Inevitable consequences follow from the new hierarchy of power among publishers
From veteran publishing consultant Mike Shatzkin:
The current very public battle over trading terms taking place between Hachette Book Group and Amazon has brought forth surprisingly few recollections by those reporting it (an exception here) of a similar fight last summer between Simon & Schuster and Barnes & Noble.
This is publishing’s near-term future. The two most powerful channels that deliver books to consumers — one dominant in online transactions and one dominant in physical store presence — are determined to wrest more margin, which ultimately also means more pricing control, from their publisher trading partners.
The B&N dispute becoming public was a first for them. The only prior disputes between a publisher and a trading partner that had ever leaked beyond the buyer-and-seller that I can recall involved Amazon, and they were rare. The first was when Amazon took the buy buttons off Macmillan books in 2010. That was a vain attempt to stop the industry from going to agency pricing and it lasted only a few days. They pulled back so quickly from that effort that I concluded that their famous customer-centricity made punishing publishers in ways that were evident to their shoppers (which this one, which also became public, really was not) something they’d decided was not in their best interests.
Drawing that conclusion was apparently a mistake.
What B&N did with S&S, apparently, was simply to stock less of what the publisher was selling and to deny them promotional opportunities. That’s not obvious in a retail store. Books that aren’t there, or which aren’t there in quantity, are not apparent. Bookstores can be out of any particular book at any time without surprising anybody and it would take a uniquely aware book consumer to notice that something new and hot wasn’t displayed as prominently as would be expected.
But Amazon’s action against Hachette was much more visible.
. . . .
I had thought the immediate catalyst for this conflict was that Hachette was the first publisher negotiating a new deal to replace the court-imposed agreements following the agency collusion case. Apparently that is not the case. Nobody is telling me what Hachette is trying to achieve in these negotiations. One would expect that print book margin, ebook margin (often affected by various co-op fees), and ebook pricing flexibility are probably the key moving parts in the negotiation.
But the details don’t really matter. What is important to understand is how, with one exception, the power has passed from the publishers who control the distribution of copyrighted material to the retailers who control the customers. In the past, the pain for the retailer living without ready access to the most commercial books was much greater than the pain for the publisher without ready access to one retailer’s customers. Not any more.
But there is that one exception: Penguin Random House.
One former executive from a big house in a private conversation attributed the fact that PRH doesn’t ever seem to be subject to Amazon’s bullying to the fact that PRH’s second-ranking executive, Madeline McIntosh, had a brief interlude as an Amazon executive between her former and present tenures at PRH.
But I doubt that’s the answer. There’s a simpler one. PRH is too big to bully and nobody else is.
. . . .
Of course, both Amazon and B&N have plenty of reasons to feel justified in pressing for more margin. Amazon, with its low returns, has historically been many publishers’ most profitable account. B&N knows that their stores are “showrooms”, driving sales at Amazon as well as in their own stores. Amazon has no reason to want to be the most profitable account for publishers on the back of their own investments, efficiency, and customer loyalty. B&N wants the publishers to pay for the value they reap from being on B&N shelves that is not resulting in B&N sales.
Link to the rest at The Shatzkin Files
PG proposes that one contributing factor to pricing disagreements between Big Publishing on the one hand and Amazon and Barnes & Noble on the other is that Big Publishing hasn’t the foggiest idea about what works and what doesn’t in retail.
, Amazon will pay Passive Guy a small affiliate commission on any of your purchases. 
“What is important to understand is how, with one exception, the power has passed from the publishers who control the distribution of copyrighted material to the retailers who control the customers.”
That exception might contain my thought, but I’m not going to go looking for it. But does he not remember that B&N can kill a publisher’s book? Can make them change the cover? That charges publishers for putting books on display?
This power passed from the publisher to the retailer many moons ago.
The exception is Penguin Random House, who is apparently too big to boss around.
Funny how being too big to boss around is good when it’s a publisher, but bad when it’s Amazon or B&N.
All publishers are at the mercy of book stores. This is where authors get hurt!
Indeed.
Excuse me while I go bang my head on my desk multiple times….
The power passed from the publishers to the retailers decades ago. B&N had publishers by the throat since the 1990s at least and it started in the 1980s.
But they still kept publishers as an essential piece of the business. They didn’t open things up to anyone else. As a matter of fact, most of the big booksellers preferred to work with a few big publishers. They created the industry that we see today — controlled by an for the big brick and mortar chains….
And big publishing’s business model was designed to play a key but utterly dependent role in that paradigm.
But now the power passed from the big brick and mortar retailers to Amazon. And Amazon has a whole different way of retailing — and the publishers don’t understand it or how to fit into it.
This isn’t about publisher’s losing power. This is about publishers being the footman whose job it is to ride on the back of the carriage and look beautiful while opening doors suddenly having a very different job when the boss no longer uses a carriage.
