Friday, November 14, 2014

The Amazon Hachette Dispute Comes to a Pyrrhic End

As the Epirot Illyrian general
Phyrrus demonstrated, winners
can be losers too. 
Image source: Wikipedia

Amazon and Hachette announced a settlement this week in their long festering contractual dispute.  I'm glad it's over.  As I discussed in a NINC interview last month, the dispute evoked a lot of unnecessary ugliness in certain quarters of the indie author community.

At the heart of the dispute was the Agency pricing model for ebooks, which meant it was a battle was over pricing and margin.  According to most press accounts, Hachette wanted the freedom to set consumer prices and earn 70% list for its ebooks, and Amazon wanted to pay Hachette lower margins so it could fund deeper discounting.  I covered the dispute back in May here at the Smashwords blog.

According to carefully worded statements this week by Amazon and Hachette - neither of which boasted of victory - Hachette will retain Agency pricing control yet conceded to certain unnamed Amazon demands that will incentivize lower pricing from Hachette.

It's not easy to pick winners and losers.  As with most wars, even winners can be losers.

Here's my attempt to examine the winners and losers of this episode, along with speculation on long term implications.

Hachette *mostly* won, but is now boxed into a position where faithful authors will expect higher net royalty rates for ebooks as well as other perceived reforms from publishers.  The Author's Guild has already hinted as much.  In a blog post this week commemorating the agreement, Authors Guild president Roxana Robinson took the opportunity to urge Hachette to raise ebook royalty rates for authors.

Amazon mostly lost, because it appears Agency wasn't dismantled or critically injured.  Amazon will likely seek revenge through other means (see below).

Agency mostly won. It dodged a bullet to the benefit of publishers and indie authors alike, and to the benefit of Amazon's retail competitors.

Amazon mostly lost on the PR front.  Amazon's heavy handed tactics confirmed the industry's worst fears about Amazon.  Word of Amazon's heavy-handedness leaked out into the mainstream media where it probably tarnished Amazon's otherwise pristine image in the minds of consumers who were paying attention.  Amazon dare not replay the same overt tactics again unless it wants to rip the scar off of the bloody putrid mess and invite people to connect dots back to the Amazon/Hachette dispute.

Amazon boxed in.  Just as Hachette is boxed in with expectations of payback from their defenders, so too is Amazon.  If Amazon puts the squeeze on indie authors and their 70% list, their supporters will cry foul ("Hey, I defended you like a loyal pit bull in your dispute with Hachette!")

Author affinity for publishers damaged.  Amazon partisans orchestrated a rage-fest against traditional publishers, further eroding the once divine reputation of traditional publishers. Amazon partisans used this dispute as an opportunity to paint all publishers with the broad brush that publishers don't care about authors, want to exploit authors, want to overcharge customers for ebooks to protect their print businesses, collude on pricing, and who knows what else, strangle puppy dogs?  All good conspiracies are grounded in a small amount of truth.  Yes, no doubt, publishers have much opportunity to bring reforms that benefit authors, though I thought the vitriol was excessive.  I also believe that indie authors are well-served by a thriving and profitable traditional publishing industry because it creates more publishing options for all authors.  When indies go too far to tear down publishing houses, they risk tearing down their own house as well.

Authors attacking authors.  Successful traditionally published authors who stood by publishers were attacked.  This, to me, was one of the most unfortunate outcomes.  When authors are attacking authors, you know the world has gone mad.  It was all the sadder that most of these attacks came from the indie author community.  Indies should be better than this.

Any perceived victory for publishers will likely prove Pyrrhic. The Hachette agreement, which was itself preceded by Simon & Schuster reaching new terms with Amazon, will likely be followed by other publishers striking similar deals now that the goal posts are planted in the ground.  To the extent Amazon feels it was forced to settle, this settlement will dredge up their bitter memories of the time publishers forced Amazon to move to Agency in 2010.  Amazon doesn't like it when others exert power over it.  Can you blame Amazon?  No one appreciates feeling powerless.  Amazon prefers its supplier frenemies divided, conquered and dependent. If it can't crush Agency, it will try to neuter the publishers who use it. It views publishers as fat middlemen to be disintermediated, their fat to be rendered away and conveyed to the bellies of customers. Although Amazon's ability to replay their heavy-handed Hachette playbook is limited, I expect they'll exact a different type of revenge in the form of discoverability and merchandising. Think of it as passive-aggressive. Amazon will redouble efforts to undermine the power of publishers by diverting more reader eyeballs to indie books in KDP Select and Kindle Unlimited, and to Amazon imprints that are exclusive to Amazon.  Amazon has every right to arrange their own shelves. Let's call it the cloak of invisibility that no author or publisher wants to wear.
Like with most battles, all combatants lost a little something in end.  Here's wishing the industry greater peace and prosperity in the future.


Inkling said...

Quote: If Amazon puts the squeeze on indie authors and their 70% list, their supporters will cry foul ("Hey, I defended you like a loyal pit bull in your dispute with Hachette!")

