of chips at a time, so they sell most of their chips to Amazon.

Now Amazon wants Hachette to lower the price of the chips it sells them… so they’ve decided to stop selling chips from Hachette to the readers.

So the readers have money, but can’t buy any chips. Writers have chips, but can’t get any money. Amazon and Hachette have neither money, nor chips, but they’ve deciding how to divide the pot between them.

A very weird poker game.

And one with some nasty consequences.

If Amazon wins, Hachette will want to recoup their losses. They’ll no doubt raise prices to do that, and use it as an excuse to cut author royalties, too. If Hachette wins and Amazon can’t squeeze them, they’ll turn to other publishers, and to the independent authors and squeeze them next. Oh, and you’ll be able to forget about those Amazon discounts.

It’s a four-sided poker game, and the only players who can’t win are the ones who are actually bringing something of value to the table. And they can’t even get a cut of the pot. It would be great if the judge in this case would decide that both sides were wrong and the best solution would be to split the contested funds between the readers, in the form of lower prices, and the writers, in the form of higher royalties.

Unfortunately, that’s not gonna happen.

{ 6 comments… read them below or add one }

1 David in Arbutus July 9, 2014 at 11:04 am

I personally think we need a Justice Department to return to enforcing the antitrust laws of the US, as they were back in the days of Bobby Kennedy. That would put an end to a lot of this crap. Price fixing, collusion between publishers, collusion between booksellers, and websites that run all of the brick and mortar stores out of business are just one more example, along with airlines that merge to avoid competition, insurance companies that merge and pretend they are banks, and banks that are commodities traders; and all of them owned by a narrowing number of corporations. It is time for stockholders to be seen as gamblers with a gambling addiction, and an addiction to unrealizable profits. The Hachette – Amazon war is just the tip of the iceberg, and they both cry that they are trying to protect the consumers? Amazon would not have ruined countless small businesses, if that were it’s ethics. We’ve been Walmarted, Goggled, and Appled to death with megacorps that won’t even pay their fair share of taxes while expecting the government and the rest of us to pay for the infrastructure that supports their empires, and they want unrealistic profits while they are at it. Enough. They are the Death Star.

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2 Doc Coleman July 10, 2014 at 8:33 am

Actually, a lot of people think that the Justice Department coming after Apple and the Big Six (now Five) publishers is one of the things that set the stage for this particular debacle. Hechette is just the first publisher to get squeezed by Amazon. A testing of the waters if you will. If Amazon prevails, in the courts, or in the theatre of public opinion, they’ll try this again with other authors.

I can’t blame a company for wanting to make money. I want to make money, too. But this is one of those cases where they are poisoning their own supply line. Both Amazon and Hechette. It’s not good business for anyone.

Doc

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3 J.R. Murdock July 9, 2014 at 2:11 pm

I think you’re missing part of the argument here.

Hachette’s cover price is X.
Amazon wants to change X-Y, but pays Hachette X regardless of what Y is.
Hachette wants to force Amazon to charge X and NOT offer Y as an option.
Amazon sent an offer to Hachette in January. Hachette never responded and their contract expired. Amazon extended the terms of the contract another month. Still no response from Hachette.
Due to legal reasons (Amazon might not be able to legally sell Hachette books if no contract is agreed upon), they stopped stocking Hachette in bulk and removed the preorder buttons (can’t take preorders for books you can’t legally sell. They only order books as orders come in, and because Hachette is only good at sending out massive quantities of books and not small orders, that’s where the delay in shipping exists.

Hachette cried FOUL! in public. Amazon made more offers still with no response from Hachette to date. Hachette is holding out on responding for something, and at this point it’s still unclear WTF they are doing or what they’re thinking.

Where all the ‘noise’ is coming from is authors in both camps speculating and pointing fingers, and name calling. All this hand waving is just pent up anxiety over what’s happening and, sadly, little else.

And yes, it’ll keep going ON AND ON AND ON until something finally comes about.

Me, personally, I’d like to see Hachette charge $20.99 for their ebooks and Amazon no longer discount. It’s a win for everyone except Hachette authors who’ll never sell another ebook. Indies sell more ebooks, every other publisher with lower prices sell more books and ebooks, bookstores will sell more physical copies. It’s just that Hachette will never sell ebooks at the price point they think they will sell for.

I’d go on and on and on some more, but…yeah.

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4 Doc Coleman July 10, 2014 at 8:44 am

J.R.,

I don’t think Hachette really wants to force Amazon to give up discounting prices. I haven’t seen anything to that effect, and it would be pointless. Hachette will make the same amount from any given sale no matter if Amazon does or doesn’t discount it. The discounts come out of Amazon’s share.

Putting that to one side, this is the first that I’ve heard that Hachette has been ignoring Amazon’s attempts to renegotiate their contract. I knew the contract was up for re-negotiation, but I had not heard that it had expired. You’re right, in that if the contract has expired, it puts a new spin on it. If I was a Hachette stockholder, I’d want heads to roll. Letting a major distribution conduit contract expire and doing nothing is grossly negligent and very bad business. And it would be against the law for Amazon to continue to sell Hachette books without a contract in place to give them the rights, unless the books had already been paid for by Amazon and were considered Amazon’s property for resale. Which I don’t think would cover e-books.

My main objection is the insistence that people pick sides between Amazon and Hachette, when it is pretty obvious that both are behaving badly.

Doc

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5 Indiana Jim July 9, 2014 at 11:02 pm

“…the best solution would be to split the contested funds between the readers, in the form of lower prices, and the writers, in the form of higher royalties.”

One side already offers lower prices to readers and higher royalties to authors.

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6 Doc Coleman July 10, 2014 at 8:51 am

Except that Amazon isn’t a publisher. They’re a distribution conduit. And the problem with that is that you’re playing at Amazon’s table, in their room, with their cards, and they can change the deck any time they want. Createspace and KDP do offer some valuable services to independent authors and publishers, but that doesn’t make Amazon a hero to the people.

Just look at what Amazon did with ACX: They cut the right’s holder’s share of audiobooks from a sliding 50% to 90% in the right’s holder’s favor, based on sales, down to a flat 40% share. And what is Amazon doing to justify this larger share of sales? Nothing. They’re doing it because they own the distribution conduit and the biggest retail seller, Audible.

Hachette may not be doing you any favors, but Amazon isn’t your pal either.

Doc

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