Updated: ‘Amazon Derangement Syndrome’ characterizes dispute between Amazon and Hachette

So, there’s a thing. Over on The Passive Voice, and some other blogs with similar points of view, they refer to it as “Amazon Derangement Syndrome (ADS),” for the way a certain class of people seem to like to run around like chickens with their heads cut off whenever the evil Amazon does another evil thing evilly.

Now, I’ll grant that ADS might not be the best term to go around using if you want to engage in serious discourse, given that the sort of people who toss it around are likely to be just as opinionated in favor of Amazon as the alleged ADS “sufferers” are against it. All the same, it’s kind of telling that there’s enough of this kind of sentiment going around that people have actually coined a cutesy term for it.

Regardless of your opinions on the matter, it really is interesting to watch people start going off on Amazon in regard to the contract dispute with Hachette. There was that Laura Miller Salon piece Paul mentioned. There’s an Orbit (Hachette) author who writes of “How Amazon Means Less Books For You” (instead of the grammatically correct “fewer books” because she thinks “less” sounds better). And Gizmodo’s Eric Limer contends that “When Amazon Plays Dirty, You Lose.”

It’s entirely understandable that some people, especially the authors getting caught in the middle of the dispute, would be inclined to blame Amazon rather than their publisher. After all, their publisher is the one who’s directly paying them money. And they want to think their publisher has a stake in the success of their books, since those are the way the publishers make their money, too.

But on the other hand, we have agents and authors contending that Hachette had been delaying shipments of books to Amazon as early as November, or as recently as April. The thing is that it takes two to tango. You need two hands to make a clap, you need two teams to hold a tug-of-war. If Amazon is throwing its weight around, then guess what? Hachette is throwing its weight around, too.

And that’s perfectly normal. That’s the way contract negotiations often work between two parties with an equal stake. (For example, between Barnes & Noble and Simon & Schuster last year, as noted by Hugh Howey. Think Amazon’s the only bookstore willing to play hardball?)

Both Amazon and Hachette are invested in getting Hachette books to customers, because that’s how they both make their money. And anything that either one of them does that keeps Hachette books from getting to customers hurts them both and they both know it. If Amazon loses Hachette books, it’s just lost a big chunk of what customers go there for, and if Hachette loses Amazon distribution it’s just lost 20% of its paper sales and at least 60% of its e-book sales. It just comes down to how much money each of them should make.

And when you’ve got two parties fighting over slices of the same pie, the only means either one has of putting pressure on the other is going to hurt them both. So what these negotiations come down to is a big old game of chicken, with each side seeing just how far the other is willing to let them go.

You don’t just get Amazon throwing its weight around to try to hurt Hachette, you get Hachette throwing its weight around to try to hurt Amazon, too. Either way, both Amazon and Hachette feel the pain from things either one of them does. And, of course, anything that hurts Hachette is, in turn, going to hurt the authors Hachette pays…whether it was Amazon who did it or Hachette.

Of course, publishers are the proverbial men who buy ink by the barrel that you’re not supposed to pick a fight with. The Big Five are all part of media conglomerates that have their own news divisions, in addition to having a whole bunch of authors (many of whom blog) in their pockets. So invariably, the narrative we end up seeing all over the place is that, if Amazon takes a hard line, Amazon is evil. If Hachette takes a hard line, and does something that will adversely affect its authors, like delaying shipments, it’s because the evil intractable Amazon made Hachette do it. Heads I win, tails you lose.

Now, I’m not saying Amazon is all sweetness and light. But I’m not so willing to let Hachette off the hook either. Hachette was one of the Big Six Publishers, and aside from their lack of concern helping keep many e-book prices artificially high during the pre-Kindle years, they colluded illegally to force Amazon to raise e-book prices. So they’ve lost a big chunk of “benefit of the doubt” as far as I’m concerned.

