Tuesday, May 27, 2014

Amazon Speaks

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

The Amazon Books team says:


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

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

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

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

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

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


Thank you.

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

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

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

As for the authors being harmed by these negotiations?

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

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

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

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

Does Hachette care about its authors?

We'll see...

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

Addendum #1

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

Addendum #2

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


For the link lazy:

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

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

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

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

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

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

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

Addendum #3

Hachette has responded:

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

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

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

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

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

(thanks to Dan DeWitt for that above link)

So what do we know and what can we guess?

Know: Amazon and Hachette cannot agree on terms.

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

Know: Amazon doesn't see this ending early.

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

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

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

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

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

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

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

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

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

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

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

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

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


Fisking Charlie Stross: More on Hachette/Amazon

I don't know Charlie Stross, but he's a Hachette author who just commented, wrongly, on the Amazon/Hachette situation. I've already fisked Lilith Saintcrow on this issue, and blogged about the silly things said by James Patterson and Scott Turow.

Barry Eisler calls this "situational stupidity". To quote Barry:

"It’s when an otherwise intelligent person feels so strongly that his emotions obstruct his ability to access his reason, rendering him functionally indistinguishable from a person who is natively stupid."

I agree with Barry, and also believe that's why Lili, Scott, and Jim seem to be arguing via the argumentum ad passiones logical fallacy. That's when people try to use emotion to persuade because they can't using logic.

Lili is a textbook case of author Stockholm Syndrome. To quote her:

"she(my editor) advocates for me tirelessly in editorial and marketing meetings. She fights for my books, she fights to bring my books to you. She is everything an editor should be, and it’s largely because of her faith in me that I can write full-time and pay my mortgage."

She truly believes that her editor's faith and efforts within the publishing house (which should be doing everything it can to promote Lili's books without an editor having to tireless fight for them) are largely the reason she can pay her mortgage. Not her own writing and talent, but her editor.

She appeals to emotion by using loaded words instead of facts. Amazon is a "behemoth" (as opposed to Hachette, which David Gaughran just pointed out is part of Lagardère Group, a giant worldwide media company - magazines, radio, television, online, digital, and books - with annual revenue of approximately $10 billion dollars).

Amazon was "squeezing" Macmillan for more cash (no they weren't, Macmillan was trying to force Amazon to raise ebook prices. In a legal business negotiation each party tries to get the best deal possible and can walk away at any time, there is no squeezing).

Amazon's "blackmailing" her publisher (she meant "extort" but neither definition fits any of Amazon's business practices. They don't have dirt on others they are saying they'll reveal, and they aren't coercing others to do business with them via threats).

Amazon is a "greedy organism" that will "metastasize". Actually, Amazon is a business in a capitalist society--both of which are not just legal but heartily endorsed by our government and our people. Like any company, they seek higher profits and market share. What company doesn't? All companies that try to succeed are cancer? Really?

Patterson appeals to patriotism with the loaded terms "American way" and "American literature." He uses scare words "battle tactic", "war", "pain", "suffering", and "stress" and calls for laws to change things. All without any data, facts, logic, or evidence.

Turow calls Amazon's removing buy buttons "the most daunting exercise of brute market power". Since when are retailers required to sell what Turow wants them to sell? Or price according to how wholesalers want them to price? He says Amazon has "untoward power" (as if the Big 5 don't) and that "It’s a head-scratcher why anyone with regulatory authority would tolerate it." Hint: Because it is legal. The DoJ went after publishers for colluding, not Amazon for being a monopoly or monopsony. Who don't think the Big 5 publishers had lawyers who tried their damnedest to play the monopoly card with Judge Cote?

In the last few days, we've seen emotional appeals devoid of facts and logic, serious situational stupidity, and Stockholm Syndrome.

And now here's Charlie to add to the nonsense with this blog post.

Charlie: Amazon: malignant monopoly, or just plain evil?

Joe sez: When Barry read the tile to the Charlie's post he said to me:

"I would ask him if he really means that. Because if he does, I don’t see how in good conscience he can allow himself to be part of something like that. Isn’t it the same as investing in apartheid South Africa or something similar? If you voluntarily take part in something you know is — something you publicly accuse of being — a “malignant monopoly or just plain evil,” doesn’t that make you malignant or evil yourself? I’m genuinely curious about how Charlie rationalizes his contribution to something he knows is malignant or evil."

