Amazon Speaks

(Now with three addendums! See the bottom of the post.)

The Amazon Books team says:

(AMAZON OFFICIAL)

We are currently buying less (print) inventory and "safety stock" on titles from the publisher, Hachette, than we ordinarily do, and are no longer taking pre-orders on titles whose publication dates are in the future. Instead, customers can order new titles when their publication date arrives. For titles with no stock on hand, customers can still place an order at which time we order the inventory from Hachette -- availability on those titles is dependent on how long it takes Hachette to fill the orders we place. Once the inventory arrives, we ship it to the customer promptly. These changes are related to the contract and terms between Hachette and Amazon.

At Amazon, we do business with more than 70,000 suppliers, including thousands of publishers. One of our important suppliers is Hachette, which is part of a $10 billion media conglomerate. Unfortunately, despite much work from both sides, we have been unable to reach mutually-acceptable agreement on terms. Hachette has operated in good faith and we admire the company and its executives. Nevertheless, the two companies have so far failed to find a solution. Even more unfortunate, though we remain hopeful and are working hard to come to a resolution as soon as possible, we are not optimistic that this will be resolved soon.

Negotiating with suppliers for equitable terms and making stocking and assortment decisions based on those terms is one of a bookseller's, or any retailer's, most important jobs. Suppliers get to decide the terms under which they are willing to sell to a retailer. It's reciprocally the right of a retailer to determine whether the terms on offer are acceptable and to stock items accordingly. A retailer can feature a supplier's items in its advertising and promotional circulars, "stack it high" in the front of the store, keep small quantities on hand in the back aisle, or not carry the item at all, and bookstores and other retailers do these every day. When we negotiate with suppliers, we are doing so on behalf of customers. Negotiating for acceptable terms is an essential business practice that is critical to keeping service and value high for customers in the medium and long term.

A word about proportion: this business interruption affects a small percentage of Amazon's demand-weighted units. If you order 1,000 items from Amazon, 989 will be unaffected by this interruption. If you do need one of the affected titles quickly, we regret the inconvenience and encourage you to purchase a new or used version from one of our third-party sellers or from one of our competitors.

We also take seriously the impact it has when, however infrequently, such a business interruption affects authors. We've offered to Hachette to fund 50% of an author pool - to be allocated by Hachette - to mitigate the impact of this dispute on author royalties, if Hachette funds the other 50%. We did this with the publisher Macmillan some years ago. We hope Hachette takes us up on it.

This topic has generated a variety of coverage, presumably in part because the negotiation is with a book publisher instead of a supplier of a different type of product. Some of the coverage has expressed a relatively narrow point of view. Here is one post that offers a wider perspective.

http://www.thecockeyedpessimist.blogspot.com/2014/05/whos-afraid-of-amazoncom.html

Thank you.

Joe sez: I'm surprised that Amazon decided to release a statement, since they rarely do. And I'm tickled by what they said.

They haven't stated that Hachette is pushing for the agency model (I believe William Ockham is correct and Hachette is pushing for that), but apparently negotiations won't be resolved soon.

Amazon is encouraging its customers to buy Hachette titles from third-party sellers, or a competitor. That kind of invalidates the whole "Amazon is a monopoly trying to ruin competition and must be stopped by the DoJ" debate. Since Hachette books are available for pre-order elsewhere, and since Amazon doesn't have a league of enforcers preventing people from buying Hachette books elsewhere (Amazon is even encouraging it), I can't see how the anyone can still make that silly argument.

As for the authors being harmed by these negotiations?

Amazon is willing to help them through these hard times by paying them... if Hachette kicks in half.

Apparently Amazon made this offer to Macmillan two years ago. Since this is the first I've ever heard of it (Amazon rarely makes public statements) I can only assume that Macmillan DIDN'T take Amazon up on that offer. And my assumption is solid, because I know several Macmillan authors, and none of them got any sort of bonus check.

How embarrassing for Macmillan. Their authors, and the public media, were vocal about at the injustice of having the buy buttons taken away by Amazon when Macmillan tried to force Amazon to raise ebook prices.
Maybe those authors should be wondering why the their publisher, Macmillan, didn't help assuage their pain. (actually, I was wrong about this. see addendum #2 below)

Hachette now has this offer on the table. Regardless of the negotiation, Hachette can ease their authors' financial woes by contributing to a fund to help them.

Does Hachette care about its authors?

We'll see...

I'm also eager to hear what Scott Turow, James Patterson, Lilith Saintcrow, and Charlie Stross have to say about this.

Addendum #1

Here's the data that Author Earnings gathered about Hachette titles. Must read.

Addendum #2

Apparently I spoke too soon about Macmillan, and I'm wrong. Someone in the comments posted a link stating that Macmillan and Amazon did indeed pay authors a bonus.

http://www.mhpbooks.com/amazon-macmillan-pay-authors-for-books-that-were-never-sold/

For the link lazy:

In a letter to authors accompanying Macmillan royalty statements, CEO John Sargent has two surprising announcements: one, that many authors will be paid at a higher royalty rate than the company is contractually obligated to pay — 25% of net receipts, instead of 15% of list price. And, second, that the company has decided to pay royalties on sales that were lost during the infamous Amazon “buy button” fiasco. According to Sargent, “We believe it was not fair that authors should suffer from the Amazon buy button takedown imposed on us for a week last year when we switched over to the agency model. So we estimated as best we could what Kindle sales would have been for that week and processed the royalties on those sales as if they had happened.” The payment is tactfully being called an “Amazon Kindle Outage Adjustment.”

