Thursday, November 13, 2014

Amazon/Hachette Negotiations Finally End

Via Hachette:

Dear Authors and Agents,

I’m very happy to bring you the good news that Hachette Book Group has reached a new agreement with Amazon for ebook and print sales. While the new ebook terms will take effect early in 2015, Hachette titles will be restored as soon as possible to normal availability on Amazon, will be available for pre-order, and will be included in promotions on the site, a very positive development as we head into the holiday shopping season.

The new agreement delivers considerable benefits. It gives us full responsibility for the consumer prices of our ebooks.  This approach, known as the Agency model, protects the value of our authors’ content, while allowing the publisher to change ebook prices dynamically to maximize sales. Importantly, the percent of revenue on which Hachette authors’ ebook royalties are based will not decrease under this agreement.

Throughout our negotiations, Hachette has strived to reach an agreement that is in the long-term interest of our authors, readers, and this company. The past several months have been difficult ones for the writers Hachette publishes and the agents who represent them.  We send our sincere thanks to you for your patience and support as we conducted this negotiation.  I feel strongly that this new contract reestablishes our positive relationship with Amazon, an important retailer and industry leader, and that this strong relationship will benefit the writers we publish for many years to come.

Hachette and Amazon have just issued the following joint press release:

HACHETTE BOOK GROUP AND AMAZON REACH NEW EBOOK AND PRINT BOOK AGREEMENT

November 13, 2014 - Hachette Book Group and Amazon (AMZN) today announced that the companies have reached a new, multi-year agreement for ebook and print sales in the US.

Michael Pietsch, Hachette Book Group CEO said, "This is great news for writers. The new agreement will benefit Hachette authors for years to come. It gives Hachette enormous marketing capability with one of our most important bookselling partners.”

"We are pleased with this new agreement as it includes specific financial incentives for Hachette to deliver lower prices, which we believe will be a great win for readers and authors alike," said David Naggar, Vice President, Kindle.

The new ebook terms will take effect early in 2015. Hachette will have responsibility for setting consumer prices of its ebooks, and will also benefit from better terms when it delivers lower prices for readers. Amazon and Hachette will immediately resume normal trading, and Hachette books will be prominently featured in promotions.

Joe sez: As many had guessed, this was all about discounting. As with S&S, it appears to be an agency model, but one that incentivizes discounting.

Which is similar to the KDP structure. If self-pubbed authors keep their prices within a certain range ($2.99-$9.99), they get 70%. Outside of that range, they only get 35%.

What does this mean for the publishing world?

Not much. The Big 5 are no doubt going to continue to price ebooks as high as they can to protect their paper sales. The majority of Big 5 authors will have fewer ebook sales as a result. The lucky bestsellers who are released in large paper numbers will continue to stay rich.

Now let's wait for Authors United and the Authors Guild to chime in and take credit for all of the pressure they put on Amazon to force Bezos to take the tough, hard deal he's been giving indies for several years.

92 comments:

Alan Spade said...

We don't know exactly the percentages, but yes, I agree that Amazon is trying to develop the same business pricing model with the Big 5 as with the self-published authors. Hachette has more leverage than self-published authors, so it would only be logical for their percentage to be higher.

Laura Resnick said...

But..but...but... culture! And holy war! Religious war! War on writers! And, um.... puppies and Mom and freedom!

Are any of those things spelled out in this agreement?

Jason Brant said...

I'm so happy that Hachette saved literature.

Clint Hollingsworth said...

After a while, I just feel cynical about all of it...

Hugh Howey said...

Hachette just signed the same basic deal they were offered in January. A deal they were probably close to signing in June before the PR campaign began and they said, "Hey, let's see how this plays out."

They got spanked up and down the street, readers and writers were damaged, and the people with the loudest opinions on this will continue to understand almost none of it.

John Ellsworth said...

Is there anyone left in the room for DOJ to go after?

What? It was all smoke and mirrors?

Those are the hard cases to pursue, the imaginary ones.

Alan Spade said...

I agree with Hugh, it was clear from the start that Hachette was trying to get more leverage in the negociations with its PR campaign.

I don't think they succeeded, and Simon&Schuster, which didn't enter in a PR war, and which consequently signed much more quickly, is likely to have got roughly the same deal than Hachette.

S&S authors just suffered a lot less, thanks to their publisher.

I would say that among authors, and on the Internet, Hachette's image is now more tarnished than ever.

Bridget McKenna said...

What's David Streitfeld going to do for a living NOW?

Patrice Fitzgerald said...

Sigh. So you mean, literature wasn't being destroyed?

(Puts the popcorn away and waits for the next kerfuffle to pop some more...)

Thanks for bringing this to us, Joe. Your comments are always illuminating.

T. M. Bilderback said...

Well, at least the bean counters...I mean, gatekeepers...are back in place, and Authors United can stop saying that Amazon ruins your mind, curves your spine, and loses the war for the Allies...(paraphrased from George Carlin.

Megaselling authors...I mean, Literature...is now safe from the swarming hordes.

Richard Fox said...

Fedex just lost business now that Authors United has no reason to send Very Important Messages.

Jill James said...

Thanks for keeping us up to date, Joe.

SJArnott said...

The VPs at Hachette have managed to squeeze a few more pension-earning years out of the old model.

And the higher the price of BPH ebooks, the easier it is for indies to undercut them.

Mackay Bell said...

Joe, thanks to you and Hugh, and some of the outspoken others, what would have been simply another example of big media manipulating the public for the benefit of the rich elite, became a serious discussion of corruption in the publishing industry and the abuse of writers by people claiming to love books.

As you and others said, this was really a typical business negotiation, and odds are the outcome wouldn't have changed anyway. But your efforts really raised the level of the debate.

I learned a lot.

Thank you.

Rick Chapman said...

Reading this is both sad and pathetic. You were all played for fools by a $75B corporation that wanted more margin and MDF from a supplier. Don't any of you get that?

Sad, sad, sad.

You can read more about how you were played here:

http://www.rule-set.com/ricks-blog/amazon-vs-hachette-its-over-and-what-really-happened-and-aaag-owes-indies-and-authors-an-apology

Rick Chapman said...

+++ Bridget McKenna said...
What's David Streitfeld going to do for a living NOW? +++

Maybe right about that 30% retail usage fee you're paying for a download service, how Amazon doesn't actually pay you any royalties, and marvel about that 65% margin grab on international sales and on prices above $9.99. Which, as we all know, is the most supercalafragilisticexpealidotious price in the world.

For you as an indie. Not for the big give.

Maybe things like that?

F.M. Kahren said...

All of the faux outrage and moral qualms evaporate once the money issues are settled.

Rick Chapman said...

+++ All of the faux outrage and moral qualms evaporate once the money issues are settled. +++

Yes, they do, don't they.

Now, maybe some of the pundits can spend some time splaining to Amazon that hitting indies up with an outrageous 65% margin grab for books priced over $9.99 and sold internationally should stop.

Since $9.99+ for Hachette is OK, then I guess I should have the right to find out what pricing works best for me.

Any maybe Howey or Konrath or Gaughran or someone should ask what's up with 30% for a download service?

And then perhaps one of these notables should suggest telling Amazon to stop calling a 30% retail usage fee a "royalty?"

And maybe promise to never, ever ask indies to run over to a dumb website such as change.org and be used as a weapon in a negotiation we have no stake in?

That would be nice.

Rick Chapman said...

+++ Hachette just signed the same basic deal they were offered in January. A deal they were probably close to signing in June before the PR campaign began and they said, "Hey, let's see how this plays out." +++

No they didn't. And you should stop saying things that simply aren't true. You have done a great disservice to indies by repeating assertions that anyone who understands what's been going on can find out for themselves.

This battle was over agency pricing. The publishers wanted to retain it, Amazon didn't, and that's what the fight was about. It was a power struggle between a channel and a supplier and neither side was the good or bad guy. Just two large entities slugging it out.

Suppliers like agency pricing because it enables them to optimize revenue on hot new titles/products. Channels like wholesale because it shifts pricing and promotional control to them.

Amazon decided to back off its demand that the publishers give up agency because it's not illegal and Amazon wasn't able to bluff Hachette. As the controversy ramped up, AMZ decide to take the extra margin and MDF and be happy.

Indies NEVER had a stake in this and you shouldn't have encouraged indies to get involved in this battle. It was never our fight. Fat download fees, ruinous 65% margin fees, international margin grabs et al ARE our concern.

Do us all a favor and focus on those issues. And stop claiming on your blog that Amazon pays me a royalty as an indie. It does not.

Rob Cornell said...

Rick Chapman:

Unless you have some secret insider knowledge about the details of the negotiation, you need to STFU.

Man, is this getting old.

Rick Chapman said...

+++ Unless you have some secret insider knowledge about the details of the negotiation, you need to STFU. +++

You don't need that. It was all out there in the public. All you needed to know was how channels and suppliers worked and what they were fighting about. It was public knowledge agency pricing was the sticking point. Do you know nothing about the fight?

And I wrote about what was happening in real time as it was happening and accurately predicted what would happen. All documented and on the record.

So you need to get a clue and learn something.

Alyx said...

Rick, you do understand that Hachette and traditional publishers offer (require) a much, much worse deal? I never got more than 6% from 4 different big publishers, AND they kept the rights to my books as long as they wanted, completely ignoring that the contract was only for a few years. (They did, after all, write the contract... and I don't have the money to sue.)


