Amazon-Hachette: Whose Side Are You On?

laura resnickBy Laura Resnick

The non-disclosure agreement governing the current negotiations between online retail giant Amazon and publishing corporation Hachette sometimes seems about as effective as a gag order in a custody battle between Hollywood celebrities.

Hachette has released multiple statements and leaks about the negotiations, including a claim that “Amazon has been demanding payments for a range of services.” Amazon made a statement in May, eventually followed by an Amazon executive telling the media in July, “This discussion is all about e-book pricing.”

However, apart from such occasional tidbits, there’s little information about the specific terms on the table. And in the absence of details, there has been a great deal of speculation, supposition, and passionate side-taking. There are those who vehemently criticize Amazon, such as the New York publishing establishment, many vocal Hachette authors, some celebrities, and quite a lot of the media. There are also those who defend Amazon, including many vocal self-published writers, some bloggers, and some small publishers. Predictably, Hachette’s defenders and detractors are the exact opposite of Amazon’s.

I’ve been a full-time, self-supporting novelist for the past 26 years, and I, too, have passionately taken a side here. I am on my side.

And I have yet to encounter a large business corporation that’s on anyone’s side but its own, so I decline to take either side in a business dispute between two large corporations arguing over their own profit margins.

If Amazon wins, any additional money it earns from Hachette books will not be sent to Hachette authors.

If Hachette wins, is it going to raise digital royalty rates, for which the “industry standard” among the major houses is currently 25% of digital net? Or will it implement a fair reversion clause for the author’s licensed rights? Hachette has given no indication that these measures are anywhere in its plans, regardless of the outcome of these negotiations. I am also frankly skeptical that a victory for Hachette here will lead to any improvement in its authors’ earnings.

As far as I can see, there is no scenario in which writers will emerge better off from this negotiation. There are only scenarios in which they’ll maintain a status quo I consider inadequate, or emerge worse. So as far as I am concerned, a plague on this negotiation!

Which is not to say that I don’t understand the gravity of Hachette’s position. After all, it’s estimated that Amazon now controls up to half of all book sales in the US. That makes it a market that the famous Big 5 (Hachette, Simon & Schuster, HarperCollins, MacMillan, and Penguin Random House) can’t afford not to do business with, even if they hate the terms on the table.

And, boy, do I know how that feels! After all, I spent most of my writing career in precisely the same dilemma: I was in a terrible negotiating position for every book deal I made for years, because my only realistic choice was “take it or leave it.”

Due to the way that production and distribution of books functioned until quite recently, a book contract with one of the major houses was just about the only feasible way for a commercial fiction writer to reach readers and earn income with a novel. And the major houses knew it—which put them, when dealing with writers, in the sort of extremely powerful negotiating position that Amazon is currently in with Hachette.

The market-dominance that major publishers had in negotiations with writers cemented what we know as “industry standard” clauses, a situation wherein their book contracts are virtually indistinguishable from each other. And because of the lock that publishers had on book production and distribution (realistically, how were you going to get 50,000 copies of your novel produced and distributed without them?), none of the publishers needed to compete with each other by improving terms or innovating the way they dealt with writers.

Yes, if there was a writer or a book that more than one of them really wanted, they’d negotiate on the advance certainly, and even on some of the contract terms. But for the vast majority of writers, even if the advance was negotiable (and often it was presented on a take-it-or-leave-it basis), key contract terms were not negotiable. And they are still not negotiable. Several years into the digital revolution and the rise of a huge self-publishing industry, the major houses still aren’t negotiating with writers on various key contractual clauses that are virtually identical from house to house.

So, yes, I certainly understand the situation that Hachette is in when dealing with Amazon, and I can appreciate Hachette’s frustrations. But I’m not sympathetic, since Hachette is one of the same companies that were—and still are—implacable in their “industry standard” and “non-negotiable” contract terms with writers, after all.

Finally, no, I do not see Amazon as my friend or champion. Amazon is just doing far and away the best job of selling books (particularly ebooks), and that gives them enormous power. Indeed, I don’t disagree that it gives them too much power. I just disagree with many people’s proposed solutions (such as boycotting, price-fixing, or government intervention).