Any time you see a narrative that puts all the blame on Amazon without recognizing Hachette has to be pushing things from its side, too, you ought to be at least a little suspicious. You don’t get to blame Amazon for everything just because it’s big. Hachette is pretty darned big, too, but like all the major publishers, it just loves playing the victim card when it doesn’t get its way.

I wonder just how far both sides will be willing to go before one or the other caves? Would Hachette dare to pull all its books from Amazon unilaterally and let them stew? Would Amazon dare to remove the buy buttons again, as with Macmillan (rather than just removing pre-order buttons), and let Hachette stew?

I’m sure it won’t come to that. Sooner or later, one side or the other will cave, because that’s what these negotiations are for. And it’ll all be over until the next big publisher has to enter into contract negotiations with Amazon, a few months down the line. I suppose we might as well get used to seeing Amazon Derangement Syndrome writ large across the blogosphere, because something tells me it’s going to be with us for a while.

Update: This piece, and a couple of ADS-inspired blog postings (one of the ones I mention above, and another) are getting a lot of play on The Passive Voice today. In his writeup of this one, Passive Guy writes:

PG suggests that Hachette needs Amazon far more than Amazon needs Hachette.

Chris estimates that Amazon sells 60% of Hachette’s ebooks (the most profitable books any publisher sells). In the comments on another Amazon/Hachette post, someone calculated that Hachette sales represent less than two-tenths of one percent of Amazon’s business.

As PG mentioned in a much earlier post, higher prices for BigPub books and the lack of availability of BigPub books help the sales of indie authors more than anyone else.

It’s a good point. Apple’s e-book store was able to get by without Random House (the biggest Big Six publisher at the time, while Hachette is now one of the smallest) for a year. If necessary, Amazon might be able to do without Hachette for a while.

It would almost be amusing to see that happen, for Amazon to go right past removing buy buttons and simply delisting all Hachette books en masse from its store. “Oh, we’re not playing games, we’ve just decided we don’t want to carry your books anymore. Don’t let the screen door hit your bum on the way out.”

It’s almost too bad it probably won’t go that far.

12 Comments on Updated: ‘Amazon Derangement Syndrome’ characterizes dispute between Amazon and Hachette

  1. Chris, you wrote (as have so many others) “if Hachette loses Amazon distribution it’s just lost 20% of its paper sales and at least 60% of its e-book sales.”

    Although repetition seems to increasingly make people believe this is a truism, the statement has no basis in fact. If Hachette loses Amazon as a distributor, it MIGHT lose some sales, but many, if not most (and even conceivably all) people who want to read James Patterson who previously bought via Amazon, will simply buy the book elsewhere.

    The problem with statements such as yours is that it assumes that people who buy from Amazon not only currently never buy from any other retailer but that they will in the future never buy a product they want from another retailer. In fact, statements such as yours imply that the only reason the product is bought by a consumer is because Amazon is selling it, not because they want the product.

    In this same light, there is another mistake being made by commentators (not you, in this instance), which is that Amazon is fighting for the right to discount Hachette books when selling to the consumer and Hachette is resisting. This is not the case at all. This is, as you rightly note, a question of how much discount Hachette has to give Amazon.

    Amazon is finally under pressure from shareholders to produce a profit and start giving dividends. The only ways Amazon can do this is to either increase the price to the consumer so each sale makes a profit or lower its acquisition costs so that it can continue to sell to the consumer at the same price yet turn a profit. (I wonder how much of this is a result of the requirements of the settlement that require a profit over a publisher’s line.)

    At no time that I am aware of has Amazon said that if Hachette increases the wholesale discount to Amazon, Amazon will increase the discount to the consumer.

  2. Hi Richard. I am someone who has worked with Amazon, Walmart, Best Buy, and Staples from a variety of vendor product classes and have seen how much business is lost when battling any one of them in contract disputes. It seems logical that people who really want something will go get it where it is available but a large percentage do not and the sale is lost or delayed. This is especially true for non-essential purchases such as books where the buyer engagement may be iffy at best.