It's not Amazon here-- it's independent publishing. Whether I'm dealing with Amazon, Apple, or Bn.com, I'm getting TEN TIMES the percentage, and I retain complete and absolute control of my own work. I'm not really sure what you see the problem for authors there. If we ever don't like the deal Amazon or other retailers offer us, we still have control of our own books. I gather you don't think that's a big deal? But there are two of my books where the traditional publisher did a really bad job, and the books didn't sell and should have, and I could sell them myself... only they're furiously hanging on to the rights to books they "leased" for a few years... a decade ago. They have no interest in releasing them again... they just don't want me to have my own books. Why? Goodness knows. But when I think of that, I don't think of AMAZON as the exploiter of authors, ha ha. I think of the publishers who refused to let me have my own books, and also refused to re-print them, because, well, because they can't even come up with a reason, and they don't think they have to.

Oh, well. It's not your problem. But my choices also are not your problem, so we're going to go on taking advantage of the vastly expanded opportunities we have. And notice how many of us-- who KNOW what the situation is because we're veterans-- are choosing never to bother with a trad publisher again. Do you actually think we don't know what we're doing?

Well, we do.

Alyx said...

Rick, you need to consider bottom line. You say Amazon is charging 30% for "a download service," and that makes me wonder if you understand the concept of "retail." For one thing, there are actually other book retailers, and they all take about the same amount (some take a bit more), and it's not for "downloading service". You might notice that all these retailers have stores-- server space, employees, office space. They also have to advertise and pay for promotion, web design, everything else. That's overhead.

What's the difference between "overhead" with the NY publishers? Well, I remember one of those publishers earnestly telling me that their overhead was r0%, which seemed really high, but then, they have to pay Manhattan rents and Manhattan salaries. Oh, and then there's the "distribution costs" (this really applies mostly to print books, but they seem to be using the same numbers more or less). The'middlemen" cut is somewhere around 55%.

How much does that leave for the author... hmmm.... 5%? Gee, that 70% I get from Amazon sounds a whole lot better, doesn't it? Like 14 times better.

Wait! Ebooks are cheaper to produce! So overhead is lower for the big publishers, right?? Which is why they are "giving me" 12%. Cough. Gee, I guess that publisher is charging me a "Download fee" of considerably more than 30%.

And you know, Rick, in the end, the comparisons break down. Amazon doesn't pay me "royalties", as you claim, because they are not my publisher. I pay myself royalties, along with a rather substantial per-unit profit. That is, you shouldn't worry about comparing the publishers with Amazon. Compare the publishers with ME. There's overhead... and the rest is ALL MINE.
And if it doesn't work... if I don't want to work with Amazon anymore... I still have control of my books. In quite literally 10 seconds, I can take the book down. Compare that with the 10 years and counting I've been trying to get a book back from one of the Big 5.
You should address the rights situation, as that is very important to most of us.




Alyx said...

Alyx says-- sorry, that's 40% big pub overhead, not "R" percent. Terrible typist here!

NJMANGA said...

The long wait is finally over but so many of their titles are still either full price or over retail such as their yen press prints, in which a few manga are priced at 13 to 26 dollars a volume, im hoping its just a computer glitch on amazon end and not hachettes way of making up for losses throuhg their yen press arm

Walter Knight said...

I prefer that the Big Five keep their E-book prices high so that I can compete.

Joe Konrath said...

You seem desperate for my attention, Rick. So I'll give you five minutes.

Here Hugh Howey and David Gauhgran and Joe Konrath and Passive Lawyer and others have spent so much time telling us how awful agency pricing was. Awful, awful, awful. And that $9.99 was a golden number.

Agency pricing was terrible for Big 6 authors, who made a lot more money previously to the collusion that forced Amazon to accept it.

But Agency pricing isn't what's bad--DTP had agency pricing from its inception. Refusing to allow Amazon to discount was where the harm was being done. I've said that repeatedly. When publishers control prices, authors get harmed.

Where did I repeatedly say $9.99 was a golden number? You're both misquoting me and putting words in my mouth.

The publishers used their writers and Amazon used you.

You make this statement without proof or any discernible logic. No, Rick. Amazon hasn't used me.

By forcing the publishers to abandon agency pricing

Amazon wasn't against agency pricing, Rick. You're conflating agency with the ability to discount. They stated they were fine with agency.

THAT’s why they put indies in their $7 pricing box and are keeping us/you in it.

Those devious bastards! Making me rich while customers benefit form lower prices! Someone needs to stop them!

Hachette failed to break

Hachette just broke. They now have pretty much the same deal KDP authors do.

Stuck in a $7 roach motel paying 30 points for a download service

The stupid you're radiating with that sentence is enough to power a small city.

Amazon is the go-to destination for readers. They became that by innovating, offering great prices, and making readers and writers happy.

Rather than take advantage of Amazon's platform, publishers have been fighting it even as they boast record profits. This isn't good for authors.

Exhibit A is Joe Konrath, who has spent many pixels preaching the evils of agency.

When you say shit like that, quote me, pinhead. Agency isn't evil. Publishers trying to stall ebook growth by pricing books to high is the problem. You seem to be oblivious to this.

If Amazon had gotten everything it wanted, just who does Konrath think would have paid for the loss of revenue?

If Amazon had gotten what they wanted, revenue would go up. I've proven that with my whole career.

Openly ask Hachette why they can't reach an agreement.

Uh, they have.


No. They haven't. They gloated that they hadn't contacted Hachette.

You haven't gotten a single thing right.

Well, how were the authors hurt?

Three times Amazon tried to compensate authors. Hachette and AU refused.

We'll see if they aren't compensated now that they've reached an agreement.

Stop carrying water for Amazon.

When I state opinion, I back it up with facts, links, quotes, examples, and defend my opinion. You haven't. Not once.

Apologize for all that bad advice and analysis you provided.

When I'm wrong I admit it. I've been right about this entire situation.

push for a more reasonable retail usage fee on downloads, help us get reasonable royalties on international sales

If you were someone I respected, I'd send you an email about all of the terms and conditions I've fought with Amazon about over the years that were later implemented by them.

You won't be getting that email.

help out some self publishers with reviews and PR

Count how many guest blogs I have. Then look up why I no longer write Amazon reviews; because Amazon screwed up.

You post was click bait, and didn't even function well at that, considered your lack of traffic. If you want to debate me, fisk me properly, don't make nonsense up.

Anonymous said...

I think it's pretty predictable what the pubs will do. They will use agency pricing to create the same effect as "windowing", where they'll make the ebook higher than the hardback (or at least ridiculously high for an ebook) for the first however many months after the release. They don't care about lower margin because the aim is not to sell ANY ebooks during this period, and any that do sell will bring in huge margins even at a lower percentage. After the print run is over they'll lower the ebook prices down into the reasonable, maybe even competitive, range and sell as many as they can. Ebooks replacing paperbacks is the goal, while preserving the print business until it dies of old age eventually.

I'm actually fine with all of this. I do feel bad for the midlisters getting so screwed by their publishers, but that's always been the case and the ones with any sense have options nowadays, so it's really their problem.

Rex Kusler said...

The smart ones are those who got out early, like Blair S. Walker who gave it all up to fly helicopters. I wonder how he's doing.

William Ockham said...

One thing that amuses me is that the people who whine the most about Amazon can't seem to take the obvious step and stop selling on Amazon. Rick Chapman must be an idiot by his own definition. He is paying 30% for a f***ing download service. Who in their right mind would do that? And look at that ruinous international 65% margin grab. He is putting up with that.

Or maybe he is perfectly rational and intelligent person who realizes that Amazon has built an incredible experience for readers and it is actually worth it to be on Amazon's platform. That he and most other writers and publishers make more money by taking advantage of the services that Amazon provides. Based on his actions rather than his rather overheated rhetoric, I think he is an intelligent person.

Here is a little hint for Mr. Chapman and other intelligent people. The dispute between Amazon and Hachette was really about the spread between the retail price of the hardback and ebook editions of bestselling titles. The publishers need it to be as small as possible and Amazon prefers it to be fairly large. We will know who won this negotiation when we see how that turns out. If
it settles at $2-$3 per copy sold, Hachette won. If it is $5 or more, Amazon ate Hachette's lunch. If it is around $4, it was a draw. I didn't choose those numbers at random. When Amazon controlled retail pricing (before the illegal collusion), the spread was about $5. When the Big 5 controlled ebook retail prices, it was between $2 and $3.

Anonymous said...

Not being as smart as Rick, let me ask this...

If 30% for a download service is too much, what's the number?

Keep in mind, if we can find some who will do it for us for - say - 10%, I need to know their reach.

Ah, prolly lost poor Rick there, so I'll explain...

If I want someone to speak at my business meetings, my neighbor will do it for a bagel and a coffee. Bill Clinton will do it for 200k.

See the difference? If you build a brand and a reputation and become #1, you make money sharing your good name and good systems with others.

AMAZON DOESN'T OWE YOU JACK SHIT RICK.

NO ONE OWES YOU A LIVING.

Rob Cornell said...

"So you need to get a clue and learn something."

Sorry, Rich. You lose. As Joe has already pointed out (saving me much needed writing time), you have no idea WTF you're talking about. Though you sure do work hard to make it sound otherwise.