This isn’t about publisher’s losing power. This is about publishers being the footman whose job it is to ride on the back of the carriage and look beautiful while opening doors suddenly having a very different job when the boss no longer uses a carriage.
Well said.
Ultimately, this is what all the sound and fury signifies: publishers’ bewilderment over what the hell they’re supposed to do now.
There are plenty of ways for them to be useful and relevant, but who knows whether they’ll get the hell off the back of the carriage in time to claim their new place in the industry.
At least Amazon’s model seems to have a place for smaller businesses. Amazon seems to work *with* smaller businesses.
Amazon has created innumerable smaller business, or at least made it possible for them to exist. Amazon is a big ol’ conveyorbelt for getting goods as cheaply and as quickly and as conveniently as possible to consumers.
If you’re looking for a metaphor for its disruptive power, you might think of railroads.
Suddenly people all over the continent (the world) can get their goods to people far, far away, with both sides of the transaction secure in the knowledge that a competent, conscientious logistical provider will ensure that they get from A to B, and that if there is any trouble in the transport, the provider will make it good.
And just like the railroads, the ‘Zon’s interest is in feeding the machine. It wants the most goods, the most variety, the most inputs so it can satisfy the most consumers and keep them coming back. “We sell books. People want more books than the current system can provide. Fine. Let’s fix it so more books can enter the system, faster and cheaper and with more variety.”
They’re doing it with music (although they weren’t the first) and they’re doing it with audio and they’re doing it with video. And that’s just on the content side. Anybody can set up an Amazon seller account and suddenly Joe’s Piddlywinks, S.P. is on Amazon, just like Megawink, Inc. Joe’s product page looks just like Megawink’s. If Joe can deliver, suddenly he’s in direct competition with Megawink, without spending a dime. All that infrastructure, all that reach – at the push of a button. Now that’s leveling a playing field.
Yes.
Not one word about Indie publishing in his piece, as far as I could note (and I read the original).
If I were Mike, I wouldn’t say a word about Indie publishing either.
Especially after Examiner.com publicly called him a liar the last time he tried.
The power is actually passing to the reader. Amazon knows this. BigPub does not.
The first was when Amazon took the buy buttons off Macmillan books in 2010. That was a vain attempt to stop the industry from going to agency pricing and it lasted only a few days.
I believe it was Bob Mayer who pointed out that Macmillan foolishly believed they won that round. They were so busy giving each other high fives for “making” Amazon restore the buy buttons that they completely missed the fact that “Holy s**t, Amazon can remove buy buttons from our books at any time.”
Four years later, publishers still don’t get it.
Maybe Mac also missed the fact that Amazon realized the situation would ultimately end up in court and they (Amazon) would be the innocent party.
Isn’t Mike’s post just a wordy admission that he doesn’t know what’s going on?
You just described Mike’s writing in general.
LOL!
The publishing insiders are trying to rewite history and forget that at trial it came out that Amazon knew of the conspiracy (courtesy of RH) since Oct 2009 so when they pulled the plug on MacMillan they knew the other conspirators would step up and demand the exact same terms, thereby revealing their conspiracy. So, after publicly establishing without a doubt they were against agency and not part of the conspiracy, they stepped back and waited for the inevitable lawsuits.
But in their eyes, that was a victory…
Must… resist… blogging.
Here’s what I don’t get. If PG linked to one of my blogs, and a whole bunch of people disagreed with me, I think I’d stop by and debate them.
Shatzkin doesn’t debate. He doesn’t mix it up with his detractors. He flat out refuses to continue. I can’t think of any legacy publishing apologeticist who does debate, except that one time Zacharius engaged on my blog.
“vain attempt to stop the industry from going to agency pricing” actually means “collusion to force a retailer to price according to the wholesaler’s terms”. Collusion is illegal, and store owners can price however they want to price things. That’s called capitalism. And, as other posters have said, it wasn’t a vain attempt. Amazon won.
Amazon, with its low returns, has historically been many publishers’ most profitable account.
Which is true, so it makes no sense what Shatzkin says next.
Amazon is allowed to dictate its own terms for the items it sells. Just as publishers can sell to whomever they choose, for whatever amount they choose. Just as publishers “wrest more margin” from authors.
Random Penguins may not be subject to the same arrangement as smaller pubs are, just like big bestselling authors get better deals than midlist writers. But Shatzkin suggests that Random Penguins is too large to bully, which is incorrect. If Lee Child doesn’t get what he wants from his publisher, he goes elsewhere. Where would Random Penguins go if Amazon stopped carrying them? Which of those companies can survive without the other?
Shatzkin’s rah rah rah for legacy publishing is becoming a self-parody. He no doubt chooses his words carefully to please his corporate masters, but when he continues to say things this wrong-headed, and refuses to engage dissenting points of view, he’s just showing everyone how irrelevant he has become.
