Home » Amazon, Big Publishing, Pricing, Royalties » Bringing Down the Hachette

Bringing Down the Hachette

31 May 2014

From Slate:

Amazon is digging in for a lengthy fight with one of the Big Five publishers, Hachette, and flexing its extraordinary market muscle while the two companies negotiate a new contract. It’s understocking Hachette books so as to create shipping delays, cutting discounts, suggesting alternative titles to buyers, and even refusing to take pre-orders, foreclosing a major sales opportunity. 

. . . .

Neither side is officially discussing exactly what it is they are fighting about. But all indications and industry chatter suggest that Amazon and Hachette are revisiting the pricing and revenue split for e-books—the same contentious issue that prompted the 2012 price-fixing suit against the Big Five publishers, from which Amazon emerged more powerful than ever.

The publishing industry is cheering for Hachette to hold the line and has denounced Amazon’s anti-Hachette tactics almost unanimously.

. . . .

But the publishing world that is speaking as one against Amazon is really made up of two principal factions: publishers and authors. Their interests are not identical, and authors should consider the possibility that the publishers have contributed to the difficult situation they now face. Literature could end up suffering for it.

The crux of the issue is that in recent years, e-books have been more profitable for publishers than print books, despite the substantially lower price tag. But they’re less profitable for authors of new releases. This is not a well-known fact, but one group to have noticed is literary agents, who are in the business of ensuring that authors (and they themselves) get their fair slice of the pie.

So when HarperCollins, another Big Five publisher, boasted about its digital profits in a presentation to investors last year, literary agent Brian DeFiore seized on Harper’s own PowerPoint slide to point out that authors of new releases get the short end of the deal. On the blog of the leading agents’ trade association, DeFiore published a post headlined “e-books and profitability—What we’ve always said and publishers have always denied.” He noted that Harper’s chart neatly demonstrated that for a given title, the e-book is more profitable than the hardcover edition precisely because the author makes less money on it.

“Look at Harper’s own numbers,” DeFiore wrote. “$27.99 hardcover generates $5.67 profit to publisher and $4.20 royalty to author. $14.99 agency priced e-book generates $7.87 profit to publisher and $2.62 royalty to author.”

. . . .

By leaving royalty rates where they are, publishers have left their nice digital margins hanging out there for everyone to see. And when Amazon sees someone else’s healthy profits, it’s like a dog smelling a steak. As Jeff Bezos has said, “Your margin is my opportunity.”

What I suspect is happening right now is that Amazon is telling Hachette that they want some of that margin. If Hachette had spread some of those digital profits to authors in the first place, it would not be vulnerable to this tactic. What’s more, if Hachette had been the first to raise author pay, it no doubt would have snagged some marquee writers.

Link to the rest at Slate and thanks to Randall for the tip.

Amazon, Big Publishing, Pricing, Royalties

26 Comments to “Bringing Down the Hachette”

  1. At least this blog speaks about how authors get screwed by the publishers when it comes to eBooks. But, I don’t think that Amazon wants more of the extra-profit from eBooks. Amazon wants low eBook prices. Low eBook prices translate in more Kindles and more eBooks sold by Amazon.

  2. Their interests are not identical, and authors should consider the possibility that the publishers have contributed to the difficult situation they now face.

    Wait…SLATE just said that? SLATE just admitted that publishers might have been anything other than innocent and angelic during this entire kerfuffle?

    I’m amazed.

    Literature could end up suffering for it.

    No, literature will be just fine. It’s authors I’m concerned for. I want them all to be able to pay their bills, not to get jacked by their dumb publishers and then replaced with more cogs once all this is settled.

    • +100

    • But maybe the authors getting less will bring more over to independence. Let the publishers abuse them. Sooner or later, something has to give. Let publishers dig their own graves. The authors will wake up one day and realize there is life beyond their cages.

      • Yep. Hopefully it doesn’t take those authors too long to figure out they’re getting screwed. They really are missing out, it seems.

      • Why was it that when I read your comment, Melanie, I thought, “Come to the side of the Indies. We have cookies, and Kool-Aid.”

    • Evan also wrote a great piece on self-publishing for WIRED. He’s a fine reporter.

    • I am likewise confusticated and beboggled. If anybody at Hachette sees this, I suspect they will need new undergarments. When you’ve lost Slate, can Salon be far behind? And when you lose Salon, you’ve lost it all.

  3. “It’s understocking Hachette books so as to create shipping delays”

    Read: refusing to provide Hachette with free warehouse space.