Joe sez: I'd guess Charlie is going with hyperbole here. But even if he really feels Amazon is a cancerous corporation who controls prices in order to keep them artificially high, or Satan on earth meant to destroy humanity, Charlie doesn't have a choice on whether his work is available on Amazon or not. 

That's up to his publisher, Hachette.

Though it does beg the question why he's upset that his pre-order buttons were removed and his shipping delayed. If you believe something is malignant or evil, as Barry said, you shouldn't want to take part in it. According to his title, Charlie should be thrilled that Amazon is doing this, because who wants to be associated with a malignancy, or an evil?

Charlie: (I've written before on this blog, notably in 2012, about how to understand Amazon's business strategy. Consider this an update.)

Last week, Amazon.com began removing the pre-order links from titles by the publishing group Hachette. This is a cruel and unpleasant action, from an author's point of view; if you're a new author with a title about to come out, it utterly fucks your first-week sales and probably dooms your career from the outset.

Joe sez: Charlie, I am truly sorry your pre-order links are gone. But to paraphrase what the pseudonymous William Ockham said via Twitter:

"Hachette authors who are complaining about Amazon: remember that advance check you got? You signed away your right to complain about it when you signed a contract w/Hachette and gave up distribution rights. It's wrong to blame Amazon because your publisher fails to get your books into stores."

In the legacy system you are a part of, Charlie, first week sales are indeed important, and poor sales can hurt your career... within the legacy system.

But your career isn't dependent upon Hachette, or any other publisher, and you shouldn't believe it is. I'm guessing your experience, and things industry folks have told you, have convinced you how important first week sales are to them. So you are about to have your first week sales utterly fucked because of what you publisher is doing, and how the industry is set up to weigh first week sales heavily. 
And you still think Amazon is the one being cruel and unpleasant? They didn't force you to sign an unconscionable, one-sided contract with a publisher who doesn't care about its authors. 

Charlie: And if you're someone like me, with a title about to come out, it frustrates and irritates your readers and also damages your sales profile and screws your print run (because if Amazon don't order your books in advance in dead-tree form they don't get printed, and if they aren't printed and in the warehouse they can't be sold elsewhere). Make no mistake: Hachette may be hurting, but the people who take the brunt of this strategy are the authors.

Joe sez: Hachette can end this whenever they like. But they are apparently holding out, while simultaneously refusing to explain what the terms of the negotiations are to their authors. Which means your print run will suffer because your publisher cares more about controlling pricing than it does your new release.

Charlie: (Disclaimer: I am published by Orbit, a Hachette imprint, in the UK. Amazon is not currently removing the pre-order option from titles sold through amazon.co.uk. My Orbit books in the UK are published by Ace, part of Penguin group, in the USA. And I've got another series published (on both sides of the pond) by Tor. However, Amazon have played this nasty trick on Tor, Ace, and Hachette at different times: I've been caught up in it more than twice, and if they extend this strategy to amazon.co.uk again, my UK readers are going to be unable to buy "The Rhesus Chart" from Amazon.)

Joe sez: You call it a nasty trick.

Did you follow the agency model DoJ suit? The real nasty trick was perpetrated by big publishers, who colluded to control ebook pricing. That's illegal. That's why they lost. (Tor and Ace are part of Macmillan, who tried to force Amazon to accept higher ebook prices.)

What makes you think Amazon is throwing its weight around, when there is no evidence of that? The precedent shows publishers trying to throw their weight around. The agency model, windowing, high ebook prices--big publishing is guilty of all of this. And more.

Charlie: Forbes mostly calls it right, at least at the corporate level, and until the end of this paragraph, where their 'free-market' knee-jerk kicks in and they bottle it:

Joe sez: Free market is a knee-jerk? You do know the definition of a free market is one free of price-fixing, and Hachette was guilty of collusion in order to price-fix?

People have a choice on where to buy books. Amazon being the biggest bookseller on the planet doesn't make them a monopoly or monopsony. If readers demand Hachette books, Amazon has not prevented them from being sold. There are thousands of other retailers who sell Hachette titles.

I have five books published through Amazon's Thomas & Mercer imprint, and more than a dozen self-pubbed through Createspace. Guess what? Indie bookstores and B&N don't stock my paper books. And they are allowed to make that choice. And I don't publicly whine about it.