Again, unless you know something the rest of us do not (here's a hint--you don't), please stop wasting so many "pixels" here.

Rob Cornell said...

Apologies. I mean *Rick* not Rich.

Cheers.

Anonymous said...

Rick Chapman was banned by David Gaughran from posting on his blog because of the way he interacts. Thought I'd throw that out there.

Rick Chapman said...

+++ Rick, you do understand that Hachette and traditional publishers offer (require) a much, much worse deal? +++

Alyx, I'm both "formally" published ("In Search of Stupidity: Over 20 Years of High-Tech Marketing Disasters") and self published. I began self publishing two narrow band business books 20 years ago and turned down offers from publishers to take them on because I made more money doing it myself. In a week or so, I release the second edition of one of those books. I won't use Amazon because it makes no financial sense to do so.

I am well aware of the issues that surround publishing (worked in that industry for a bit and didn't much care for it). I will point out that the model is being disrupted and if publishers expect to survive, they're going to have to change the way they think and pay. I cover some of that here:

http://www.rule-set.com/ricks-blog/what-hugh-howey-wont-talk-about-but-should-the-publishers-and-amazon-part-viii-the-next-to-last-part-no-really

(If they don't adapt, they will die and that's their problem. But we're talking the deal Amazon offers here and it's not all that lovely.)

But a business model that, at its core, consisted of hauling millions of pounds of paper around from point A to B was going to develop a distribution system that reflected that physical reality. Channels come into existence not because anyone loves them but because they're necessary.

Now, technology is disrupting that business model. Paper is dying. Amazon has disrupted the old channel system and after two centuries, that's a good thing. But this in a sense is completely off the point.

+++ It's not Amazon here-- it's independent publishing. Whether I'm dealing with Amazon, Apple, or Bn.com, I'm getting TEN TIMES the percentage, +++

And this is why this whole thing is so sad. It's unbelievable how many people repeat this canard and don't realize how foolish this claim is. I have to say, in the annals of deceptive advertising, Amazon's use of the word "royalties" in its reporting system has been stunningly effective and completely untrue.

You are getting nothing in terms of percentage. Zero. Zilch. Nada. Amazon pays indies nothing in royalties and never has. Amazon, in so far as indies are concerned, is not a publisher. ALL they are is an expense applied to your bottom line. They provide no publishing services. You pay for their marketing services.

+++ I retain complete and absolute control of my own work +++

Yes? So do I with my self published books. That's why you call it "self publishing! That's always the quid for the quo. I get all the money and pay all the expenses. All that Amazon is is an expense. When I had my self published books, printed, I paid for that and took all the revenue left over after I'd paid for all my expenses. I never looked at the printer and "thanked" them for my royalties. I looked at them and thought about how I could get the cost of printing my books down.

+++ Do you actually think we don't know what we're doing? +++

Unfortunately, I do. You've just demonstrated that you don't fully understand the difference between an expense and a royalty.

Amazon is charging you 30% points for a download services. That leaves you with 30% less to market and sell your book, an expense that you bear solely. That's WAY high. 65% for a book over $9.99 is ruinous (and don't forget how you're being slaughtered on your international sales). The publishers were never so predatory. Amazon, in its battle with the publishers over control of the pricing model for E-books, concocted a phony box that I refer to as its $7 dollar roach motel and it's a sight to behold watching all these indies bouncing of the sides of this tatty establishment and thinking they're in a Hilton.

You are not.

Rick Chapman said...

You say Amazon is charging 30% for "a download service," and that makes me wonder if you understand the concept of "retail."

Alyx, not only do I understand the concept, I have worked in it, written extensively about it, conducted primary research on it and have friends who work in channels.

Alyx, I suggest you visit my blog and read my series on how the book channel works. Now, a great deal of my experience working in channels came about in the software industry. Up till the mid-2000s, the retail software industry resembled the paper book market very closely, though price points were higher and the nature of software made overall channels more complex than books.

The retail market for software was almost completely disrupted by SaaS and mobile technology. This is what is happening in paper technology. I wrote about why the 1999-2001 push by Adobe, Sony and others to kickstart the E-book market failed and analyzed why and predicted when it would restart in the second edition of "In Search of Stupidity: Over 20 Years of High-Tech Marketing Disasters." I predicted 2010/11 and was off by two to three years.

I know a great deal about this topic and am on the record.

+++ For one thing, there are actually other book retailers, and they all take about the same amount (some take a bit more), and it's not for "downloading service". You might notice that all these retailers have stores-- server space, employees, office space. +++

Alyx, the battle between the publishers was about E-books, not paper. Amazon badly wants to control that market because it's a very profitable one. No physical inventory. Margins on E-books are glorious as compared to physical items and paper.

Amazon indeed has overhead to manage its E-book inventory, but its costs are much, much lower than managing millions of paper books and its system scales out at very high levels. It costs them pennies to add a new book to its inventory.

As for the transmission costs, you pay them, so they have no exposure.

Rick Chapman said...

+++ One thing that amuses me is that the people who whine the most about Amazon can't seem to take the obvious step and stop selling on Amazon. Rick Chapman must be an idiot by his own definition. He is paying 30% for a f***ing download service. Who in their right mind would do that? And look at that ruinous international 65% margin grab. He is putting up with that. +++

One thing that amuses me is people who make claims that they have no way of knowing are true or don't bother to verify them.

I indeed don't sell my business books through Amazon. Makes no financial sense.

+++ The dispute between Amazon and Hachette was really about the spread between the retail price of the hardback and ebook editions of bestselling titles. +++

And that is obviously untrue. Nothing about the deal that the industry is cutting with Amazon changes that in the least. The publishers keep agency, Amazon gets more swag from the publishers (and the publishers pass it along to the writers).

Such as it has been when the channels and suppliers fight it out and such will it ever be.

Anonymous said...

" I won't use Amazon because it makes no financial sense to do so."

Placing your book on the worlds largest electronic bookstore, which does a fairly decent job of catering to even the sub niche markets, isn't a good idea? Sure, there's other ways to get your book out there, and other websites, but I'm wondering what your CBA looked like in order to come to that conclusion.

If 65% for a book over $9.99 is ruinous, whats the word for the avg 17.5% percent you would receive if traditionally published no matter what the cost of your book?

How much of the 30% I lose to Amazon is marketing? How much is downloading?

Rick Chapman said...

+++ Anonymous said...
Not being as smart as Rick, let me ask this... +++

I don't know how smart you are. I do know I regard anonymous posters as being cowards.

I have a personal policy of answering AC's once if they ask something interesting. Then you go off my radar screen.

+++ If 30% for a download service is too much, what's the number? +++

10% for a new writer. Let the poor bastard keep some money in their pocket so they can build sales.

After that, 15%. Considering we're talking about zero physical inventory, that's a very handsome margin. 65% is predatory.

Also, since Amazon doesn't apply 30% to its imprints, I'd like to feel I'm playing on a more level playing field.

+++ Keep in mind, if we can find some who will do it for us for - say - 10%, I need to know their reach. +++

We can hope for competition to lower our expenses. I'm sorry, you'll have to do your own research.

+++ Ah, prolly lost poor Rick there, so I'll explain...+++

No, I don't pay attention to AC's and snarks. Their explanations lack interest.

Nirmala said...

Rick, I suggested over on your blog that another way of looking at this is that as a self-publisher, I am...well...a publisher. So just like almost every other publisher, I want to sell my books on the biggest retailer out there: Amazon. And since most retailers take at least a 30% cut of the stuff they sell, that seems reasonable to me. I doubt the big 5 are paying less than 30%.

So you are correct that Amazon does not pay royalties, and that comparing the deal I get with Amazon and the deal I would get with a traditional publisher is like comparing apples and oranges (which by the way is a perfectly valid comparison if you are choosing between an apple and an orange).

However, when I compare the deal I get as a publisher of my own books with the deal that every other publisher gets that sells their books through Amazon, then it is perfectly reasonable for them to charge 30% margin on my books just like they do with the big publishers. Show me a book retailer (or any kind of retailer) that only wants 10% of the sale. They do not exist or are extremely rare.

You may be correct that I can hire a "download service" for much less, but they won't bring any potential buyers to me. I would have to do all of that myself. And since Amazon brings me a lot of buyers, I am glad to sell my books on their site and pay them 30% for the privelege.

As for the $7 window for indies to make 70%, a lot of self-published authors have spoken out about how this does not make a lot of sense. But practically speaking it does not rank high on the list of complaints about Amazon because most authors are OK with pricing their books in that range. It clearly sucks for someone with an ebook that really should be priced higher like a technical book with high costs of production and a very narrow market. But for most of us, it is not a big problem which is why we do not harp on it much.

Rob Cornell said...

Nirmala,

Spot on.

But I don't expect Rick to understand that distinction.

It is funny, though, that a massive amount of people who have written and worked in publishing for 30+ years use selling on Amazon as part of their business model.

Clearly, Rick is smarter than all of them.

Rick, maybe you need to take a trip over to kriswrites.com or deanwesleysmith.com. Those are a pair of writers who understand the business of publishing (or business just in general) better than anyone I've ever met.

You could learn a few things if you're willing.

Nirmala said...