I'm sure that a few will cry foul. But in my experience most Amazon author fanboys are beyond reason. Amazon already pays half the royalties that Apple pays for ebooks outside the $2.99-9.99 price range and they not only meekly submit, most doesn't seem to have read their contract carefully enough to realize that.

I simply can't understand people who submit to abuse like that and remain loyal.

That said, if Amazon had been able to force the major publishers to accept only 50% royalties like I suspect it wanted, that same amount or less would have soon been imposed on independent authors by fiat. We may have avoided that bullet.

These contracts also give the major publishers several years to establish alternatives, particularly alternative source tools.

I'd love to see a website, perhaps managed by Google and open to all authors and publishers, that'l link to all a book's sources (or all the sources that the author wants included). That way, when Amazon starts curtailing availability, readers woud have a one-stop place to go for options.

I just checked, and interestingly is owned by B&N (it forwards to B&N). If B&N is willing to contribute that to a good cause, it be ideal for such a website. Over time, it could be built into a site more useful than Amazon.

At any rate, the major publishers have won a breathing spell for them and for all publishers and authors. The real question is whether they'll have the good sense to take advantage of that window of opportunity.

Scath said...

Probably because it's not abuse.

It's a two tier royalty structure.

Anonymous said...

This is just great as a summary of the #Amazon - #Hatchette dispute and its outcomes but also as a piece of writing! Thanks, #Smashwords, for keeping us informed AND entertained: "[#Amazon] views publishers as fat middlemen to be disintermediated, their fat to be rendered away and conveyed to the bellies of customers."

Emily Hill ~ AV Harrison Publishing said...

Watching the The Gorilla try to juggle with The Hatchet over these long months has been like seeing the production "Who's Afraid of Virginia Wolff" once too often. Blechh!

I pulled my eBooks off the Amazon/Kindle months ago in favor of the sanity-safe haven of Smashwords and turned my writing skill back to my newspaper job, so happy to have shed the circus cape.

Mark, your observation regarding the possibility of covert-Amazon pay back is so correct, from my personal experience: For speaking out nationally in September 2012 against Amazon for its 'frozen sales board' debacle, under the banner "Kindlegate" I got phone calls at home from Amazon exec's; cyber-stalking from an insecure Kipust; and "you can now speak to the hand" for the months that followed my inquiry on "where's MY royalty check?"

LOL - The game-on is now gauging how miserable Hachette will become, having made nice with the 800-pounder.

Claude Forthomme said...

Excellent analysis, many thanks, I really enjoyed the read (and the images - Amazon "rendering" the fat!) I completely agree with your take on it, and the fight(s) is/are far from over. Actually, I suspect it has more to do with establishing Amazon itself as a "big" publisher rather than defend itself as a big intermediary which it already is!

Louis Shalako said...

Sometimes it's better to just sit back and listen.

Joleene Naylor said...

thanks for the breakdown, mark :)

K.C. Taylor said...

Mark, Amazon already favors books enrolled in Select. Most indies will report a big drop in sales from the time KU went live in July. It's now pretty much required to buy ads from BookBub, ENT, etc. to be visible on Amazon if you're not part of the Amazon fold (assuming you're not a big name in your own right).

Richard said...

I'm so glad that this particular skirmish is finally over. It was getting boring and stupid. I heard from both sides over and over again and found little common ground with either side, except, that Amazon sends me royalties, so I did tend to be more forgiving on that side. You also send me royalties, so I tend to also extend a more open mind in your direction. Hachette, should come out of this painted like the sideshow charlatan they are. The fact of S&S/Amazon's settlement proves that publishers are actually capable of doing business without running out a puppet and pony show. Having spent years as a retail owner, I've seen all this coming down the pike long before. Coop advertising and other forms of positioning are nothing new, but for any producer of goods to think that they should have the right to dictate retail price is just wrong. They really kept their spin doctors busy convincing the liberal minded public that Amazon is some kind of predatory evil force. C'mon, guys. Man up. It's business, after all.

Dovetail Public Relations said...

Richard, business is business but even in business it's good to have boundaries. Amazon has gone to great effort to earn the predatory label. Check out Amazon's Gazelle Project -

Richard said...

Well, I guess they started believing their own press pretty early on. Even before they began turning a profit. Personally, I don't approve of practices that treat one class of vendors differently, or punish the smaller guy whose capitalization is nonexistent, but your point is well taken. Reminds me of something that used to be brought up pretty regularly in business meetings. It was called "ethics". Remember that? I guess it's forgotten by most publicly held companies now, but it used to be taken very seriously. Anyway... onwards as best we can!

Unknown said...

I wouldn't use Amazon for anything, even if they carried the cure for cancer, I'd choose death.

Tyler K. Barnes said...

In March this year Amazon has also reduced royalties for authors and publishers who use ACX, (aka: Audible), which is pretty much the only game in town now due to lack of competition.

I can't find the comment thread today, but several indie-publishers stated that they were now priced out of hiring voice actors for their books, so the winds have shifted against both the voice actors and the smaller publishers and indies, the ones who Audible previously “liberated” from traditional publishers, (phrase from Amazon).

One can only speculate how far along Amazon is on mirroring this business model with their Kindle Unlimited plan.