This is the part of the Forbes article Charlie quoted:

Forbes: What we're really seeing is a battle between the people who make the product and the people who distribute it as to who should be getting the economic surplus that the consumer is willing to hand over. Like all such fights it's both brutal and petty. Amazon is apparently delaying shipment of Hachette produced books, insisting that some upcoming ones won't be available and so on. Hachette is complaining very loudly about what Amazon is doing, entirely naturally. The bigger question is what should we do, if anything, about it? To which the answer is almost certainly let them fight it out and see who wins.

Joe: My take is different. I agree with William Ockham. So here's William...

William: If you want to understand what a party is doing in a negotiation, a good place to start is with their public statements. In this case, we know exactly what Hachette was planning to do in this negotiation because they published their strategy. In a letter to the federal court in the ebook antitrust case, believe it or not. When the proposed final judgment for Apple was announced, it included a provision that prohibited Apple from entering into agreements that would limit its ability to offer retail discounts. The Big 5 legacy publishers got together an wrote a whiny letter to the court objecting that this violated the terms of their settlement (the court rejected this argument because, well, it was stupid). Here's what the Big 5 said:

"Each Settling Defendant entered into a carefully negotiated consent decree with Plaintiffs. For the original three Settling Defendants, the negotiations with Plaintiffs lasted nearly one year. Although the DOJ initially sought to include a five-year prohibition against the agency model—identical to Section Ill.C in the Proposed Order—the final consent decrees permit the use of the agency model while also expressly allowing for retailer discounting for a period of two years. Once that "cooling off' period has run, each Settling Defendant may negotiate unilaterally with e-book retailers to enter into any distribution arrangement, including an agency model."

Let me translate that from legalese to English. The Big 5 are saying that as soon as the two year "cooling off" period is over, they want to get rid of retail discounting. Literally their only objection to the Apple settlement is that it will leave one ebook retailer who must maintain the ability to discount. The Big 5 have been waiting for two years for a chance to get rid of retail discounting. And take special note of that word "unilaterally". That means that the Big 5 each have to negotiate independently with their retailers. Those "original three Settling Defendants" are reaching the end of their "cooling off" period in September. They are negotiating new contracts with retailers right now. Unilaterally. Which means only one of them (at a time) can try to impose their preferred "no discounting" policy on retailers. One of them has to go first.

I have a clue as to which of one of the three is doing it. The only time a single one of the Big 5 tried to negotiate a no-discounting agency agreement with Amazon, Amazon removed the "buy" buttons from their books (that was MacMillan in January 2010). So, I think it is pretty safe to assume that Hachette is the one trying it now.

But maybe that's not enough evidence for you. Let me suggest that you find a few Hachette ebooks which are not available for pre-order on Amazon and then go over and look at the prices on Barnes & Noble's web site. Carefully note the paper list price and the ebook price. When I did this, every single title I checked fell within the non-discountable price bands in Apple's illegal proposal from January 2010. And if you check the ebook prices for the same books in the iBookstore, you will discover that Apple is offering most of them for less. Because Apple needs to keep its nose clean during its appeal. Hachette has pretty clearly already got B&N to sign on to the non-discountable agency prices (because B&N would love not to have to compete on price with Amazon).

I really don't understand why this is such a big mystery to people. Hachette is doing what they said they were going to do. Amazon is reacting exactly the way we would expect them to.

Joe sez: Really? You don't understand why people aren't getting it?

William: Ok, I do understand it. Nobody is paying attention to what is really going on. It's just too inconvenient to spend your time reading a bunch of boring court documents. Unless, you know, your livelihood depends on it. Or like me, you just like that sort of thing.

Now, I ask you this. Do you think Amazon is going to give in? I don't. A long time ago, I read a book that had a very important concept about negotiation. It's called your BATNA. That stands for Best Alternative To A Negotiated Agreement. You always need to know yours and it really helps if you know the other party's. I think Amazon has the best BATNA. They just stop carrying Hachette books. Amazon buyers will still be able to get them through third-party sellers on Amazon's site. Hachette's BATNA is what, exactly? So, I predict that Hachette will blink. And then we will get to see if any of the other Big 5 publishers want to make a go of it.

Joe sez: William said on Twitter, "Those prices are hoofbeats and I am assuming it's a horse. Show me some stripes and I will believe it is a zebra."

I'm good with accepting William's take until more information presents itself. After all, we have a history of one of these companies illegally conspiring to raise prices, and one who wants to keep prices on everything low.

And let me repeat something for those who still don't seem to get it: The Agency Model Sucks. Customers pay more, and authors and publishers earn less.

It's not that the agency model itself is bad, or illegal. But publishers are using it to keep ebook prices high to protect paper sales. (You should follow and read all the links in this post, but if you only read one, follow that one.)