I believe the very best solution would be a thriving, competitive book retail market with many strong vendors and outlets. So I’d really like to see Apple, BN.com, Kobo, and other online vendors, including new and future ones, get their heads in the game and become very successful. The more competition there is, the better my own choices and negotiating position will be in this world of big corporations that are not on my side.

***

Laura Resnick writes the Esther Diamond urban fantasy series for an independent publisher whose list is distributed by a major house, and she self-publishes her backlist.

14 Comments on Amazon-Hachette: Whose Side Are You On?

  1. Paul StJohn Mackintosh // July 8, 2014 at 11:04 am //

    You’ll see who’s side I’m on from my upcoming piece on the ALCS findings and UK creative industry profits. UK authors have seen their incomes fall by one third in a decade, and the numbers of self-supporting writers drop by almost 75%. Meanwhile, UK creative industries are growing at 5x the average GDP growth rate. And we’re supposed to side with these greed machines against Amazon? Amazon may be no better, but it absolutely cannot be worse.

  2. Best post I have seen on this dispute so far! I loved the first paragraph.

  3. I’m on the side that’s going to create the books. Ultimately I suppose that’s Hachette. I can buy books from other sources not Amazon, though it is less convenient, takes more time, and costs more. But I can’t read books that aren’t available from a publisher. The quality of self-publishing doesn’t pass muster at this time and I don’t consider it a valid option. While I would like for books to cost less, I’m willing to pay 9.99 to 12.99 for new fiction and a little more for non-fiction. Back list and older titles a few bucks cheaper.

    If push comes to shove, I’d have to bail on Amazon before professional publishing. In a better world publishers would pay more to authors but I’m not holding my breath.

  4. My biggest question is this: if Amazon is, in fact, the monopoly that the mainstream publishing industry keeps wanting everyone to think it is, why haven’t they filed with the SEC as Amazon did with the agency pricing business?

    And this whole if you don’t side with the publisher you’re siding with Amazon theme gets old after a while, too.

  5. Greg M.: And if the big five publishers go away, no one will ever publish new books ever again?

    There will always be people who want to write and people who want to read, and hence always a need for mechanisms to matchmake between the two groups. If one matchmaking mechanism fizzles, another will soon be invented to take its place.

  6. Elizabeth Burton, I think the word “monopoly” is being used like the phrase “predatory pricing,” i.e. inaccurately.

    Amazon is dominant and powerful; this is not synonymous, of course, with being a monopoly. Books and ebooks are sold by many other vendors, including a massive corporation like Apple and a big one like BN. It’s just that none of them has the market share Amazon does.

    And as the Passive Guy has explained before (most recently on The Kindle Chronciles “podcast”), predatory pricing is a pattern that necessarily includes RAISING prices AFTER eliminating competition. Amazon has not raised prices or eliminated competition. So describing Amazon as engaging in predatory pricing is a lot like assuming someone is getting married (i.e. discounting consumer prices) in order to collect the divorce settlement. Yes, of couse that happens… but the divorce settlment isn’t why most people get married, and there’s no evidence that it’s why Amazon engages in discounting.

    But it has by now become clear that when this is pointed out, people who are misusing those terms just get angry and double down on their conviction that Amazon is a monopoly engaged in predatory pricing.

  7. And now Amazon has made a VERY unusual offer… which Hachette has rejected.
    http://newteleread.com/wordpress/chris-meadows/hachette-rejects-amazon-proposal-to-give-hachette-authors-100-of-e-book-revenue/

    This doesn’t alter my view that writers will not emerge better off (and may emerge worse off) from the next/eventual distirbution deal between Amazon and Hachette.

    But I think it’s very interesting. A shrewd move on Amazon’s part in a number of ways. A predictable response from Hachette. And the question is–will this change the conversation? Or will Hachette authors, for whom Hachette has just rejected a SUBSTANTIAL short-term income boost, double down on the anti-Amazon, pro-Hachette statements they’ve been making for 2 months?