By the way, Rick, you correctly chastised me on your blog for comparing apples to oranges when I compared self-publishing to traditional publishing percentages (even though again it is a valid comparison when you are choosing between self-publishing and traditional publishing).

But, I think when you compare Amazon to a download service, you are also comparing apples to oranges. If Amazon was equivalent to just a download service, then every publisher out there from the smallest to the biggest would drop Amazon and move to a download service for their ebooks. But obviously they do not do this because Amazon offers something more than a simple download service to publishers of all sizes including self-publishers. In a nutshell they offer access to their millions of site visitors as potential customers which is why they are a retailer and not just a download service, and which is why they earn their higher fees than what a simple download service could charge.

Knave said...

Rick, your view of Amazon being a simple download service is unfairly limited.

Amazon is also a store front. Those people who might purchase and download said book, do so by first finding it. They find it, most often by searching through a comprehensive and well designed catalog. A great many books are found not simply because the customer knows the seller. They are found because the system is in place that lets them search for almost anything, then narrow their results to find exactly what they seek. A good selection with the ability to compete on price is the holy grail of a store, just ask Walmart. The ability to help a user find what they want is the holy grail of a search engine, just ask Google. The ability to connect a customer to the product they want, at a price they are willing to pay seems to be the holy grail of Amazon. You may choose to see it as ripping off the writers of 30% of their income. Most writers will see it as a way to make their product accessible to millions of possible customers.

Sure you could rely solely on your own website to sell your books and maybe get it past a few thousand people. But most people choose to also offer their work on Amazon. Why? Because to them it is worth paying 30% of the earnings to an intermediary, for a sale they would NEVER have had otherwise. For all those sales that find you only via Amazon. Would you prefer 100% of nothing, or 70% of something? It actually makes the math a LOT easier there...

Nirmala said...

Knave: good points. I would add that a lot of people would not buy the book on my own website even if they found their way to it on there. They trust a big name retailer like Amazon and might not want to give an unknown website like mine their credit card info or trust me to handle the sale or returns with integrity. Or they own a Kindle and want the convenience of using their Kindle to read the book without having to sideload it on there, or in many cases, they do not even know how to sideload a file on their Kindle.

The range of services that Amazon offers for their 30% is quite extensive actually compared to a simple download service.

Rick Chapman said...

+++ Rick, +++

Hi, Nirmala. How's it going?


I suggested over on your blog that another way of looking at this is that as a self-publisher, I am...well...a publisher. +++

Your logic is indisputable. But you are also a content provider.

+++ And since most retailers take at least a 30% cut of the stuff they sell, that seems reasonable to me. +++

That's is entirely up to you. For 30%, you get to be one of millions of files stored on remote servers. Amazon will not market or sell your book. You will spend all your time and money doing that, but you have will have far less money for those activities once it's done with you. Not to mention you're gutted like a fish on international sales even if you stay in the roach motel.

30 points is good money indeed for a retailer. Golden actually.

65 points is insane.

+++ Show me a book retailer (or any kind of retailer) that only wants 10% of the sale. +++

Nirmala, as a writer, I suggest you cultivate the valuable trait of being an ungrateful bastard. Not a lot of people get rich writing and just making an living takes an effort.

The paper book chains live on about 15 points net margin (at least on books). They have to fund a lot bricks and mortars and warehouses and people with that.

Amazon doesn't. I say that at 15%, they're doing good business off us indies. 15% is darn good money on a download whose transmission costs I pay for.

If Amazon wants more margin, let it earn it by offering proactive, measurable marketing programs that help you drive sales.

As for future publishing, you and I have discussed it. The old model is being disrupted and new ones are coming into existence.

My suggested split of the future? 40 you/ 40 publisher (if they can demonstrate an ability to E-market) and 20 to AMZ if they can show they can drive indie sales. If not, 15 points is nice money for downloading.

Rick Chapman said...

+++ Amazon is also a store front. +++

Hmmm. I suppose you could make that claim, but it's not much of a store. How am I going to browse through millions of books?

I believe it's closer to the truth to call it a massive downloading repository UNLESS you spend a great deal of MDF on SEO, buying up key real estate, buying a data concierge, etc.

Which few indies can afford.

+++ do so by first finding it +++

Yes, search is how you find something, but usually you know WHAT you want to find. Amazon certainly generates a few drive by sales, but unless you vigorously market your book yourself, it does nothing for you.

Except extract 30% to download a file.

+++ You may choose to see it as ripping off the writers of 30% of their income. +++

I think 30 points is high and 65 points predatory.

+++ Because to them it is worth paying 30% of the earnings to an intermediary, for a sale they would NEVER have had otherwise. For all those sales that find you only via Amazon. Would you prefer 100% of nothing, or 70% of something? It actually makes the math a LOT easier there +++

I would prefer Amazon lower its download costs to 15% for all books and stop using indies as a club to beat up the publishers. Which is what that ridiculous 65 point margin grab is.

Andrew said...

Publishers rarely put forth any effort now in marketing their authors, unless your one that's already made them a bunch of money

There are more than a few posts out there from authors whose stories of a traditional publishers marketing effort being a variation of "This 20 year old intern sent out a tweet and a press release and that was it."

Seriously, go the the Hachette website, look at their author page, and check off those you've seen advertised in a meaningful way.

The paper book chains are dying on 15 points, which is why there are so few left.

Amazon doesn't have brick and mortar stores, but then again fulfillment centers and servers aren't exactly free either.

Between twitter, facebook, mailing lists and the like, advertising your work isn't a 24/7 slog that is also a money pit.

And when you consider that your work, if it's good and has some sales, will show up as part of the "also bought" part of the page, that alone is a good amount of free advertising. I've found more books and authors that way than I would have just perusing the shelves.

Amazons already shown it can drive indie sales. Unless all those indie "midlist" authors are outliers.

Graeme Ing said...

Rick said: " Amazon will not market or sell your book."

Actually incorrect. They will recommend it to others, both on their site and via email lists. It is no secret that Amazon has the best recommendation analysis engine online, and they use it - VERY effectively. So much so, that Amazon's marketing (particularly via email) is known to boost monthly sales from hundreds to thousands.

Marc said...

Rick,

What IYO does a traditional publisher (large or small) do for 75% that Amazon doesn't do at 30%

Alan Spade said...

And what about Google, which takes 50%? Perhaps the criticisms should be addressed primarily to Google, because it's possible that one day, Amazon will decide to align its policy on Google's.

Rick Chapman said...

+++ But obviously they do not do this because Amazon offers something more than a simple download service to publishers of all sizes including self-publishers. +++

You can test this. Here's how.

Write a book. Upload to Amazon.

Do no marketing for it.

Wait six months.

Report back on the results.

+++ But for most of us, it is not a big problem which is why we do not harp on it much. +++

Thanks, Nirmala. Let me just wipe these tire tracks off my clothes.

+++ You may be correct that I can hire a "download service" for much less, but they won't bring any potential buyers to me. +++

Take my simple test above and then let's compare notes.

+++ I doubt the big 5 are paying less than 30%. +++

Apple to orange. Indies operate under agency pricing, as you now well know. Tell David Gauhran Howey now calls it "Incentivized Agency."

As for the publishers, for those books sold at agency, Amazon's margins are locked in at around 30 points. The exact numbers are subject to negotiation.

Rick Chapman said...

+++ Actually incorrect. They will recommend it to others, both on their site and via email lists. It is no secret that Amazon has the best recommendation analysis engine online, and they use it - VERY effectively. So much so, that Amazon's marketing (particularly via email) is known to boost monthly sales from hundreds to thousands. +++

If YOU drive sales via effective sales and marketing, their search engines will respond.

If you pay via MDF, you can grab valuable real estate and do other things, you can help generate some demand, though your marketing and sales efforts will ALWAYS drive demand.

Channels NEVER make markets. Only you can.

Rick Chapman said...

+++ What IYO does a traditional publisher (large or small) do for 75% that Amazon doesn't do at 30% +++

That's a divide by zero question. Amazon does nothing and though it misuses the term "royalties," is not a publisher.

You are the publisher. What do YOU do? What will it cost you?

Amazon is an expense. A necessary one, but so were printers.

As a publisher, and therefore a businessperson. What can you do to lower your expenses to the lowest possible amount?

Now, you may not be able to bypass the expense. But neither should you lie to yourself about the nature of the expense and its value. And you should always seek to lower the expense and boost YOUR bottom line.

Graeme Ing said...

Most of us are very successful businessmen, Rick. None of us are lying to ourselves or misunderstanding what are costs are. I don't know what you are trying to prove? I accept a 30% expense for the benefit I obtain from Amazon (and other retailers). What's the problem?

Rick Chapman said...

+++ Publishers rarely put forth any effort now in marketing their authors, unless your one that's already made them a bunch of money +++

I wouldn't argue with you. My publisher didn't do much marketing for my book though it was very much a financial success. I did most of the marketing.

It helped it was a good book.

+++ The paper book chains are dying on 15 points, which is why there are so few left. +++

No, they are not. They are dying because digital technology is destroying paper, the last analog empire to fall. 25% of revenue has moved to E-tech and nothing will stop it.

++ servers aren't exactly free either. ++

No, they're not. Nor are programmers, secure facilities, software, etc.

But they scale incredibly. And they allow Amazon to add "inventory" for pennies on the dollar forever at an ever decreasing price as the price of infrastructure drops (though power and programming are variables that can be hard to control.)