Charlie: Planet earth calling: Hachette is the publishing arm of a gigantic multinational group, Lagardère, which boasts an annual turnover of €7.37Bn. However, as Lagardère's components include a hefty chunk of EADS (part-owners of Airbus) plus TV channels, duty-free shops, newsagents, sports clubs, and magazine publishing it shouldn't be much of a surprise to discover that Hachette turned over €2.1Bn in 2012. That same year, Amazon's sales topped $61Bn (or around €45-50Bn).

So, point one is that this is not a battle of equals: it's a big-ish corporation being picked on by a Goliath more than ten times its size, in an attempt to extort better terms.

William: Comparing a retailer and a multi-national conglomerate is silly.

Joe sez: And there is a big difference between sales and profits. But no matter how you slice it, Hachette isn't a helpless neophyte. They have power and capital and lawyers and have been around for almost 200 years. Amazon has the power advantage here, because they have customers Hachette wants access to. If Hachette wants to reach those customers, it will either accept Amazon's terms or withdraw its catalog. And if Amazon can't stand the idea of losing Hachette's sales, it will back down.

That's business, folks. It's capitalism. It's negotiation. And it's legal. 

It's pretty damn simple.

Charlie: But it's not that simple, either.

Forbes seem to think that Hachette is a producer and Amazon is a distributor. This isn't quite true. I am a producer. From my perspective, Hachette is a value-added wholesale distributor: they supply editorial, production, packaging, marketing, accounting, and sales services and pay me a percentage of the revenue.

Joe sez: No, Charlie. You can hire and fire a value-added distributor.

Hachette owns your ass.

Whether or not they add value is subjective. If you think it is okay Hachette makes 3x the ebook royalties you do because they do some editing, accounting, etc. that's your call. But when you sign away your rights forever you are at their mercy.

In contrast, my agent does all of that for me for several of my self-pub ventures, takes only 10%, and I keep my rights.

Charlie: (I could do this myself, and self-publish, but I don't want to be a publisher, I want to be a writer: we have this thing called "the division of labour", and it suits me quite well to out-source that side of the job to specialists at Hachette, or Penguin, or Macmillan.)

Joe sez: I hire much of these jobs out and get to keep my IP and have total control over it. I too want to be a writer: we have this thing called "common sense", and it suits me quite well to out-source that side of the job while still controlling my rights, making the lion's share of the profit, and never being at the mercy of specialists like Hachette.

Charlie: Amazon is not a value-added wholesale distributor: it is a retail distributor. They have a publishing subsidiary and allow me—if I want to self-publish—to use them as a sales channel, and will even pay quite well if I accept extremely onerous terms.

Joe sez: Onerous terms? Like 70% royalties and you get to keep your rights? Like letting you control cover art and price? Like letting you make your book free and put it on sale? Like getting your books into 12 countries?

Charlie: But they don't do much else for me and in particular if I were to self-publish through Amazon I would be vulnerable to exactly the same pressure that Hachette is currently on the receiving end of, but with less recourse.

Joe sez: I call this the "wolf argument". To wit: don't worry about being attacked by wolves when a lion is currently gnawing your legs off.

I've seen Amazon do some things I haven't agreed with, and vocally opposed. They removed reviews. They made it much harder for erotica authors to earn money (so did B&N and PayPal). They cut ACX royalties. I haven't liked some of their recent contract clauses.

But they've been overwhelmingly good to authors. Both KDP and A-Pub offer better royalties than anyone else in publishing. They continue to innovate, offer expanded services, and grow into new territories. They pay monthly, their accounting is transparent, and they are smart and easy to work with.

Someday Amazon may start throwing its weight around and squeeze authors. And someday a meteor may hit the earth and annihilate all life.

I'm not going to live my life, or base my career, on what a meteor, or Amazon, might do.

Charlie: Amazon's strategy (as I noted in 2012) is to squat on the distribution channel, artificially subsidize the price of ebooks ("dumping" or predatory pricing) to get consumers hooked, rely on DRM on the walled garden of the Kindle store to lock consumers onto their platform, and then to use their monopsony buying power to grab the publishers' share of the profits.

Joe sez: So much wrong here.

First, Amazon invented the distribution channel. They aren't squatting on some natural resource. They created the proprietary format. And proprietary formats have been part of technology as long as there has been technology (remember the Tesla/Edison AC/DC battle?), and are legal.

