Monday, August 11, 2014

Weaponizing Authors: The War Between Amazon & Hachette Continues to Escalate!

It was just Friday night I wondered if maybe Amazon and Hachette were ready to bury the hatchet--bad pun intended--and then the next day I and every other KDP author received the latest salvo from Amazon in my inbox.

During the early stages of the war Amazon had been mostly quiet in public.  This gave the advantage to Hachette and its authors, who were all too happy to go on Twitter, Facebook, etc. to demonize Big Bad Amazon trying to bully them.  And there were the people like me who just really didn't give a shit about a pissing match between two megacorporations.

Now Amazon has decided to start actively recruiting its own resistance to Hachette.  They want you and me, the indie authors who publish through Amazon, to take to the virtual streets to combat the forces of Hachette.  (This whole thing is ripe for a South Park parody; too bad by the time they actually produce any episodes the war will be over.)

Here's the actual text of the letter:
Dear KDP Author,

Just ahead of World War II, there was a radical invention that shook the foundations of book publishing. It was the paperback book. This was a time when movie tickets cost 10 or 20 cents, and books cost $2.50. The new paperback cost 25 cents – it was ten times cheaper. Readers loved the paperback and millions of copies were sold in just the first year.

With it being so inexpensive and with so many more people able to afford to buy and read books, you would think the literary establishment of the day would have celebrated the invention of the paperback, yes? Nope. Instead, they dug in and circled the wagons. They believed low cost paperbacks would destroy literary culture and harm the industry (not to mention their own bank accounts). Many bookstores refused to stock them, and the early paperback publishers had to use unconventional methods of distribution – places like newsstands and drugstores. The famous author George Orwell came out publicly and said about the new paperback format, if “publishers had any sense, they would combine against them and suppress them.” Yes, George Orwell was suggesting collusion.

Well… history doesn’t repeat itself, but it does rhyme.

Fast forward to today, and it’s the e-book’s turn to be opposed by the literary establishment. Amazon and Hachette – a big US publisher and part of a $10 billion media conglomerate – are in the middle of a business dispute about e-books. We want lower e-book prices. Hachette does not. Many e-books are being released at $14.99 and even $19.99. That is unjustifiably high for an e-book. With an e-book, there’s no printing, no over-printing, no need to forecast, no returns, no lost sales due to out of stock, no warehousing costs, no transportation costs, and there is no secondary market – e-books cannot be resold as used books. E-books can and should be less expensive.

Perhaps channeling Orwell’s decades old suggestion, Hachette has already been caught illegally colluding with its competitors to raise e-book prices. So far those parties have paid $166 million in penalties and restitution. Colluding with its competitors to raise prices wasn’t only illegal, it was also highly disrespectful to Hachette’s readers.

The fact is many established incumbents in the industry have taken the position that lower e-book prices will “devalue books” and hurt “Arts and Letters.” They’re wrong. Just as paperbacks did not destroy book culture despite being ten times cheaper, neither will e-books. On the contrary, paperbacks ended up rejuvenating the book industry and making it stronger. The same will happen with e-books.

Many inside the echo-chamber of the industry often draw the box too small. They think books only compete against books. But in reality, books compete against mobile games, television, movies, Facebook, blogs, free news sites and more. If we want a healthy reading culture, we have to work hard to be sure books actually are competitive against these other media types, and a big part of that is working hard to make books less expensive.

Moreover, e-books are highly price elastic. This means that when the price goes down, customers buy much more. We've quantified the price elasticity of e-books from repeated measurements across many titles. For every copy an e-book would sell at $14.99, it would sell 1.74 copies if priced at $9.99. So, for example, if customers would buy 100,000 copies of a particular e-book at $14.99, then customers would buy 174,000 copies of that same e-book at $9.99. Total revenue at $14.99 would be $1,499,000. Total revenue at $9.99 is $1,738,000. The important thing to note here is that the lower price is good for all parties involved: the customer is paying 33% less and the author is getting a royalty check 16% larger and being read by an audience that’s 74% larger. The pie is simply bigger.

But when a thing has been done a certain way for a long time, resisting change can be a reflexive instinct, and the powerful interests of the status quo are hard to move. It was never in George Orwell’s interest to suppress paperback books – he was wrong about that.

And despite what some would have you believe, authors are not united on this issue. When the Authors Guild recently wrote on this, they titled their post: “Amazon-Hachette Debate Yields Diverse Opinions Among Authors” (the comments to this post are worth a read).  A petition started by another group of authors and aimed at Hachette, titled “Stop Fighting Low Prices and Fair Wages,” garnered over 7,600 signatures.  And there are myriad articles and posts, by authors and readers alike, supporting us in our effort to keep prices low and build a healthy reading culture. Author David Gaughran’s recent interview is another piece worth reading.