Which, ultimately, is why I’m posting this here and not on my blog. Shatzkin currently has 8 comments. No one is listening to him. If I made a big deal out of his nonsense, it would send a lot of traffic his way, resulting in more comments and attention.
I’m done giving him attention. He doesn’t deserve it.
Which of those companies can survive without the other?
Yep.
Actually, Mike came over to comment on one post many, many months ago. He didn’t find a lot of people agreeing with him (although everyone here was civil) and made some comments to the effect that the people on TPV didn’t understand how publishing works.
He hasn’t been back since.
I’d argue that the people on TPV do know how publishing works, and that’s the problem.
What we don’t understand is why a dying industry with multiple opportunities to save itself continues doggedly on the same track.
Well, my reaction to your initial sentence, Joe, was, no, don’t resist–blog! blog! I’d enjoy seeing your commentary.
But reading to the end of your comment… I see you’re right. I’d never direct anyone’s attention to Shatzkin’s blog for an informed perspective on the current book world. So why direct anyone’s attention there at ALL–and in blogging a response, you would indeed direct attention to him. And that’s a waste of attention that could be better directed elsewhere.
agreed laura. Better to blog about who can lead with reason and reality and verve than who cant. Many no longer care to hear how bad/stupid/backward big pub or anyone else is. It’s been said and said and has lost its lustre.
Effective Actions. No more talk talk talk talk.
I keep waiting for someone honest to write a book called The Only Book You Must read Before you Publish, or Else. give it away from free. The idea that one can ‘save’ people by merely informing them over and over, has never worked, not in peace and esp not in war. Too many learn by failure and death rather than by being warned and warned. The repetition of warning begins, like a nagging wife, to go in one ear and out the other.
there are better ways … no doubt someone will seize on them and let us all know… there are many ways to proceed without wasting time challenging and badgering the deaf and blind, for any reason.
There is one value in reading Shatzkin. If you need to know the consensus view of the Big 5 publishers, Shatzkin is the go-to source. He is smart, honest, and shares his views publicly. Look at the difference between the NY Times articles on the Amazon/Hachette kerfluffle and his views. It suggests that the NYT got played and Big Pub thinks that its partners (agents and writers) are rubes. It also indicates that Big Pub has no clue what their end game is.
Shatzkin has responded civilly, if dismissively, to several comments I’ve made on his blog, and has made at least some efforts to address counterarguments I’ve posed. I don’t think he’s quite as engaged as some are, but it’s not fair to say he just floats along in a fog of denial.
He’s refused to engage me on several occasions.
There’s a deep disconnect prevalent in the legacy world. This is necessary, because looking too closely at the man behind the curtain will reveal scary truths.
People would rather defend their beliefs to the death than consider they might be wrong. It’s genetic. When the game changes, you have to change with it or perish. Trying to find relevance in an antiquated status quo is reassuring among those who deny the future. Ten people who are each individually unsure of something can become a like-minded group completely sure of everything. Safety in numbers. Shatzkin is read by the legacy industry, does consulting for the same industry, and reflects what they want to hear because that’s where his bread is buttered, and it reaffirms is own security in his future. He likely believes his own nonsense because he has to.
Conversely, when I find myself preaching a bit too loud about the merits of self-publishing, I try my best to temper that enthusiasm, experiment, discuss issues with peers, and adjust my beliefs as more information comes in. When I’m sure I’m right about something, that’s when I need to think more about it.
But my job doesn’t depend on people believing me. Everyone involved in the legacy industry needs people to believe what they’re shoveling, or else they’ll vanish.
You’re way, way scarier than I am, Mr. Konrath. That’s probably most of the difference in the way we’re treated. Also, it’s much easier to dismiss me than it is to dismiss you, so it’s safer to reply to me.
I’ve come to the conclusion that his blog is now designed to keep him working for big pub because he was one of the first ones who said jump ship from trad pub or be the house slaves. It was only later that his posts became next to meaningless and wholly opposite in tone. So that’s my theory. It’s professional self-preservation in an industry that’s burying its head in the sand.
I’d argue that Mike knows how publishing used to work then, and the people on TPV know how its works now.
Bazinga!
If nothing else, Mike’s posts are the whetstone on which we can sharpen our arguments. And I appreciate being corrected by the smarties here. How else am I ever going to learn?
There I go again. Silly, optimistic me.
Partners? Bullying? This stuff is getting to sound like high school.
thou has said it, and same goes for all sides. worse than high school. Slam books from junior high school. What will take us forward, rather than treading in the same ol s pit? that’s what I want to look to/ for/find. The old trope of look what they’re doing to us now, has changed far too often into, look at who the latest idiot ‘on the other side’ is.
Great. My aught six has more sense. It aims and brings down food, spends no time criticizing the game.