Second, show me a predatory pricing campaign that was successfully litigated. This canard gets trotted out a lot, but "predatory pricing" in this case means "lower prices for consumers" who tend to like that, as does the DoJ. Most retailers use sales as loss leaders. The DoJ isn't trying to protect competitive businesses from the workings of the market (including smart, aggressive competitors who innovate and have superior skills, like Amazon.) The DoJ's goal is to protect consumers from the failure of the market (such as when publishers collude to fix prices).

Why don't you think a $28 hardcover is predatory? Why can you get a season of TV on DVD for $10 (24 hours of entertainment), but hardcovers (8 hours of entertainment) are so ridiculously marked up they qualify as luxury items? A book costs about $2 to print. Why the inflated price? And if publishers really competed with each other, why are books by every publisher similarly priced? And why does every publisher have a practically identical boilerplate contract with practically identical terms?

Third, Amazon doesn't require DRM. Your shithead publisher does.

Fourth, they aren't a monopsony. They just happen to have the most market share, which they got by keeping prices low and offering good selection and customer service. Your publisher makes a higher profit on every one of your books than Amazon does. Especially ebooks.

Your share of the profits is being eaten by Hachette, not Amazon. But by all means, keep defending them while demonizing the retail outlet that probably accounts for the majority of your sales. (If it doesn't yet, it will. Check out the latest Author Earnings report. You should look at it anyway, because it compares how many self-pubbed authors and legacy authors make a living wage. Answer: more self-pubbed authors.)

Charlie: If you're a consumer, in the short term this is good news: it means you get cheap books. But if you're a reader, you probably like to read new books. By driving down the unit revenue, Amazon makes it really hard for publishers—who are a proxy for authors—to turn a profit.

Joe sez: Via Wikipedia, Stockholm Syndrome is a psychological phenomenon in which hostages express empathy and sympathy and have positive feelings toward their captors, sometimes to the point of defending and identifying with them. These feelings are generally considered irrational in light of the danger or risk endured by the victims, who essentially mistake a lack of abuse from their captors for an act of kindness.

Charlie, publishers have been earning record profits these past few years. Publishers aren't a proxy for authors. Publishers are property owners. They do whatever the hell they want to with the property they own, your best interests be damned.

Stop defending the company giving you lousy contract terms, keeping you in the dark about this situation, and who, in your own words, is dooming your career.

Charlie: Eventually they go out of business, leaving just Amazon as a monopoly distribution channel retailing the output of an atomized cloud of highly vulnerable self-employed piece-workers like myself. At which point the screws can be tightened indefinitely. And after a while, there will be no more Charlie Stross novels because I will be unable to earn a living and will have to go find a paying job.

Joe sez: You didn't take that far enough. Amazon's ultimate goal is to create a machine that runs on the screams of babies, and use it to fly the earth directly into the sun, the entire time kicking you in the balls over and over while calling you mean names.

You're right about something. The screws are being tightened on you. But it isn't Amazon doing it.

Charlie: TL:DR; Amazon's strategy against Hachette is that of a bullying combine the size of WalMart leaning on a much smaller supplier. And the smaller supplier in turn relies on really small suppliers like me. It's anti-author, and in the long term it will deprive you of the books you want to read.

Joe sez: Again, only Hachette and Amazon know what the negotiation details are, but William makes a damn good argument that it is Hachette trying to force the terms, and a pretty good guess those terms involve agency pricing.

Hachette does rely on you, and other authors, but you don't have to rely on them. Authors can reach readers without Hachette. If Hachette disappears tomorrow, readers will still be able to get books. Even your books... unless they become part of the assets in the bankruptcy case.

Charlie: Final note: some time in the 1980s the US Department of Justice's anti-trust lawyers changed their focus from preventing monopolies from forming to preventing companies from colluding to preserve their margins ("price fixing cartels"). As a result, Amazon very nearly gained a monopoly of ebook sales; they're still around the 85-90% mark in the UK, and peaked at over 80% in the USA. (The irony of the DoJ-Apple iBook store settlement is that the DoJ went after the market incomer with the higher prices and 10% market share, rather than the near-monopolist who was using predatory pricing to drive their competition out of business.) It's hard to argue against low prices, but consider this: texts are a cultural medium, and the production of new texts is not something amenable to automation or mass production. I can't go out and hire twenty people off the street and install them in a cubicle farm extruding Charlie Stross branded fiction product. (I can't even hire twenty SF novelists and train them to do that. Our product is bespoke and highly idiosyncratic.) It used to be the case that cultural activities like writing fiction benefited from some barriers against marketization, but a corollary of the global free trade regime we live in these days is that no field is exempt. The net book agreement was declared illegal decades ago: my product has to compete for your attention and money in the same market as the X Men movie franchise and Assassin's Creed games. Neither of which have a near-monopoly incumbent like Amazon squatting between them and their customer base, trying relentlessly to depress prices and force them out of business.