    My main beef with the Luddite authors I meet who bemoan Amazon as the source of all evil is that they take the money via royalties protected from seeing how much is actually coming from Amazon. I have been told it is as much as 40% of their total.

    Maybe Hachette should no longer work with Amazon and use it as a selling point to attract new bestseller authors. Call everyone’s bluff! Now that would be entertaining to see play out over time and to see how sales are affected for all involved.

  3. I’m no fan of ‘moral equivalence’ arguments. Most bear up poorly under close scrutiny and they remind me of a 1932 H. G. Wells article in which he blasted Poland for its large military budget, one that Wells found a threat to the peace of Europe.

    That was bosh. Caught between Stalin’s USSR, whose nastiness Wells was reluctant to admit, and a Germany about to put the Nazis into power, Poland was being wise. The fact that it’s behavior violated Wells’ long-held belief that a world state should be the source of world peace was irrelevant.

    The Poles never built up a strong enough military to stop the 1939 German invasion. They were too small for that. But their large military budget did accomplish something that altered the course of history. In the latter half of the 1930s, they built an Enigma machine and broke the German Enigma code. Changes the Germans made meant that their code-cracking technique no longer worked by the time the war began. But their success meant that the French and British, who had thought Enigma unbreakable, got active and built on what the Poles had done breaking Enigma. What Wells had regarded as evil, war-mongering Polish military spending, changed history for the better.

    Creating a moral equivalence between Hachette and Amazon makes about as much sense as one between Poland and Germany/USSR. Poland posed no threat to the peace of Europe. Both Hitler and Stalin did and, in fact, conspired together to start that war. The Poles weren’t in any position to invade France or bomb the UK. Germany was.

    In much the same fashion, Hachette poses no threat to authors and virtually none to small publishers. And yet there is this remark in the article: “Hachette was one of the Big Six Publishers, and aside from their lack of concern helping keep many e-book prices artificially high during the pre-Kindle years, they colluded illegally to force Amazon to raise e-book prices.”

    I’m supposed to be worried about that? Sorry, but I don’t use the Obama DOJ as my moral compass. I’d be doing cartwheels if the Big Six publishers were inflating their prices, which are the only prices they can affect. None of Big Six dictate the prices I set for my ebooks. The higher they set their prices, the better my ebooks will sell.

    It also helps to distinguish between hypotheticals about possible behavior and actual behavior. On one hand, there’s Hachette. How could they harm my book sales? Perhaps by flooding the market with popular ebooks and bestsellers for just 99 cents. That’d be tough for me to beat with my typically $2.99 titles.

    But how likely is that? About as likely as pigs flying. Those giant, Manhattan publishers really do long for high ebook prices and that’s good for the rest of us. Their greed poses no treat to other authors or publishers nor to the book market in general. If anything it’s a folly that ought to be encouraged.

    On the other hand, there’s what Amazon is doing to me at precisely this moment. It’s paying me grossly sub-market royalties for my Kindle ebooks. I’ve got an ebook called Tolkien Warriors that sells for 99 cents on the Kindle bookstore and the iBookstore. Apple pays me about 70 cents for each copy that it sells. Amazon only pays half that.

    I also get substantially less for my $2.99 ebooks from Amazon. Apple charges no download fees for those picture-rich ebooks. Amazon charges a download fee that’s the equivalent of a $400 hamburger. When it comes to royalties, I am getting screwed by Amazon and treated very well by Apple.

    The reality is that, from the perspective of authors and small publishers, Hachette is virtually irrelevant. It has no impact on our ability to publish or our income. On the other hand, Amazon doesn’t merely pose a threat in the future, it is using its ebook market dominance to pay authors and small publishers substantially less than any other major ebook retailer. It is cheating us right as I write this, and substantially so–hundreds to thousands of dollars a year for many authors. If you are an author, Amazon is evil. Hachette is irrelevant. In fact, I just checked and Hachette, giant though it is, doesn’t have a title that even competes in subject matter with my latest ebook, Lily’s Ride.