We recognize that writers reasonably want to be left out of a dispute between large companies. Some have suggested that we “just talk.” We tried that. Hachette spent three months stonewalling and only grudgingly began to even acknowledge our concerns when we took action to reduce sales of their titles in our store. Since then Amazon has made three separate offers to Hachette to take authors out of the middle. We first suggested that we (Amazon and Hachette) jointly make author royalties whole during the term of the dispute. Then we suggested that authors receive 100% of all sales of their titles until this dispute is resolved. Then we suggested that we would return to normal business operations if Amazon and Hachette’s normal share of revenue went to a literacy charity. But Hachette, and their parent company Lagardere, have quickly and repeatedly dismissed these offers even though e-books represent 1% of their revenues and they could easily agree to do so. They believe they get leverage from keeping their authors in the middle.

We will never give up our fight for reasonable e-book prices. We know making books more affordable is good for book culture. We’d like your help. Please email Hachette and copy us.

Hachette CEO, Michael Pietsch: Michael.Pietsch@hbgusa.com

Copy us at: readers-united@amazon.com

Please consider including these points:

- We have noted your illegal collusion. Please stop working so hard to overcharge for ebooks. They can and should be less expensive.
- Lowering e-book prices will help – not hurt – the reading culture, just like paperbacks did.
- Stop using your authors as leverage and accept one of Amazon’s offers to take them out of the middle.
- Especially if you’re an author yourself: Remind them that authors are not united on this issue.

Thanks for your support.

The Amazon Books Team

I'm surprised while they were giving us bullet points they didn't just write the whole letter for us.  I've already heard some people disputing the facts as Amazon presents them (like this); I'm sure you can find plenty of that through a Google search.  I'm not really in a position to know what happened back in the 40s with paperback books; it was a little before my time.

This doesn't really change my neutral position.  If anything it makes me want to side against Amazon, because I hate when special interest groups try to coerce me into calling my Congressperson or Senator or the President on some pet issue of theirs.  Asking me to contact a greedy corporation on behalf of another greedy corporation is many times worse than that.

What I like the least about it is how it's asking authors to choose sides.  I don't want to take money out of the pockets of Hachette authors just so Amazon can make a little more money.  Sure those authors mostly look at indie authors like me like a piece of gum on their shoe, but I'm not so jealous of their (moderate in most cases) success to wish them ill.  And yes I think $14.99 for an ebook is outrageous, but if the public is dumb enough to pay it, then why shouldn't they be able to keep charging it?  $9.99 seems as artificial a price point as anything else.  And newsflash:  I wouldn't pay $9.99 either.  $2.99 is pretty much my ceiling.  The point though is that I'm not anyone's weapon.  Since Amazon brought up Orwell, we all know 1984 dealt with the dangers of totalitarianism, which in this day and age comes from giant corporations as much as it comes from governments (who are largely owned by those corporations), so again, authors should not be forced to choose one megacorporation or another.

So how do you other indie authors feel about it?  Are you going to take sides?  And whose camp will you join?

4 comments:

  1. While Amazon is a much better business partner for me than Hachette, I don't see the need for me to write a letter on their behalf. (Although I did sign the Change.com petition that Howey and a couple other indie authors wrote.) All of my current stories are available outside Amazon as well. I will put Seasons' Beginnings into Select for a term to experiment with KU, but I don't intend to keep it there indefinitely. I would much rather watch Amazon and Hachette duke it out while I keep on writing and publishing more work.

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  2. I'm on Amazon's side, and the letter they asked indie authors to write is mirroring the letter Hachette-supporting authors asked others to write:

    http://www.authorsunited.net/

    So if you're going to fault Amazon for enlisting their authors for support, you've got to blame Big Publishing, first and too.

    Amazon's absolutely right about the cost of ebooks and how they are inflated. PT, you're correct that people should pay whatever they're going to pay, but what Hachette and some others are doing is preventing Amazon from charging that amount. Remember that Amazon set $9.99 as the default price for ebooks way back when, and Hachette and Apple, with others, conspired to break that price -- by themselves breaking antitrust law.

    Hachette is free to charge whatever they want for their books. Amazon ought to be free to sell the books for whatever IT wants to.

    The real problem here, and the one nobody (except me) is remarking on is this: There is only one big e-publisher, and that gives Amazon too much power. Hachette and Big Publishing are like WWI fighters in trenches cursing the sky, while Amazon is drones and F16s: it's not an even fight and it's only a matter of time until Big Publishing realizes that.

    What is necessary is another e-book retailer who will publish and provide a platform for authors to compete with Amazon. If Big Publishing were smart it would encourage this -- Goodreads, maybe, although Apple could certainly do it if Major A-hole Steve Jobs wouldn't have locked the iPad into its own compound and thereby isolated it from people making it a mainstream tablet. Walmart briefly dipped into ebook sales at the outset of this, and they could definitely take on Amazon and might have the incentive to do so since they want to get a higher-paid clientele.