+++ Between twitter, facebook, mailing lists and the like, advertising your work isn't a 24/7 slog that is also a money pit. +++

Yes, marketing and selling is a slog, isn't it. I wonder why publishing has its appeal? Hmmm. Who knows! Maybe one day they'll earn how to adapt.

But too bad you're going to have less money to work with after you've been shorn of 30 points and/or are violated at 65.

And if you think Amazon will make a market for your book, take the Nirmala test!

Write a book.

Upload to Amazon.

Do no marketing.

Report back on what happens.

We can all compare notes.

Nirmala said...

Rick said: "As for the publishers, for those books sold at agency, Amazon's margins are locked in at around 30 points. The exact numbers are subject to negotiation."

Yes, so publishers pay Amazon around 30% on agency priced books. I pay Amazon 30% via agency pricing. We both may need to do some marketing to get the ball rolling. We can both pay extra for MDF, although as you say, most indies can't really afford it and publishers probably are offered way more opportunities, but they do pay for those opportunities. All of that fits with my point that right now 30% is roughly what you pay to sell in online bookstores no matter who you are. You think that is a ripoff, and I am content with the split. Maybe we just need to agree to disagree.

And I do sympathize with the tire tracks on your back from the ways Amazon charges 65%. But, as I said, they don't affect us very much and so I see the world from that point of view. Even the few international sites where I cannot get 70% (unless I am in Select) are not that meaningful to us as we have only tiny amounts of sales in those countries, and we also do have several titles in Select right now.

As for your suggested experiment, we do that all of the time. We launch new books with little or no marketing and Amazon brings us sales. These sales are obviously not coming just from our websites because we use Amazon's affiliate program where we get an extra 5-7% for sales made from following links on our websites, and those sales make up a very small percentage of our overall sales on Amazon. So where do the other sales come from? From Amazon recommendations such as "customers also bought this", and "hot new releases". At this point we do very little other marketing and still sell lots of books on Amazon every month. It clearly helps a lot to have 25 books as that leads to a lot of extra sales from Amazon's recommendations. But most marketing we have done has had little or no measurable impact (with the exception of Bookbub where we usually do a little better than breaking even).

So it is simply not true that "unless you do vigorous marketing, Amazon does nothing for you". We have never done vigorous marketing and we have been making money for years on Amazon.

I get it that you think 30% is not fair, but what practical alternative are you suggesting? Show me a better way and I will be interested. Right now, there is not practically a better way that I can see. So I am content for now to work with Amazon.

evilphilip said...

I like how quick the left-leaning websites were to declare this a victory for Hachette.

It's not. Hachette lost 18.5% of their sales for the last six months and some Hachette authors will NEVER earn out their advances because their books launched during the dispute and now those books are old news to readers and for Amazon website placements and e-mail blasts.

Hachette might get to keep their ebook prices at $14.99, but they lost a ton of money and hurt the career of thousands of authors in the process.

Good job.

Rick Chapman said...

Most of us are very successful businessmen, Rick.

Really? How do you know that? It's my understanding that most writers are struggling. I fail to see how paying a fat 30% fee for downloading or a rapacious 65 points helps anyone.
+++ None of us are lying to ourselves or misunderstanding what are costs are. +++

I don't agree. I believe I've already pointed out how people are confused or lying to themselves about what they receive from Amazon. Which is not a dime in royalties. They are an expense, plain and simple.

+++ I don't know what you are trying to prove? I accept a 30% expense for the benefit I obtain from Amazon (and other retailers). What's the problem? +++

You know Graeme, if you can't figure out what the problem is with Amazon putting you in a $7 dollar roach motel and grabbing 65% of your international revenues and charging you a high download fee is, I'm not going to tell you. I'm going to save that for an article on my blog.

But a good businessperson should be able to analyze and identify the problems.

Rob Cornell said...

Okay, it's time to stop feeding the troll, folks. Rick doesn't get it, will never get it, doesn't WANT to get it.

It reminds me of a Saturday Night Live skit where they're poking fun at the TV show, The McLaughlin Group.

At one point, one of the guests says to the host, "You're insane, John." To which John replies, "Wrong. I'm perfectly sane. Everybody else is insane and trying to steal my magic bag."

Let's stop trying to steal his magic bag.

Graeme Ing said...

I'm with you Rob. All he does is foist his own issues in a circular argument. Those of us not wanting to charge more than $10 for a novel are not in the slightest bit interested in his "$7 roach motel". he's got a bit of a bee in his bonnet about that one.

You're right, he doesn't get it. His blog is full of verbose and badly thought out arguments.

Feeding time is over. I'm out.

Rick Chapman said...

+++ Yes, so publishers pay Amazon around 30% on agency priced books. I pay Amazon 30% via agency pricing. +++

Good God! An intelligent man who FINALLY realizes that indies pay Amazon under the Evil Agency program that poor, brave, suffering Jeff Bezos struggled so hard to escape.

But failed. I weep for him, though the extra loot in MDF and margin he bargained for no doubt assuages his suffering.

This makes me happy.

+++ We both may need to do some marketing to get the ball rolling. +++

Amazon will do no channel marketing unless you pay them via MDF.

+++ We can both pay extra for MDF +++

Amazon doesn't pay MDF, it charges it.

+++ publishers probably are offered way more opportunities, +++

Not probably. Are.

+++ But, as I said, they don't affect us very much and so I see the world from that point of view. +++

Yes, the fish in the ocean does not apprehend the sky above the great expanse of water, Grasshopper.

+++ Even the few international sites where I cannot get 70% +++

I do rather well internationally. My published book, "In Search of Stupidity: Over 20 Years of High-Tech Marketing Disasters" was translated into seven languages. My business books are bought regularly by overseas firms.

+++ We launch new books with little or no marketing and Amazon brings us sales. These sales are obviously not coming just from our websites because we use Amazon's affiliate program where we get an extra 5-7% for sales made from following links on our websites, and those sales make up a very small percentage of our overall sales on Amazon. So where do the other sales come from? From Amazon recommendations such as "customers also bought this", and "hot new releases". At this point we do very little other marketing and still sell lots of books on Amazon every month.+++

Nirmala, what is your time worth?

Rick Chapman said...

+++ Those of us not wanting to charge more than $10 for a novel +++

Unbelievable. Well, I AM a student of bad decision making.

The people who are thinking this through already understand what I'm talking about.

Rick Chapman said...

+++ You seem desperate for my attention, Rick. So I'll give you five minutes. +++

Thank you, but don't need it. People can go to my blog and read my series on the whole Hachette vs. Amazon fight, check the post time stamps, and make up their own minds on if I called it accurately.

I've made the points I wanted to make and need to get back to my writing. As for "link bait," all blogs are link bait.

Best of luck.

Nirmala said...

I will go one last round:

Rick says: "Your logic is indisputable. But you are also a content provider."

Yes, I am also a content provider. That is why I get to keep all of the 70% I get from Amazon, whereas a publisher has to give some of their 70% to the content provider or author. Seems like your statement is a non-sequitur.

Rick says: "The paper book chains live on about 15 points net margin"

Whoa. Now you are talking about net margin? We have been talking about gross margin so far. Brick and mortar bookstores by most reports have a gross margin of 40% ( http://retailowner.com/Benchmarks/Recreation-Leisure-Activities-Stores/Bookstores#287932-gross-margin ) and then the big chains can charge MDF on top of that. Your statement about net margin seems like another non-sequitur.

Finally you asked me what my time is worth. Huh? Is that another non-sequitur or I am missing something?

Rick Chapman said...

+++ That is why I get to keep all of the 70% +++

I'm happy that you are happy you get to keep 70%. Your happiness is important to me.

+++ whereas a publisher has to give some of their 70% to the content provider or author. Seems like your statement is a non-sequitur. +++

This statement makes no sense. I'm not sure what you were trying to say, but you need to rephrase it.

A content provider can contract with a publisher to license their content based on negotiated terms.

Or not.

+++ Whoa. Now you are talking about net margin? +++

Well, yeah. You did read my series? There's nothing new about the book publishing and channel model. Been in place for decades. I discuss gross and net when I break down the model.

You haven't learned about the difference between gross and net margins?

+++ We have been talking about gross margin so far +++

I have been assuming you read the series and understand that in E-tech, there's not the same spread between the two.

I'm not sure if you're playing games or you just aren't disciplined enough to read and learn.

Gross and net margins in E-tech don't involve the same level of spread. You haven't read the series? You don't understand how electronic inventory scales?

Your problem. Read and learn. I covered this in the series.

Let me help you out a bit. I started in high tech writing inventory management systems for beer and soda distributors in Brooklyn. New Yawk. Atlantic Ave. Used to be a lot of them there. In Vulcan. In CPM/86. A few people out there will understand this.

I have a friend in this area who's a god. Has written entire warehousing programs. For physical stuff and E-inventory.

Once you've written the system for tracking an item in inventory, adding a new item to the system is trivial. Pennies to add. If that. In the article, I really stretched and assumed a course of $1.

Now, of course, Amazon must do more than that. It must create a downloading subsystem, manage that, tie back to the database, calculate virtual inventory, build the reporting subsystem, wrap a CMS around the whole thing, manage the review comments database, etc., etc., etc.