  8. David Simon // July 8, 2014 at 7:07 pm //

    Brilliant piece of analysis. “I have no idea what’s going on, therefore I am on my side.”
    Will someone please put Laura out of her misery and let he know which side is her side.
    More please Teleread. Keep it up.
    From my side of the fence,
    DS

  9. @Chris

    If the big five publishers go the way of the dodo, I’m sure small publishers and university presses could pick up some slack, but not all of it. Stephen King will never fail to find a publisher. But I don’t really care much about King and other bestsellers. Literary fiction and non-fiction would take the hit from the squeeze. What books survived wouldn’t necessarily cost any less than they do today; the selection might be smaller too.

    What would happen to books such as Robert A. Caro’s five volume biography of LBJ without a major backer to support it? My guess is small publishers would shy away from such ambitious project. That would be a big loss; not replaceable with an other action series.

    That is why I think it is important to support professional publishing. There is a lot that could be lost.

  10. Greg M.: Publishers aren’t a charity. They’re not going to pour money into things they don’t think are going to make them any money back out of the goodness of their hearts, no matter how big they are. If one publisher is willing to invest in something like a five volume biography of LBJ, in the belief it will make him some money, then surely others will. Or if the demand is really there for such a book, it would surely be there whether the author traditionally-published it or self-published it.

  11. Deborah Smith // July 8, 2014 at 8:10 pm //

    I believe Amazon’s offer to Hachette asked Hachette to fund 70% of the royalty pool while Amazon funded 30%, didn’t it? If so, no wonder Hachette turned it down.

    Some experts point out that the timing of this contract negotiation tells them the issue is not about ebook prices per se (restoring the Agency model immediately, as Hachette probably would love to do) but about Amazon vying for a much bigger chunk of Hachette’s profit margin. Evil greedy publisher, yada yada, why should anyone care? Because Amazon’s stockholders are pressuring Bezos to finally show a profit after years of keeping book prices at bargain basement retail by eating the losses. In order to keep those prices down without spending more Amazon money, the company has to carve $$$ out of its vendors–the publishers–and by extension, their authors, (what hurts publishers will trickle down to their authors, too.) And then . . . Amazon will slice up the profits going to the KDP authors, as well. The big pubs are not gentle giants and neither is Amazon, but if Hachette loses this negotiation, leading to other major players caving on contract terms as well, Amazon will be free to re-draw publisher/vendor contracts — and KDP terms — without much to stop it.

  12. I don’t think anyone has made a convincing argument that big publishers will cease to exist. I think we bypass those “proofs” and keep leapfrogging straight into “the death of literature! and biopgraphy! and culture! and important works! and poetry! and puppies!”

    Have the “big corporation” business model disappeared from the music industry? The film and TV industry? The media/news industry?

    There are still massive corporations operating in each of those fields. Maybe not all of the ones that thrived 20 years ago are thriving (or in existence) now, but big corporations haven’t become extinct in any of those fields. They just don’t have the lock on the market they did (back when all of TV viewing was based on 3 huge networks and almost nothing else, for example), and many other business models exist alongside them now.

    It may well be that big publishing will have to adapt and change. (I, for one, think publishers have got to lower their overhead so they can increase writer royalty percentages and decrease retail prices. If they don’t, I think they’ll be out-competed for writers -and- readers by newer, more agile publisher companies that base their business models on premises more modern than “book prices should be high, because culture” (see: NYPL panel, July 1st) and “author royalties should be low, because CEO bonuses, and Manhattan prices, and authors have nowhere else to go”). But adaptatin and change is not the same thing as extinction or disappearing entirely from the marketplace.

  13. Great post. I’m on the side that is against the people that tell me I have to take a side.

    I’m against the media campaign that has been launched against Amazon that treats me like I’m an idiot. I’m against the shoddy journalism that has just repeated one sided information without any critical analysis or basic fact checking. I’m against the Hachette authors who have taken a side without know the full details of the negotiations and are telling me to take a side against Amazon.

    Does that mean I’m on Amazon’s side? Not at all. I don’t buy books from Amazon, I don’t think their market dominance is good for a healthy industry (customers or authors). I hate their exclusive content deals and I feel customers should be able to opt out of their intrusive data collecting.

    This is just a negotiation between two large companies. We don’t know what the negotiations are really about and we shouldn’t.

  14. Julie Cochrane // July 10, 2014 at 2:44 pm //

    This was beautiful.

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