William: I'm not a lawyer (and neither is Charlie Stross), but I've read the Sherman Anttrust Act. Preventing monopolies is not a goal of the law. Preventing monopolies from engaging in anti-competitive behavior is. But preventing price-fixing cartels is an explicit part of the law. There is absolutely no doubt that Apple and the Big 5 engaged in a price-fixing cartel. They were almost laughably obvious about it. Amazon gained their market position by out-competing other ebook retailers. There is no evidence that Amazon has engaged in any anti-competitive behavior. Stross and his ilk throw around the term "predatory pricing" without any indication that they understand what it means in American law. Here's a hint. There's this thing called Wikipedia. At the very least, demonstrate that you have read the Wikipedia article on a topic before you pontificate about said topic. Otherwise, people might confuse you for a bloviating blowhard. And we wouldn't want that.

Stross also trots out the "publishing is a special snowflake" argument. This is just hogwash. First, he is just wrong about the facts. He apparently has never heard of ghost-writing or James Patterson (Stross describes Patterson's business model pretty well). Stross's books (or Konrath's for that matter) are nothing special unless they connect with readers. Amazon isn't standing in anyone's way. Writers, movie makers, and game programmers all have access to the internet to sell their wares. There is no one squatting between you and your customer base. I buy my books from Amazon because they offer me a better customer experience than any other retailer. 

Let me give you a non-book example. Last week, I was looking to buy a new laptop for a project I'm starting. I'm a software developer, so I want to buy a lightweight powerful machine with Intel's latest processor, plenty of memory, and an SSD drive. I found a model on Amazon that met my needs, but it was not yet available from Amazon or any third-party sellers. There was an ad at the bottom of the page for that exact model from the Microsoft store and they had it in stock. I discovered that Microsoft had an exclusive on this laptop for now. Amazon's willing to lose a $2,500 sale by selling ads to their competition if that is what it takes to solve the customer's problem. 

Have you ever seen an ad like that for a book from a Big 5 publisher on Amazon's site? How many Hachette authors have inquired about placing ads for their books like that? What is Hachette doing to help readers find Hachette books right now. As best I can tell, absolutely nothing.

Joe sez: I actually do understand Charlie's frustration. When you have no control, and forces around you are hurting your career, it is natural to want to get angry and point fingers. When the elephants fight, it's the grass that suffers.

So stop being the grass.

It's understandable why Patterson and Turow are plaintively arguing for the legacy industry. They are the lucky ones whom publishing has blessed. They want the status quo to go on forever, and why wouldn't they? They're rich and successful and have done well in the old system.

But the majority of their fellow authors have not. The majority of authors need a day job, or a spouse that works. That's difficult enough, but legacy authors are also at the mercy of publishers who offer them one-sided contracts and pay them twice a year for sales that happened 18 months earlier. They have been taught and repeatedly told that the legacy industry is all there is, and they can't do better on their own. Some, like Lili and Charlie have bought into it so whole-heartedly that they defend their publisher's icky behavior, and condemn a company--Amazon--who could liberate them.

Author Earnings pretty much confirms that authors can do better on their own. Authors like me have been saying this--with data--since 2009. For five full years I've been screaming this shit. And yet there are still authors who cling to their publishers like life vests in a turbulent sea.

Your publisher isn't a life vest. It is a concrete block tied to your ankles.

Situational stupidity? Stockholm Syndrome? Self-delusion? Habit? Fear? Why do authors not only stay with publishers, but publicly endorse them in ridiculous blog posts?

I don't get it. And I don't care.

This blog isn't for Charlie or Lili, or Jim or Scott. They've already chosen sides. They won't listen to me.

This blog is for those who haven't made up their minds yet. Those who seek information. Those who follow Twitter or read the New York Times or pro-Hachette author blogs and hear bad things about Amazon and wonder if they're true.

I can't tell you if they're true. Only Amazon and Hachette know what's going on.

But I can hear hoofbeats. And I'm betting it's a horse.

If you think otherwise, post your argument in the comments.