Big project. Though, when you're dealing with E-inventory, location management, shipping, asset tracking et al aren't important. The beauty of digital.

But once done, scalable and repeatable. Forever. And constantly dropping in price per SKU because that's what hardware does.

The difference between Amazon's gross and net margins of E-inventory is negligible because of the above. Anyone involved in high tech understands this.

I'm sorry, but you haven't done your homework. No more questions on this area till you can demonstrate you read the series and understand this.

You want to pursue this, on my blog. No more comments here.

Terrence OBrien said...

Also, since Amazon doesn't apply 30% to its imprints, I'd like to feel I'm playing on a more level playing field.

Why should anyone give you a level playing field?

Nirmala said...

I know you said no more comments here, but I am still going to respond here.

I mentioned the bit about how a publisher has to pay the author, because my point all along has been that 70% was as good a deal for me as a big publisher. So the fact that the publisher and the content provider are the same party in my case has nothing to do with whether 70% is a good deal or not. Obviously, I do not have to split my share with anyone else and a traditional publisher does because there are two parties involved. This has nothing to do with the share Amazon takes which is why I said your bringing it up is a non-sequitur.

And both Amazon's net margin and gross margin are roughly the same for me and for publishers even if there is not much spread, so my original point still stands.
Saying that physical bookstores have a lower net margin is again irrelevant to my point.

You also may be leaving out a lot of Amazon's costs in your calculation of gross versus net such as payment processing, advertising, and the development, manufacture, advertising and sale of Kindle ereaders and tablets which they sell at the cost of materials in order to make money on ebook sales. It was their initial investment in the Kindle that made ebooks a viable product in the marketplace, and they continue to have costs associated with improving and maintaining that brand, as well as deserving to make something for that initial investment in creating a viable version of ereader technology. There is much less spread than in the brick and mortar book business, but not as little as you seem to think.

But bottom line is that like the publishers I do not have a lot of other options right now than to play ball in Amazon's court when they have 65% of the market. As I said earlier, show me another option that works as well or better than Amazon at making me money and I am interested. Until then, I have to operate in the real world of online retail as it exists today. You can think it is unfair, but I do not think anyone at Amazon will be listening when they are currently able to get almost every publisher out there to play their game by their rules. And especially, why should they give me, as a micro-publisher, a better deal than Hachette and S&S?

Broken Yogi said...

Which is similar to the KDP structure. If self-pubbed authors keep their prices within a certain range ($2.99-$9.99), they get 70%. Outside of that range, they only get 35%.

The head of S&S said that in their deal, they get a minimum of 70% at all price levels. Which they were already getting anyway. So if we take that 70% as the baseline, there's no punishment at all for pricing about 9.99, while with KDP there's a huge and crushing punishment for stepping out of Amazon's favored pricing range. So if the Hachette deal is similar to S&S's deal, there's no real pressure to price ebooks lower.

Whatever incentive there is, comes from some even better margin Amazon must be offering for prices below $10. But there's not much more room left at the top. And what it boils down to, if Amazon is offering significantly higher margins, is essentially the equivalent of a discounting of those books, with Amazon taking most of the hit, but entirey at the discretion of Hachette. And maybe that's all that is meant by "some discounting".

Run the numbers.

Suppose Hachette prices an ebook at 12.99. With a 70% margin, Hachette makes 9.10 per book, and Amazon makes 3.89. But if Amazon increases the margin to 90% at 9.99, Hachette still makes 9.00, but Amazon only makes 1.00. It is essentially discounting the book, and taking most of the discount out of Amazon's pocket. I'm not sure if Amazon can afford that kind of high margin across the board, but it certainly would create an incentive for lower ebook prices. It ends up being the equivalent of discounting, with Amazon eating most of the pain. That depends on the numbers, the margins, the levels, etc. And who knows, maybe Amazon is willing to forgo profits in order to drive prices down. Maybe not all the way to 90% margins, but since Amazon does tend to think long term, it's not completely impossible that they'd make such offers.

On the other hand, publishers would still be free to ignore those deep discounts and higher margins if they wanted to. Which they may very well want to, to protect their print distribution system. But the temptation would be there.

But in relation to the negotiations, they could have offered this not just at the start, but regardless of any negotiations at all. It certainly doesn't make sense for Amazon to have held out this long, and end up with something that is essentially a free giveaway to the publishers, who might not even want it. Of course, we don't know what Hachette or Amazon's bargaining positions actually were. But the notion that Amazon essentially made this same offer to Hachette at the start, meaning agency pricing with incentives for lower prices, and Hachette turned them down, is pretty unlikely. It more looks like Amazon just gave up trying to get its way, and is trying to create a situation that simply takes advantage of market forces to do what it's own negotiations could not: drive prices lower.



Broken Yogi said...

Nirmala,

Don't waste your time on Rick. I've made that mistake before, and you won't get anywhere with him. A total narcissist who is never wrong about anything.

But I did notice this at the end of your last post:

I do not think anyone at Amazon will be listening when they are currently able to get almost every publisher out there to play their game by their rules.

First, I think it should be clear that Amazon isn't able to get almost every publisher out there to play by their rules. They couldn't get Hachette or S&S to do that, hard as they tried to enforce lower prices or a wholesale model that would give them the continuing ability to offer steep discounts.

And especially, why should they give me, as a micro-publisher, a better deal than Hachette and S&S?

Well, one reason would be to try to steal away authors from those big publishers that they can't currently control. The current terms for self-publishers are certainly better than what we could get in the past, but they still aren't as good as they could be. If Amazon wants to really hurt big publishing, they should go after the authors who are the suppliers of big publishing, and without whom big publishing couldn't even exist. And they could do that by offering better terms and better deals and marketing and working to get print books into stores and so on for self-publishers/micro-publishers (same thing, really). It would probably be money better spent than discounting trad published ebooks anyway.

Not saying it's going to happen, but there are definitely sound reasons for it to happen.

Broken Yogi said...

Joe,

Amazon wasn't against agency pricing, Rick. You're conflating agency with the ability to discount. They stated they were fine with agency.

This isn't really true. Amazon did say a few weeks before the S&S deal was announced that they were okay with agency pricing, if done in certain unspecified ways. But we have to realize that they had already done the deal with S&S by then, in which they agreed to agency pricing, and were just doing a little spinwork to make it seem like they were okay with agency pricing, so when it came out they could say, "but we were always fine with agency pricing," when it was pretty obvious they weren't. They wanted wholesale pricing, which would mean an almost unlimited ability to discount (limited only by federal trade laws).

Now, it would make some sense for Amazon to accept agency pricing, if it meant that most ebook would be priced below 9.99. But that's why this whole conflict started in the first place: publishers didn't like Amazon's deep discounts into the 9.99 and below range, because it threatened their print windowing system, and their control over the industry through that system. That's why the Big Five wanted agency pricing, to stop Amazon from doing that to them. You know, threatening literature and culture, which was always just shorthand for big publishing's control over the industry, as God intended.

I can't imagine that S&S would readily agree to an agency pricing model that would essentially allow the same kind of steep discounting and low pricing of ebooks that they wanted to impose agency pricing on Amazon to prevent in the first place. We all know that's what happened back in 2010. They colluded to impose agency pricing to keep ebook prices high. That was the whole point of the agency pricing model. If they were going to allow low prices and steep discounting, why bother with agency pricing at all? What is agency pricing with steep discounts other than wholesale pricing?

Now, we still don't know what the "some discounting" in the public announcements of the deal amounts to. It may just be the margin incentives that come from lowering prices below 9.99 at the publisher's option. If so, that's really not what Amazon ever wanted to agree to. But final judgment won't come until we know more. But even you seem to agree that this deal allows publishers to keep ebook prices as high as they want to. So it really doesn't sound like the kind of agency deal Amazon ever would have considered favorable to its interests and goals until very recently. And I think we can read that as pure spin.

SJArnott said...

"You want to pursue this, on my blog. No more comments here."

Phew.

But talk about pitiful transparency...

Nirmala said...

Broken Yogi:
Thanks for pointing out the limits of what I was saying and how I said it. I was trying to make a simple point that Amazon was treating indies roughly similar to how they treat traditional publishers, so it seemed to me that 30% was fair enough for now, contrary to Rick's repeated assertion that it is unfair.

But you are correct that they could do more. And it could be brilliant for Amazon to go after luring more of the traditionally published authors to self-publishing with some more of Amazon's 30% share, as well as other beneficial changes to the terms we publish under. As you have pointed out several times on here, that could be the ultimate long term strategy for them.

I hope they are listening!

Rick Chapman said...

+++ A total narcissist who is never wrong about anything. +++

I'd be offended by this if I weren't staring in the mirror admiring my all consuming masculine beauty.

+++ Amazon wasn't against agency pricing, Rick. You're conflating agency with the ability to discount. They stated they were fine with agency.

This isn't really true +++

I will now depart the thread by noting you have verified my observations here and on Hugh Howey's blog. I noted your observations on MY blog and you are named by your handle.

You are, however, still not as handsome as I.

Best of luck.

Joe Konrath said...

As for "link bait," all blogs are link bait.

Taking a ridiculous, unsupportable stance that isn't backed up by logic, facts, quotes, links, or citations, is linkbait. Hence your zero comments.

You called someone upthread a coward for commenting anonymously.