    And, unlike the Big Six, Amazon’s bizarrely differing royalties based on price does distort the prices that most ebook authors and publishers charge. One example I use is a $19.99 digital textbook for nurses. For each copy that’s sold, Apple pays $14 (70%) while Amazon only pays $7 (35%). Every bit of that $7 difference is coming out of the pocket of an author and going into Amazon’s pocket. Even sixth grade math will show Amazon prices are driving up prices for consumers (to make up for how little Amazon pays) and imposting substantial harm on authors and small publisher.

    Finally, keep in mind that this situation exists in a market where Apple and B&N still pose a substantial threat to Amazon’s ebook dominance. If Amazon acquires an even larger slice of that market, it’ll lower its already too-low royalty payments still further.

    My own hunch is that Amazon wants an ebook market where it pockets 65% of an ebook’s retail price for simply processing a financial transaction and downloading a file. Hypothetical? No, that’s precisely the royalty rate Amazon already pays for ebooks outside the narrow $2.99-9.99 range.

    In short, I’m sure there are some whose thinking about Amazon really is deranged, much as I’m sure there are more that a few Amazon fanboys about. But to claim that there’s any moral equivalence between the behavior of Hachette or the Big Six and that of Amazon is ridiculous beyond belief.

    Hachette’s behavior, for good or ill, matters not for the great majority of writers and small publishers. Even its ability to harm the general public with high prices is limited. People will simply buy books from someone else.

    On the other hand, Amazon behavior is harmful in the here and now. It is imposing substantial financial harm on authors. If Amazon isn’t restrained, that harm will grow still larger. And that’s not opinion. That the only conclusion that can be drawn from Amazon’s current ebook royalty payments.

    I will give Amazon credit for something. Their FAQ about royalties here:

    https://kdp.amazon.com/help?topicId=A30F3VI2TH1FR8

    is a brilliant masterpiece of deception. Take their initial statement, for example:

    “1-1. How are royalties calculated?
    If you select the 35% royalty option, your royalty will be 35% of your list price for each unit sold. If you select the 70% royalty option, your royalty will be 70% of the list price, net delivery costs, for each eligible book sold to U.S. customers…”

    Do you actually “select” those royalty rates? That makes no sense. If it were a simple choice, everyone would select 70%. No, based on other choices you have made, including an ebook’s price, Amazon dictates the royalty you get. You don’t select royalties. Amazon does.

    Amazon then engages in a clever distraction, talking in section 1.2 about differing rates in different countries. That’s almost irrelevant. Your sales in Andorra will be small. What will really bites most authors are the price and download fee dictates for their U.S. sales. That’s relegated off to a side link. Sleigh of hand.

    Oooooh how I hate people who lie like that! I have a knack for parsing that out. All too many people don’t, and they’re not only getting cheated by Amazon, they don’t even know they’re being cheated. That’s sad.

  4. Michael W. Perry makes a fine example of why people refer to it as Amazon Derangement Syndrome as he dismisses Hatchette breaking federal laws which is somehow all Obama’s fault and actually compares Amazon to Hilter’s Germany informing us that Hatchette is innocent little Poland. Now it happens that Hatchette is an international conglomerate and the third largest trade publisher in the entire world, but we’re supposed to believe that Amazon is going to roll over them with storm troopers, possibly throwing people into concentration camps as they go.

    Seriously? I don’t know another phrase for this kind of delusion.

  5. Michael W Perry–you get the 70% royalty rate on Amazon if the price is above $2.99, and the 35% rate if it’s below. There may be some other common-sense requirements, but Amazon is very transparent about it.

    I’m worried about the fact that I’ve seen NO good journalism about this (for the record, this piece is good, but it’s an opinion piece). From The Guardian to The New York Times, no one is asking who’s doing what. There’s quotes from opinion pieces, blogs, and angry Hachette authors who, while they have the right to be angry, don’t have any way to know what exactly is going on.