What’s even more surprising — indeed, almost impossible to believe — Amazon has agreed to split the cost of these royalty adjustments.

Elsewhere in the letter, which is worth reading in its entirety, Sargent takes credit for fostering much of the health and expansion of the e-book market over the last year. “Since we moved to the agency model,” he writes, “Apple has entered the market, Barnes and Noble has increased its investment in the business, and independent booksellers, working with Google, are now selling your books competitively in the electronic book market.”

Joe sez: I do remember that letter Sargent sent to authors, asking them to opt-in to the 25% royalty rate. I remember a peer not signing it because, if memory serves, it included some one-sided provisions in exchange for the increase from 15% to 25%.

Here's an archive of the letter. If anyone has a copy of the contract amendment they'd like to share, or any proof that they actually got paid by Macmillan/Amazon, please contact me.

If you missed me saying it earlier, I was wrong. I'd still like to get more data confirming that, but if Amazon and Macmillan did compensate authors, I leaped to a lazy conclusion in my haste to chastise a publisher, and I apologize for that and am grateful someone corrected me. Good going, Macmillan, for taking care of your authors.

And for those who are curious, crow sort of tastes like chicken. Humble chicken. I don't have a problem admitting when I'm wrong.

Addendum #3

Hachette has responded:

It is good to see Amazon acknowledge that its business decisions significantly affect authors’ lives. For reasons of their own, Amazon has limited its customers’ ability to buy more than 5,000 Hachette titles.

Authors, with whom we at Hachette have been partners for nearly two centuries, engage in a complex and difficult mission to communicate with readers. In addition to royalties, they are concerned with audience, career, culture, education, art, entertainment, and connection. By preventing its customers from connecting with these authors’ books, Amazon indicates that it considers books to be like any other consumer good. They are not.

We will spare no effort to resume normal business relations with Amazon—which has been a great partner for years—but under terms that value appropriately for the years ahead the author’s unique role in creating books, and the publisher’s role in editing, marketing, and distributing them, at the same time that it recognizes Amazon’s importance as a retailer and innovator. Once we have reached such an agreement, we will be happy to discuss with Amazon its ideas about compensating authors for the damage its demand for improved terms may have done them, and to pass along any payments it considers appropriate.

In the meantime, we are extremely grateful for the spontaneous outpouring of support we have received both privately and publicly from authors and agents. We will continue to communicate with them promptly as this situation develops.

Joe sez: Hachette, the fourth largest book publisher in the United States, is owned by French media group Lagardere. Its CEO Arnaud Nourry said on Wednesday he hopes for an early end to the dispute, adding that it should not affect online sales this year.

(thanks to Dan DeWitt for that above link)

So what do we know and what can we guess?

Know: Amazon and Hachette cannot agree on terms.

Guess: This is about money, specifically pricing, specifically Hachette wanting the agency model.

Know: Amazon doesn't see this ending early.

Know: This is definitely hurting Hachette sales on Amazon, as evidenced by the Author Earnings report.

Know: Amazon offered to fund 50% an author pool, to mitigate the impact of this dispute on author royalties, if Hachette funds the other 50%.

Know: Amazon did this previously, with Macmillan authors, during their disagreement on terms.

Guess: Macmillan authors got that money (the ones I have been in tough with, or who have commented on this blog, can't remember),

Know: Hachette is lying when it stated "By preventing its customers from connecting with these authors’ books..." Amazon is not a monopoly or monopsony. It doesn't have the power to prevent book sales, and on Amazon.com third party sellers are selling Hachette books, as is Amazon.

Know: Hachette has Special Snowflake Syndrome, thinking books aren't like other consumer good and should be given special treatment because, well, because they said so. (Technically they aren't. Goods like food and fuel and clothing are necessary for life, whereas books are not.)

Know: Hachette are currently not agreeing to Amazon't author fund idea, but will discuss it after an agreement is reached.

Know: CEO Arnaud Nourry believes this dispute won't affect Hachette online sales.

So it seems like there is no bullying by Amazon, just plain old negotiation, which is completely legal.

It seems Amazon is willing to help authors with lost royalties, and at the moment Hachette is not.

It seems that Hachette isn't concerned about lost online sales.

Prediction: Amazon will remove Hachette buy buttons from its store, as it did with Macmillan. Hachette authors, who should be angry at their publisher, will stay angry with Amazon due to Stockholm Syndrome and situational stupidity. Hachette will whine about it, and eventually accept Amazon's terms. And this whole negotiation will have been about the agency model.

Or maybe I'm wrong. Maybe Amazon is trying to cut Hachette profits in half, even as it offers to help authors. Maybe Amazon will start feeling bad and return the pre order buttons. Maybe Amazon will realize books are a different commodity, as important as food, shelter, and love, and by not agreeing to Hachette's terms they are destroying culture.

Maybe.