I shredded your ridiculous blog post. You didn't reply to single point I made.

Who's the coward?

But I honestly do thank you for dropping by. You've certainly helped to stimulate discourse, and it has been polite and even mannered.

I'd be offended by this if I weren't staring in the mirror admiring my all consuming masculine beauty.

I LOLed at this.

Anonymous said...

Th deal that S&S signed gives them a minimum at a certain price. The higher they price, the more they lose.

So, if they price at $9.99, they get %70. If they Price at 14.99, they get 35%. Note, those percentages are made up.

Amazon has always been OK with Agency pricing. What they were not OK with was the inability to discount the way they wanted to the last time Agency was foisted on them. This time around, they can, and I am eager to see if in fact the higher a trad pub tries selling a book for, the larger the discount Amazon can take.

We'll find out in January.

Joe Konrath said...

But we have to realize that they had already done the deal with S&S by then, in which they agreed to agency pricing

They said this prior to the S&S deal. They've had agency pricing with DTP authors from the beginning.

Amazon was against agency pricing being forced on them through illegal collusion because it took away Amazon's ability to discount.

With KDP authors, Amazon retains the ability to discount, and also incentivizes certain prices.

One problem with this discussion and debate if that "agency" is automatically assumed to be "no discounting". But that's not the case.

Under the wholesale model, publishers also set prices. The MSRP is printed on books. Always has been. Name another product that does that.

And until the relatively recent advent of the big box stores and subsequent discounting for large orders, books have always been sold at MSRP.

The Big 6 liked discounting. I wrote a blog post about this, how Amazon essentially subsidized publishers by using steep discounts on paper books. Who wouldn't want to sell an item to a retailer for $5 and have the retailer sell it to customers for $4? It's printing money.

But when Amazon began dong that with ebooks, publishers were threatened it would destroy their paper oligopoly.

It may just be the margin incentives that come from lowering prices below 9.99 at the publisher's option. If so, that's really not what Amazon ever wanted to agree to.

That's my takeway from this. But in the long game, paper is going to become niche. Then these incentives will indeed force publishers to lower ebook prices. The paper midlist is already shrinking, and the indie list is gobbling up more and more of the market.

If publishers intend to survive, they're eventually going to have to lower prices. Amazon incentivizing them to do that will quicken the transition.

And if it doesn't? Amazon has 500,000 exclusive titles without the Big 5. They don't need James Patterson to feed Kindle owners new ebooks.

In 2010, Amazon needed publishers.

I don't think it does anymore, so it cares a lot less about how they price books. Amazon once tried to ensure the very survival of these publishers by discounting their ebooks, which helped readers adopt ebooks and the Kindle. Now all Amazon needs to do is give them enough rope to hang themselves.

When the bankruptcies begin, and author backlists are sold to pay creditors, guess who will buy those backlists? Hint: they already bought Dorchester.

Nirmala said...

Small point, but cars do have the MSRP on the window sticker....but almost everyone knows that is not the real price. I say almost everyone because we had a older friend years ago who it turns out had been buying her cars at full retail her whole life and never knew you could negotiate. We went with her the next time she needed a new car.

Rick Chapman said...

+++ I shredded your ridiculous blog post. You didn't reply to single point I made. +++

You didn't shred anything. At least one person here has noted your comment about Amazon having no problem with agency is wrong. I read further through your post and saw you take a quote completely out of context and ask why I was talking about "you" when clearly I wasn't. At that point I begin to MEGO out as it's tedious to both argue facts and point out distortions of quotes at the same time. You also started to swear and I find that distasteful.

If you want, I will put your entire refutation up on my blog and respond to it there. You are welcome to respond in any way (but no bad language and threats). I will reciprocate by placing my responses to your points and give you the last word on both this blog and mine. I don't have the time to engage in a major flame war.

Or not. Your choice. I have two novels to get to work on and some indie reviews to write and don't want to overly indulge in blog wars.

Joe Konrath said...

If you want, I will put your entire refutation up on my blog and respond to it there.

Respond here. People don't read your blog. If you want your rebuttal to be read, this is the place for it.

FYI, this is how you reply point by point.

Amazon having no problem with agency is wrong.

Amazon has no problem with agency. For the eyerollingeth time, they have a a problem with being unable to discount. Per their May 29th statement:

"In fact, the 30% share of total revenue is what Hachette forced us to take in 2010 when they illegally colluded with their competitors to raise e-book prices. We had no problem with the 30% -- we did have a big problem with the price increases."

http://www.amazon.com/forum/kindle?_encoding=UTF8&cdForum=Fx1D7SY3BVSESG&cdThread=Tx3J0JKSSUIRCMT

saw you take a quote completely out of context

If that's the case, Rick, to debate properly you have to tell us which quote I took out of context.

At that point I begin to MEGO

MEGO? Give me a break. I had to wade through your whole nonsensical blog post, and only responded in brief because I didn't want to waste an hour responding to all the stupid.

If you want to play, go upthread and reply to the points I made. Every one of them.

If you want to just say stuff without defending it, I'm not interested in taking this any further.

Show me I'm wrong. Prove it. Use links. Quote me directly.

Broken Yogi said...

That's my takeway from this. But in the long game, paper is going to become niche. Then these incentives will indeed force publishers to lower ebook prices. The paper midlist is already shrinking, and the indie list is gobbling up more and more of the market.

As much as I like to argue, I think we are in basic agreement here. Amazon might be okay with some forms of agency pricing, but not the kind they have here, most likely. My take on the negotiations is that they basically gave up at the end, realizing that they were better off just letting those market forces accomplish over time what negotiations could not. If publishers were smart, they'd have tried to get ahead of the curve, rather than lag behind and pay the price later, but the general corporate strategy in the industry is to fight change rather than be the leader of it. It will pay off in the short term, but not the long term. And short term is really what their boards want for their stock prices. Amazon operates very differently.


I still think you overestimate the power of the self-publishing industry as yet. Those 500,000 titles only generate about $400,000,000 of gross sales, and that's not enough to replace the billions from the big publishers. But, it's a growing number, and someday it really will threaten the dominance of the big publishers. And you're right that the publishers love discounting, when it comes to print books. With ebooks, they are scared shitless by it. You know why. Rather than hanging by their own rope, they will drown in their own shit. That's about the only distinction between our viewpoints here.

Nirmala said...

Rick: I hope you can maybe hear this, but Joe is right. The way you comment and blog is full of unsupported statements and non-sequitur. I have mentioned this to you before in our other discussions. You also have some valid points and a unique background to share, but it seems clear that a lot of people never get your points, and just tune you out after a while.

You may not care, but when you get the same feedback over and over, you might want to step away from that image of masculine beauty in your mirror for a while if you truly want to communicate your ideas :)

There is a very wise statement that the meaning of a communication is the message received, not the message sent. You may not be intending the messages that most people are receiving, but that is still the meaning of your communications.

Rick Chapman said...

+++ Respond here. People don't read your blog. If you want your rebuttal to be read, this is the place for it. +++

No. As a courtesy to you, I ask your permission to respond FIRST on my blog. I don't have to do this, but I think it the proper thing to do. Also, it helps everyone keep everything straight. The bouncing back and forth is confusing and this will unify the argument.

Up to you.

Joe Konrath said...

I ask your permission to respond FIRST on my blog.

I have no interest in that, Rick. I'll engage you here in the comments. You showed up here, remember? If I'd left a comment on your blog, that's were we would debate. But I didn't. Because your blog is ridiculous. Your logic is non existent. Your examples are misleading. And you're just plain wrong about nearly everything.

If you become famous and influential, I promise I'll fisk you some day. Lemme know when that happens.

Rick Chapman said...

+++ The way you comment and blog is full of unsupported statements and non-sequitur. +++

Nirmala, when we first began talking, you consistently misstated basic facts about publishing and the numbers. And you have, in a sort of left handed way, acknowledged this.

I will say I have a hard time understanding why all of a sudden you didn't understand the difference between gross and net. I certainly wrote about it.

You have learned a few things, but not enough. Asking you "what is your time worth" is not a "non sequitur." It is a fundamental marketing and sales question every business person must ask themselves. It's a spreadsheet exercise. I've been invited to speak at DBW in January and will take people through this.

Nor have I made any unsupported statements. What I have stated is openly available and can be critiqued. I don't threaten to "ban" people who disagree with me and when I make a mistake (and I don't make many because this really isn't a complicated subject) I say so.

+++ You may not care, but when you get the same feedback over and over +++

Sigh. Really. Think this through.

Go to Mike Shatzkin's blog. I get a different reception. I wonder why that is?

Here's what you need to do. As a publisher, think about what's in your business interests. Analyze all in that context.

I've asked some very hard business questions here. There's been a lot of fuzzy ad hominem nonsense about me, my narcissism, blah, blah, blah.

Really. Who cares.

Here are the hard business questions that this site and the rest of AAAG need to take up now that Amazon and the publishers are all nicely nicely.

30% for a download? Really? What are you doing to justify that huge margin grab?

Why can't I price above $9.99? Maybe that makes sense for me. When did Jeff Bezos learn more about my audience than me? And I can't believe that no on here has thought this through and not introduced one coherent thought on the problems with this.

Since Jeff has announced Amazonium Codexorum, isn't it time we all learned how it worked?

What's up with the 65% margin grab on international sales?

