Friday, June 13, 2014

The Hachette Job

William Ockham linked to Lagadere-Hachette's Investor Day Presentation Brochure from May 28 on Twitter.

(Note that this presentation came after Amazon stopped stocking Hachette titles and removed pre-order buttons. So all of these things were said to investors while Hachette was in the midst of negotiations with Amazon.)

What interested me most started on page 25. Since investor-speak is often difficult to understand, I'll attempt to translate into English.


Translation: We colluded with other publishers to fix ebook prices.

Ensuring availability of ebooks on all platforms and formats

Translation: By "all" we mean "all but the biggest platform and format, Amazon."

Supporting competition among e-retailers to avoid dominant position in the value chain

Translation: Force all e-retailers to accept our pricing structure. Then Amazon won't be able to discount our ebooks anymore.

Joe sez: I love the line "supporting competition". Because that's what all good businesses strive for; to help our competitors.

Agreement with Google for out-of-print books

Translation: Now books will never go out of print!

Joe sez: Why is there even an out of print reversion clause in contracts?

Agency model implemented with e-retailers thanks to Hachette Livre’s size and Anglo-
Saxon presence in order to retain control over ebook pricing

Translation: We're gonna make Amazon agree to agency pricing again.

Joe sez: Is this what you want, Hachette authors? For your publisher to price your ebooks at $14.99 again?

Also, I love the line "thanks to our size and presence." When Amazon uses its size and presence, they're a bullying monopoly. But when Hachette does this to force retailers to accept their pricing structure, it's a bullet point that investors are meant to applaud.

Cautious approach towards new business models

Translation: We don't innovate. We don't try anything new. Change frightens us.

Use of adequate protection mechanisms (DRM) with interoperable formats (Epub) which
are user-friendly

Translation: We have absolutely no clue what readers want.

Active search of illegal contents through anti-piracy tools limiting the proliferation of illegal

Translation: We have absolutely no clue that piracy can't be stopped, or even slowed.

Publishing benefits from consumer awareness regarding fraudulent nature of file sharing
and the existing legal frameworks against piracy

Translation: Because look how well it worked for the War on Drugs!

A publisher is a sifter: culling of contents, focusing on superior works among a high number of
projects submitted

Translation: We don't write any of the books we publish, but we justify out 75% digital royalty take because "sifting" is really important.

Joe sez: Because readers are too stupid to find books to read on their own.

Seriously... sifting? That's how Hachette is going to stay in business?

Does this mean every "superior" work that Hachette publishes is a success? That every work they pass up is doomed for failure? That their sifting skills are so unique, so valuable, that millions of readers seek out the Hachette brand based on their imprimatur?

Did the investors wear hip waders to this meeting to avoid getting the waist-high bullshit on their shirts?

Traditional publishers remain more attractive − Bestselling authors need exclusive services
(advances, editorial expertise, marketing and sales clout…) not offered by new publishing structures

Translation: We're really essential! Really! Millionaire authors would never think to hire out any of those services for a fixed cost. They'd rather let us keep the lion's share of the royalties for their lifetime plus 70 years.

− Rare self-published authors proving to be successful subsequently looked for a traditional publisher in order to increase their sales

Translation: Self-publishing isn't a threat. There are still enough authors who want to sign with us, because they've never looked at or read Konrath's blog.

Ebooks share of total sales in the USA should continue to increase but at a lower pace to
stabilize between 25-35% by 2017

Translation: Because we said so.

After all, look how other tech markets stabilized. That's why there are still travel agents, 35mm film, cassette tapes, dot matrix printers, VHS, paper maps, phonebooks, TV antennas, encyclopedia sets, and buggy whips.

Joe sez: This is called "existence bias". Hachette believes paper books will continue to be a major part of their business, and never bust like all the above obsolete companies did.

Can you imagine a Xerox investor meeting where it said that desktop printers were going to stabilize, so don't worry, we'll still have coin op copy machines everywhere?

With a forecasted digital penetration of the market of <40%, publishing will still be driven by print book sales: the complexity of the business will remain and won’t be acquired by new players.

Translation: Notice all those villagers outside our castle with torches and pitchforks? Don't pay any attention to them. They're harmless.

Joe sez: How can Hachette actually believe this? Self-pub has grabbed a healthy share of the market. My Amazon published books have sold over 300,000 copies (those don't include my KDP). New players are eating Hachette's lunch.

Publishers need size and muscle in order to keep control over relations with authors,
over pricing and distribution

Translation: We'll keep those pesky authors in their place, and retailers will do what we say.

Joe sez: In a 52 page report, authors are mentioned on only 13 pages. The report never mentions how Hachette plans to keep authors, or find new authors. The only time it mentions author relations is "in order to keep control".

If you owned a dairy farm and were talking to stockholders, wouldn't you focus a large part of your presentation on the cows? That's where the milk comes from, after all.

CONCLUSION - Digital modifies the market environment of publishing but represents an opportunity for publishers, whose role remains central

Translation: We're relevant! We said so four years ago, remember?

Joe sez: The only central roles in publishing belong to readers and writers. Third parties can take a cut if they provide value.

Hachette does not provide value for the majority of its authors. Right now, it is trying to force the agency model on Amazon, which will raise ebook prices, hurting authors and consumers. It offers poor royalties and unconscionable terms (out of print reversion clauses, next option, non-compete).

My advice: dump your Hachette stock immediately.

Hoping authors remain uninformed and continue to take bad deals is not a viable long-term business plan.

Stating that digital will stabilize when history shows new technology always ultimately dominates is downright stupid.

Refusing to innovate in any area at all is a recipe for extinction.

I said it years ago. Hachette, and Big Publishing, are selling drinks on the Titanic. They'll make a few more bucks before the ship goes down. But the ship will go down.

And to you authors who keep signing publishing deals: good luck trying to get your rights returned when your publisher goes bankrupt and they're sold as assets to pay off creditors. But in the meantime, make the most of your awful royalties, terrible contract terms, and lack of control over your career.