    “cutting discounts”

    Read: selling books for Hachette’s clearly-marked list price.

    “suggesting alternative titles to buyers”

    Which they have always done.

    “and even refusing to take pre-orders”

    Read: refusing to disappoint customers by taking pre-orders for books that they may not be selling n the future.

    • Exactly.

    • OH THE HUMANITY

      You guys. YOU GUISE. Literature may suffer.

      Beware.

      • I do love that they highlight the publisher greed in not sharing the wealth with the actual CREATORS of their product.

        But the old, “Amazon is going to destroy literature” bit I could have done without.

      • Everyone STAY CALM!

        I talked to Literature today. We had a frank, heartfelt, honest discussion, and it’s feeling good about its future.

        It’s also leaving for Capri on the next flight, and it’s never coming back.

        • 🙂 Exactly. Literature will get written and published on the net with or without an advance, with or without big publishing. With or without a patron of the arts, a day job or government stipend, with or without big business interests. So will popular fiction and anything in between “literature” and commercial fiction.

          Whoever controls the means of e-distribution (e.g., Amazon, Google) controls access to and the visibility of fiction. But distributors can’t control its output unless they control the artist’s mind and motivations. If a large advance, high status and a highly materialistic lifestyle are an artist’s main motivators for creating a work, that work may not be worth much in the grand scheme of things anyway.

          The health of the publishing industry has little to do with good writing. The motivations and honesty of the individual writer do.

          Art happens. Commercial art happens. We’ll barter it in the streets if we have to. We’ll do it for free. No one can control it with any worldly carrot, because art IS the carrot.

      • @ Libby

        And the lit-fic fetishists will also suffer, as they sip their chardonnay and nibble their brie while looking down on the hoi polloi lumpenproletariat from their pristine ivory towers. Ah, the horror… the horror. 🙁

  4. When I first read this I thought that maybe, just maybe, we had our first bi-partisan article. It even had some math and a decent description of what’s really happening. From Slate of all sources!

    Even a quote from Darth Bezos himself; ” As Jeff Bezos has said, “Your margin is my opportunity.” Which says a lot more than what they are using it for.

    The author flirted with the truth for a few paragraphs before reverting to the trade-pub party line at the end. Still, based on the drivel we’ve been served so far by the various media outlets, it’s the only one that’s shared the blame with Hachette.

    Hopefully this leads to more balanced articles…and monkeys might fly out of Patterson’s butt. I won’t hold my breath waiting for either one.

  5. What value do publishers produce? How do they benefit me? How are they benefiting their authors right now?

    Perhaps I should really be asking, how do I benefit at their expense. Isn’t that a major play of their own playbook?

    So those models die away. And in this case everyone just happens to have a front-row seat to those death-throes.

  6. “Literature could end up suffering for it.”

    It seems so long ago, but wasn’t the original Kindle complaint that Amazon was making way too many new books, and new authors, available to readers?

    Dan

  7. What I suspect is happening right now is that Amazon is telling Hachette that they want some of that margin. If Hachette had spread some of those digital profits to authors in the first place, it would not be vulnerable to this tactic. What’s more, if Hachette had been the first to raise author pay, it no doubt would have snagged some marquee writers.

    Wow, so much fail in one paragraph. Amazon is trying to lower their own margin. Is disagreement is over retail prices, not the writer’s royalty. The publisher didn’t just “not raise” royalties on ebooks. They cut them. Oh, I give up. Trying to kill the zombie memes with facts on this one is just like trying to stop Niagara Falls with a toothpick.

    • Will, dude, go read the source article, PG left out all kinds of stupid.

      At least this guy admits that publisher maaaaaybee sorta have screwed authors in digital royalties.

      He does, then, go in to the journalistic theory du jour: Amazon is DEMANDING more margin, and never once touches on the agency possibility.

      We still don’t know for sure, but I’m smelling a fail here in guessing Zon’s motivation.

  8. Remember when journalists were concerned with reporting the truth? Yeah, me neither.

  9. I wonder how many $100,000 advances for unprofitable presidential biographies has James Patterson’s ebooks paid for?

  10. I would like to borrow Tony Stark and have him explain it to these people:

    You’re missing the point! … there is no version of this where you come out on top.

    • Or, to be even more blunt, the amalgamation of these lines from Next:

      Cris Johnson: I’ve seen every possible ending. None of them are good for you.

      […]

      Cris Johnson: You have one way out of this.

      [Mr. Pietsch holds up the detonator; Bezos shoots it out of his hand]

      Cris Johnson: That wasn’t it.

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