    The most definitive quote I’ve seen was a German publishing executive quoting Amazon as saying the delays are related to the contract negotiation, which means it could be either party’s fault.

    What worries me is how a reflexive response against Amazon is preventing the investigation into this that Hachette authors need.

  6. There’s this piece from Forbes that seems more or less neutral, and this blog post citing it that points out opinions are running high on both sides.

    It’s worth noting that most of the noise has come from Hachette and its supporters. Amazon seems to be keeping its mouth shut. It’s interesting to consider what might happen if a Hachettes author were to make such a big public deal out of his contract negotiations like this.

  7. The whole thing just strikes me as a bunch of two-year-olds trying to have their own way.

  8. Thanks, Chris. I’ll take a look.

  9. I admit, I’m no fan of the “ADS” shorthand (me, I’d prefer something like AAA–anti-Amazon agenda–or AAB–anti-Amazon bias), but what’s truly unfortunate is that “Amazon Derangement Syndrome” actually fits right into the rhetoric, given that the use of stuff like the “self-publishing s*** volcano” and “freight-class” fiction.

    Unfortunately, none of the rhetoric seems to really want to take things head on. All the authors and agents and publishing “analysts” seem to want to paint Amazon as the bully. It’s easy–not least of all because given that Amazon’s revenue from Hachette is such a minuscule percentage of its revenue in general, Amazon is likely too busy innovating and publishing and shipping and basically printing money that it doesn’t have to be too concerned with Hachette.

    But what it neglects is that Amazon is a business who continues at every step of the way to put customers–readers–first. I’ve seen authors and agents claim that this runs counter to that, but really it doesn’t. Amazon doesn’t want to list ebooks as more expensive than their print equivalents. Amazon doesn’t want to be beholden to publishers when it’s setting its prices for readers.

    I’m not even sure the fault is on Amazon. I’ve never been, in these situations. Many claim that “Amazon removed ‘buy’ buttons from Macmillan books” a couple years back, but I’m not convinced that, due to protracted negotiations, Amazon didn’t temporarily lose the right to sell Macmillan books. From what I’ve heard in this case, Hachette might well have delayed fulfilling Amazon’s orders of books as far back as November; is it possible that because of their negotiations, Amazon simply no longer has the right to list books for pre-order? I mean, honestly, if it’s dire enough, isn’t there a chance that in six weeks, because their negotiations have failed, Amazon won’t be able to sell Hachette books anymore? In which case, are they simply supposed to refund all those preorders? Isn’t it simpler to just not accept pre-orders in the first place of books it’s not convinced it will be able to sell?

    I don’t know. I don’t know any of it, because I’m not a Hachette exec or an Amazon exec.

    All I know is that, as a reader, author, and publisher, Amazon has done nothing besides go out of its way to ensure that I’m satisfied at every level possible. As a customer, Amazon offers the very best experience possible (even when it goes wrong, for whatever reason, Amazon’s return process is legit amazing. It’s awesome).

  10. Will, very well put and I agree with your assessment, including the risk of taking preorders without an agreement in place. I was a vendor selling GPS for years before I circled back to books and was always so impressed with Amazon. They brought editors to meetings to get the copy right. They pushed for terms but unlike Staples
    actually spent marketing monies on marketing and frequently offered some additional marketing gratis. We did have a product recall and they automatically shut down all our product sales for 90 days, a giant pain but one I also understood. Truth is, they do not need Hachette as much as Hachette needs them and both parties know this. I would be curious if someone on this thread can point me to some factual article on Amazon treating their employees badly. I read this elsewhere but it is so counter to what I saw when in their Seattle offices I am curious. Could be their warehouses are tough. Whose aren’t. Thanks.

  11. Amazon engages in classic monopolist behaviour and the bought and paid for shills come out of hiding to lick Bezos smelly butt! Good luck with that, but the company is doomed because it can’t earn a profit ethically and in the end the stock will fall like an avalanche.

  12. My my, how unusual. Anonymous poster engages in cliche name-calling and predictions of doom.

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