No Davids in this Game of Publishing Thrones

Hachette and Amazon are embroiled in a rather acrimonious dispute over new distribution terms. Publicly it is unclear exactly what exact terms the dispute concerns, though many believe it to be about e-book pricing and discounting. The story has been widely covered in the mainstream media with some alarmingly bias pieces. David Streitfeld of the New York Times was never on my Christmas card list and he won’t be anytime soon. The mainstream media always love a story they can portray as good versus evil; the little guy against big guy. I find most of the media characterisations of the two main players some way off the mark.

The Wall Street Journal recently reported that the US Department of Justice (DOJ) has tapped three publishers on the shoulder and asked for an update on served orders and rulings by the US courts back in 2012 regarding pricing discussions the publishers may have had with others in the book industry. It shouldn’t come as a surprise to many that big publishers are once again under close scrutiny.
The Wall Street Journal newspaper (owned by News Corp—who are the parent owner and media conglomerate of HarperCollins) also reported that the three publishers in question (Hachette, Simon & Schuster and HarperCollins) are none too pleased with this uncomfortable and untimely intervention, and that the DOJ enquiries have “created anxiety in the publishing industry” and it is a “sensitive and costly issue that publishers thought they had resolved”. How very delicately put. Perhaps the three publishers don’t like being reminded that in 2012 they were found to have committed corporate collusion with Apple in an effort to unreasonably inflate the cost of e-books to customers by forming an industry cartel? And that they were ordered to renegotiate contracts.
Unfortunately Hachette Book Group finds itself batting first in negotiations, knowing that whatever settlement is agreed (primarily with Amazon), it will pave the road and conditions ahead for the other Big Five fish. When you don’t negotiate first, it’s easy to point fingers and scream: What the fuck were you thinking when you agreed to that?!
Discussions between Hachette Book Group and Amazon are not going too well at the moment and it’s led to Amazon upping the ante by dragging their feet on delivery timelines for Hachette titles (up to two to three weeks), reducing stocked inventory, and removing the pre-order feature on their websites for new titles. It’s speculated that much of the current stand-off is over Amazon’s desire to deliver discounted titles to customers and share the discounted hit with publishers rather than carrying the loss in profit themselves. I should point out those publishers, in 2011, decided on an Agency Model of agreement with Amazon, whereby the retailer acted as a retail agent for the publisher and purchased e-books at 70% of retail price. With Amazon pushing for a $9.99 core retail price for most new e-books (listed as $14.99 and higher from the Big Five), Amazon were taking a marginal loss on many major titles. Under the older wholesale distribution agreements—built around print books—no matter how much Amazon discounted a book to the customer, the publisher always got its agreed margin, whether Amazon sold the book at $10 or $5.
The trouble with the Agency model agreement is that it dictates to the retailers what price a book can be sold at (set by the publishers), limits discount margins and cooperative windowing just at a time when retailers hold the most accurate sales data and can better react to what should be stocked. Publishers have slowly but surely been conceding power to retailers over the past two to three decades, and that’s what happens when you lose touch and place more middlemen between you and the reader buying your product. Publishers need to begin to rediscover their roots from decades ago—and that means reconnecting better with both important ends of the book scale—with authors, and their authors’ readers.
If you don’t take care of your industry environment; take your eye off the ball and continue to feed the gorilla because it seems easier; then don’t complain when the gorilla becomes the 800 pound menace you feared it might become.
We’ve read what the Wall Street Journal’s slant on all of this is. Enter the Washington Post on June 2nd. This time airing the views of bestselling US author, John Green. Green is published through an imprint of Penguin Random House and quite an outspoken author on issues like this. His quotes in the Washington Post accuse Amazon of bullying Hachette Book Group. The Washington Post certainly can’t be accused of towing any particular editorial line, unlike the Wall Street Journal or New York Times. The Washington Post is ironically owned by Amazon founder, Jeff Bezos.
What’s ultimately at stake is whether Amazon is going to be able to freely and permanently bully publishers into eventual nonexistence.~ John Green, Washington Post
Green’s claims that Amazon are bullying Hachette and threatening the future of publishers are also somewhat ironic, considering his own publisher Penguin harbour Author Solutions—a questionable self-publishing service company known for its deceptive and heavy-handed upselling of expensive marketing packages to authors. I’m all for anti-bullying measures and even some of the passionate rhetoric that goes with it, but I’d suggest John Green looks a lot closer to home first before he starts taking cheap shots at Amazon.
Green then goes on to tell the Washington Post:
The breadth of American literature and the quality of American literature is in no small part due to the work that publishers do, and it’s very unfortunate, in my opinion, to see Amazon refuse to acknowledge the importance of that partnership.~ John Green, Washington Post