    Big Publishing is reactionary: they are protecting the world of old publishing and big-name authors are fearful of e-readers and easy-to-publish ebooks, something I've been pointing out since Garrison Keillor wrote an essay complaining that if ANYONE could write a book, then nobody (him) will make enough money to live as a writer:


    http://www.nytimes.com/2010/05/27/opinion/27iht-edkeillor.html?_r=0

    And economics of companies like Hachette are based on using ebooks to prop up hardcover books and their overly-taxing, overly-costly, limited-appeal basis. What other industry works on that model? Imagine if pizza restaurants were Big Publishing.

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  3. "Hmmm. People really want pizza delivered. But if we deliver pizza to their houses, they won't come eat at our restaurants! And we have these highly-paid chefs we have been promoting for years, and have put billions into infrastructure to build these restaurants, and have a whole setup where we pre-make the pizzas and have them ready to go right in the restaurant!

    Here is what we will do: first, let's get famous pizza lovers to point out that pizza at home frequently isn't is as good as restaurant pizza. I mean, we can't just let some guy with an oven and a truck compete against us, can we? Talk about the tactile feel of the tables and the seats, how the lighting in the restaurants makes pizzas taste much better, just like when you were a kid.

    Next, let's raise the price of delivery pizzas way way up. Granted, it costs us less money if they eat it at home, but that's no reason to charge them less. Who will pay the chef, after all?

    And let's get all the OTHER pizza places in on this. That guy with his oven and truck? Screw him. All the other big pizza companies are going to agree that Home Pizza costs twice as much as Restaurant Pizza.

    What's that? Home pizza is experimenting and trying kinds of pizzas we don't serve? THERE IS ONLY ONE KIND OF PIZZA. Crush them."

    It's insane. Record companies didn't argue (much) about the manner of delivering their product:

    "Over the past decade, technological changes for recording music in a digital, instead of analog, format, along with digital distribution on the Internet, are changing the costs of producing and releasing records, thereby changing the dynamics of the relationship between artists and their labels."

    http://www.forbes.com/sites/richardbusch/2012/03/27/major-record-labels-as-dinosaurs/

    That article talks about the changes facing the music industry, including the fragmenting of the audience and the fact that music lovers are becoming increasingly addicted to free or low-cost items. Seem familiar? It goes on to talk about how record companies need to reduce overhead and find other ways to make profits, like putting on a tour, for example. It also talks about how new small businesses have risen, helping small recording companies do the same things Big Music always did.

    Anyone who's ever tried to get one of their books into an actual bookstore -- as I have -- knows how Big Publishing screws over indies, and even indie bookstores screw over indies. I know: I contacted over 70 different indie bookstores across the country to find out if I could get "Eclipse" into their store back when real books were still a valid business model. NONE of them would allow it. And yet Amazon lets me use their store and not pay a single thing unless I make money first.

    Any indie author who doesn't wholeheartedly back Amazon is like the butler siding with the master of the house just before the revolution. Amazon isn't perfect and needs competition, but if Amazon falls we're all back to 'publishing' our books by stapling together a bunch of pages and leaving them at the library. (With apologies to Slim Dyson.)

    I know this was rambling. I'll probably turn it into a better article in the magazine someday.

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  4. Basically, I agree with Briane.

    The thing that no one seems to be mentioning is that Hachette is saying that Amazon doesn't have the right to choose what products they sell. Every other company in America may choose to carry product A or not carry product A as they see fit. Let's pretend that Hachette books=product A.
    Amazon says, product A sells for a much higher price than the rest of our product line, we don't want to carry that at that price point. Hachette says, "But you sell books, so MUST carry our product A, too."
    Amazon says, "We'll carry it if you lower the price."
    Hachette says, "We refuse to lower the price and you MUST carry our books."
    I could go on with that, but that's probably clear enough. Basically, I'm for Amazon's right to choose what products they carry. Also, as a consumer, I resent Hachette's strong arm tactics to require me to buy an overpriced product.

    One of the arguments I've seen a few places is that we, as consumers, ought to WANT to pay higher e-book prices to support the brick-and-mortar books stores. Well, maybe a better way to put that is that we should want e-book prices to be high so that physical stores can stay in business. But, you know, that's just dumb. No one said that Netflix prices should be artificially inflated so that Blockbuster could stay in business. And I'm not sorry that Blockbuster is gone, because they failed to adapt to the changing market place. Physical bookstores that don't adapt, likewise, don't deserve to have us prop them up just so that they can stay in business. The same applies to publishers.

    I'm not just behind Amazon on this because they publish my books; I'm behind them because, even if what they are doing is in their own interest, it's also in the interest of consumers and in the interest of indie authors. Nothing that Hachette is doing is in my interest or in the interest of their authors. If their authors got a bigger cut of the sales, things might be different, but Hachette, like every other large publisher, does not pay their authors a higher percentage for e-book sales; all the extra profit goes to them, and that's just wrong.

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