That's a start. Lots of other things people need to think through. If you hate publishers, not my issue. You're a publisher and now you get to deal with a big, powerful, margin hungry channel.

I suggest you start to think about training the Big Cat to not need to feed on your liver. Try to train it to subsist on some extra digits you really don't need.

Nirmala said...

Rick: I said that your way of communicating makes people want to tune you out. I am sorry to say it has worked on me now also.

I did learn some things from reading your blog, so thank you for that.

Joe Konrath said...

Go to Mike Shatzkin's blog. I get a different reception. I wonder why that is?

Because Shatzkin is a status quo apologist for big publishing houses?

30% for a download? Really? What are you doing to justify that huge margin grab?

It's called being a retailer. In this case, the retailer is the most popular retailer on the Internet, and the one that innovated the most popular ebook reader on the planet.

Why not ask what B&N does to justify earning 50% of a paper book's list price? Why do they get that huge margin grab?

Why can't I price above $9.99?

You can. Who is stopping you? But you'll only earn 35% on Amazon. When you create your own online retailer used by millions of people, you can set the percentages you want.

When did Jeff Bezos learn more about my audience than me?

LMAO. When did you learn more about pricing ebooks than Jeff Bezos, who has access to all of Amazon's sales data and customer habits?

What's up with the 65% margin grab on international sales?

What don't you understand about capitalism? Seriously. If I create a website and want to charge customers a million dollars a year to access it, I can. That's not a "grab". It's a free market system.

Rick Chapman said...

+++ I am sorry to say it has worked on me now also. +++

That's fine, Nirmala. Sometimes a fish just needs to be a fish.

But please don't misquote me. I never said anything about Amazon being "unfair."

I said they were "high" at 30 points and "predatory" at 65%.

Which is an accurate statement.

Graeme Ing said...

Definition of predatory: "seeking to exploit or oppress others." I'd call that an accusation of Amazon being unfair.

Rick Chapman said...

+++ Because Shatzkin is a status quo apologist for big publishing houses? +++

And are you an apologist for a giant retailer?

+++ 30% for a download? Really? What are you doing to justify that huge margin grab? +++

You're contractually requiring me to set my price at $14.99 for the latest Stephen King release? Really? What are you doing to justify that 33% premium.

It's called being a publisher.

In this case, the author is the most popular writer of horror and suspense on the planet. We feel justified in charging a premium for early access to his next novel. And if we're wrong, the market will teach us a hard lesson. However, it seems the market hasn't. And Stephen did transform the entire horror genre into one that many feel now deserves to be thought of as literature.

By the way Jeff, before you start sniffling about the unfairness of it all, we note you buy those iPhones from Apple at "agency" pricing and don't even mention the word "wholesale" where Tim Cook can hear, lest he make you fly down to Cupertino, wear a wetsuit, sit on a chair in his office, balance a colored rubber ball on your nose, and go "arf, arf, arf" while clapping your hands together.

+++ Why not ask what B&N does to justify earning 50% of a paper book's list price? Why do they get that huge margin grab? +++

Why not ask Amazon what it does justify earning 30% when all it does is provide a file upload/download? And why is this issue of relevance to an indie? How about some more info on marketing and sales tactics for indies. Who cares about B&N?

+++ Why can't I price above $9.99? +++

When will Amazon explain about the pricing codex and tell us how we can get on it and thus escape a predatory 65% margin grab? And also the slamming on international sales?

+++ When did Jeff Bezos learn more about my audience than me? +++

LMAO. When did you learn more about pricing ebooks than Jeff Bezos, who has access to all of Amazon's sales data and customer habits? +++

LAMOATPWDKTMATWAISINU.

Translated, that means laughing madly out loud at the person who doesn't know that a median applied to niche and individual skus is not useful.

And what's up with the 65% margin grab on international sales?

+++ What don't you understand about capitalism? +++

What didn't Amazon understand about capitalism? "Agency" pricing is used all the time in many different industries. But, I note that Howey and all the rest of you were quite happy to advocate on behalf of a $75B corporation in a struggle with a $15B collective entity.

Now, that's over.

I think you, and Hugh Howey, and David Gauhgran and all the rest of you should use your influence, such as it is, to persuade Amazon to lift these ridiculous restrictions and predatory price grabs. That would help indies.

Why not advocate on behalf of the real little guys? Capitalism does not preclude lobbying and persuasion. And pressure. As Amazon demonstrated to the Hachette authors.

I note that you've written ANOTHER articles on the evils of agency publishing. The article is bad because your assumptions are incorrect. Publishers do not agency price all their books and agency price their top titles for X period of time before dropping back to retail. I cover this in greater detail on my blog.

Regardless, for indies, the article is totally irrelevant, except for the fact I don't quite understand why you think agency pricing is so BAD for authors who are signed with publishers yet so WONDERFUL for indies who currently live in just such a regimen.

Now, this really IS it for me. I have two new reviews to get up, on for the "Orb of Chaos" and one for "Beyond Cloud Nine."

When it comes to indies, I try to put my time, which is money, where my mouth is.

Nirmala said...
This comment has been removed by the author.
Joe Konrath said...

And are you an apologist for a giant retailer?

I'm an activist for authors. At this moment, Amazon's agenda is beneficial to authors. I'm not a paid consultant.

I've never publicly sided with Amazon when I feel they are behaving badly. Publishers have been treating authors poorly for decades, and Shatz invariably takes their side. He's become a self-parody.

Do you think you actually replied to my responses, Rich? Because you didn't.

a median applied to niche and individual skus is not useful.

You're referring to the 3 million niche Kindle titles available on Amazon? You think Amazon came to its pricing decisions using a median applied to that niche?

I'll have some of whatever you're smoking. I bet it's a lot of fun.

"Agency" pricing is used all the time in many different industries.

I see why Gaughran banned you. You simply keep repeating the same nonsense over and over without responding to the many examples exposing it as nonsense.

How many times in this thread have I said that agency pricing isn't what the negotiations were about, and that both Amazon and I are fine with agency?

advocate on behalf of a $75B corporation in a struggle with a $15B collective entity.

I love this canard. You do know Amazon just posted quarterly losses, right? They innovate, invest in their own growth, and don't make close to the same profits at that $15B cartel known as the publishing industry.

BTW, I advocate on behalf of authors, and explain why Amazon is a viable and preferable choice when pursuing book sales.

The article is bad because your assumptions are incorrect.

And your hair is blue. Because I say so. Why should I be bothered proving it with, you know, facts and logic?

I don't quite understand why you think agency pricing is so BAD for authors who are signed with publishers yet so WONDERFUL for indies who currently live in just such a regimen.

I'm done with you. If you can't bother reading what I write, I can't bother responding to your drivel.

On the off chance that some new writer is reading this and hasn't heard me say this a billion times already, high priced ebooks mean less money for authors. That's why, when I got my rights back and could price my ebooks reasonably, my income went up 10x.

Publishers want high priced ebooks to protect their paper distribution cartel. Only a few high-tier bestsellers benefit from this protection. All other authors get screwed.

Nirmala said...

I can't resist:

++You're contractually requiring me to set my price at $14.99 for the latest Stephen King release?++

This has nothing to do with the discussion you were responding to that was about your assertion that 30% for indie books is too high (OK, you did not say unfair, just too high...does that mean it seems fair to you even when it is too high?). Bringing up Amazon's hypothetical dealings with Stephen King's publisher on a book that would not even be subject to 30% under indie terms is a perfect example of one of your many non-sequiturs. I had no idea what your point you were making.

++When will Amazon explain about the pricing codex++

This codex is something you seem to have made up entirely out of whole cloth. Amazon once said that some books may need to be priced higher when it argued for an ideal pricing of $9.99 or lower for most ebooks, and it seems that since then they have accomodated the possibility for higher priced books into both their contracts with the big publishers and their existing terms with indies. There is no codex and no need for a codex describing exceptions for higher priced books under current terms for selling on Amazon, as the terms for higher priced books are already clearly delineated (even if they are unnecessarily high or even predatory). As Joe has suggested, it is their website and they get to set or negotiate the terms. If you or any publisher finds them acceptable, fine. If not, then go somewhere else to sell your higher priced book(s), as you already are doing.

++Why not ask what B&N does to justify earning 50% of a paper book's list price?++

You brought up the margin in physical bookstores upthread to make a point and so did Joe here, and yet now you say it is irrelevant. It is a valid question: What do retailers do to deserve their margin? At least half a dozen commenters on this thread have stated why they think Amazon is justified in charging 30% and you have not responded to any of their points except with untrue claims, like saying that Amazon does nothing for us to help market our books.

Finally, you keep bringing up the 65%. Most of us are not affected much if at all. You are affected and that is of course unfortunate for you and others in your situation. Most of us will express our opinion if asked but we do not spend a lot of time or effort trying to get it changed as it is not generally a pressing concern for most indie authors. So sue us.

Your arguments keep coming back to the same points over and over, but there is little motivation on our part (or for that matter on Amazon's part) to consider your pet peeves further when it is clear that you do not really engage in an exchange of ideas and viewpoints, but instead hold your view as invariably correct, and everyone else's as invariably wrong. That is in part why I suggested you reconsider your communication style.

And finally, perhaps as a fish, I do not really need to consider the sky very much until I sprout lungs and wings. For now, I am enjoying the water :)