A few guiding points here, Johnny-boy.
Your arguments—like many in the mainstream media—imply that Amazon is the only retailer in town. It’s not—not by a long, long way. So the Hachette/Amazon dispute is also threatening the very core of American literature—is it? It’s funny how Green’s insular views reflect only what might be happening out on the prairie land in good old America. Does John Green have a thought how this might also be affecting authors and literature in little old Europe, considering Hachette is a massive French-owned publishing group. And that Amazon operates websites across the globe in multiple languages? Hachette might only be the fourth largest publisher in the USA, but it’s the third largest publisher in the world and second largest publisher in Europe. Europe—you know, Johnny-boy—that little island to the east of America?
Like Green, Malcom Gladwell is another bestselling author with a great deal to say on this. To be fair, Gladwell is directly affected by this dispute because he is published by Hachette-owned Little, Brown in the USA. Gladwell, contributing to a Q&A in the New York Times with David Streitfeld (a US national paper which has run a number of articles on this in the past week), Gladwell stated that he is ‘surprised and puzzled’ by Amazon’s actions.
It’s sort of heartbreaking when your partner turns on you.~ Malcom Gladwell, New York Times
Okay… thanks, Malcom. But could we focus on the Hachette/Amazon dispute?
Oh, I’m sorry, Malcom… you were talking about that. So, like Green, you want to play the victim role; the sensitive offspring trapped in the middle of mom and pop’s acrimonious divorce settlement? Gladwell continues:
Over the past 15 years, I have sold millions of dollars’ worth of books on Amazon, which means I have made millions of dollars for Amazon. I would have thought I was one of their best assets. I thought we were partners in a business that has done well.~ Malcom Gladwell, New York Times
Here’s a heads-up, Malcom. Amazon is not YOUR partner; it is just one of many retail partners YOUR publisher chooses to work with. You are not Amazon’s ‘best asset.’ You are not even one of Amazon’s assets. You are your publisher’s best asset, and your best combined assets are your readers and your books. If you want to cry a river of crocodile tears, then spare a few for your readers who want to buy your great books from one regular and reliable source—be it their local independent bookstore or through their online Amazon account.
Gladwell remains upbeat; believing the partnership between Hachette and Amazon can be repaired. He believes both companies need each other. Somehow I still suspect Hachette need Amazon more than Amazon need Hachette.
If this keeps going, the authors are going to have to get together.~ Malcom Gladwell, New York Times
Authors have got together and many are voting with their keyboards and the Internet, choosing to deal directly with retailers like Amazon and Barnes & Noble, with distributors like Kobo and Smashwords. They are collectively called author-publishers, and they can afford to call companies like Amazon a partner. But just like Hachette and the other Big Five publishers, these authors are also at the mercy of Amazon’s terms and conditions and a retailer with both market dominance and a publishing platform. Many indie and hybrid authors have also wisely learnt not to put all their eggs in one basket.
I applaud Hachette’s move in launching a dedicated bookstore with Books-A-million. It’s the kind of initiative that should have been undertaken long ago. All Big Five publishers need to start properly examining online platforms with direct sales to readers and fostering proper links with their authors’ reading communities. I applaud Walmart’s move to capitalise on this dispute by heavily discounting Hachette titles. If the shoe was on the other foot, it’s exactly what Amazon would do.
Much of the media coverage over the past two weeks has painted this dispute out to be some sort of David and Goliath battle. Instead, this is very much a case of Goliath versus Goliath. There are no Davids in this Game of Publishing Thrones. Mike Shatzkin, veteran industry consultant and founder of The Idea Logical Company, posted about the dispute on his blog yesterday. It’s a balanced and meticulous piece and I mention it in regards to my previous Goliath comment. Shatzkin believes this may only be fixed by further government intervention and there is not a great deal that Hachette or the other publishers can ultimately do to resist Amazon’s demands, other than hope the medicine is fairly shared out. The opening line of his piece did amuse me, though:
A great deal has been written in many venues about the current tussle between dominant Internet retailer Amazon and one of the three smallest of book publishing’s Big Five general trade houses, Hachette Book Group.~ Mike Shatzkin, The Idea Logical Blog
Only Mike could describe three of the Big Five trade houses with a sentence containing the word ‘smallest’. It’s like fussing over the size of the last five deckchairs on the Titanic! Does it really matter, Mike? You can sit on whatever one you like!
I’m inclined to agree with Shatzkin’s two core points; that if not now, then at some stage down the road further legal rulings (whether by the DOJ or FTC) are going to have to be made in a bid to prevent Amazon from hurling bricks through windows and publishers from playing the pity-poor-us, we have to sleep five-to-a-bed game card.
[Reports late today suggest some Hachette titles are now being restocked by Amazon.]

Mick Rooney – Publishing Consultant

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