How to Read a Book Contract – For Avoidance of Doubt

31 March 2012

A reprise of a post from last year.

Contract clauses beginning with the phrase, “For the avoidance of doubt” are a common feature of business contracts.

For example, Company A is negotiating a three-year contract with Company B to purchase twenty different products from Company B. The contract includes ten pages outlining minimum purchases, pricing and quantity discounts, price adjustments for changes in raw materials costs, methods of calculating credits for returns, etc., with variations for each product.

Company A carefully analyzes all the different combinations of prices, refunds, etc., but wants to make certain it doesn’t receive a big bill as a result of unanticipated future permutations.

Company A might insert a clause in the contract that says, “For the avoidance of doubt, Company A will never be required to pay Company B more than $2 million during any calendar month.” (PG has somewhat simplified the likely language.)

With this clause in place, as Company A’s CFO manages cash flow, she knows she will never have to write a monthly check for more than $2 million to Company B.

Last week, Passive Guy blogged about an important essay from Kristine Kathryn Rusch discussing borderline fraudulent contract practices of publishers in recent contracts with authors.

The practices Kris mentioned included embedding important contract provisions in difficult-to-decipher e-rights clauses or obscure clauses in the Warranties section of publishing contracts, traditionally the home of routine boilerplate. An example of one buried warranties restriction Kris identified would “warrant that the writer will not write anything until this particular book under this particular contract is published.”

So, how is an author to respond when the publisher or agent-turned-publisher offers up a shady contract?

An intelligent (and the recommended) response would be to hire a competent attorney to review the contract.

Now, to be completely truthful, is it possible for a clause to be hidden from a competent attorney? The answer is “Yes.” Not likely, but possible. Passive Guy would love to assure you that all attorneys sprinkle themselves with fairy dust each morning so they never make mistakes, but this is not the case. (Besides, fairy dust makes PG sneeze.)

In the absence of fairy dust, an approach to buried gotchas PG sometimes uses is to expand the familiar For Avoidance of Doubt clause into a Smoke ‘Em Out Clause.

The purpose of the Smoke ‘Em Out Clause is to:

  1. Reveal where the gotchas are buried, and/or
  2. Provide a reasonably good method for avoiding the effects of buried gotchas

Here’s an example, based in part on Kris’ essay, of what a Smoke ‘Em Out Clause might look like (simplified to keep you from falling asleep). The term, “Work” is a defined term identifying the book that is the subject of the publishing contract. Reservation of rights would be handled in a separate clause.

For the avoidance of doubt, no provision of this contract shall:

  1. Give Publisher any rights to any present or future work of Author other than new books with the same characters and settings as the Work.
  2. Prevent Author from publishing any of Author’s present or future books with another publisher or self-publishing such books except for books with the same characters and settings as described in Paragraph 1 above.
  3. Give Publisher any rights to electronic versions of the Work except for an ebook version of the Work with features substantially identical to those ebooks being sold at retail by Publisher on the date of this contract.
  4. Give Publisher any rights to versions of the Work in electronic or other formats that are not being sold commercially at retail by one or more major book publishers on the date of this contract.
  5. Give Publisher any rights to past, present or future creations of Author that are not books, including adaptations by Author or others of the Work into a form that is not a book or ebook.
  6. Give Publisher any rights to modify the content of the Work as initially accepted for publication by Publisher without Author’s express written consent in a document separate from this contract.

Passive Guy could go on, but the purpose of the sample clause is to demonstrate what a Smoke ‘Em Out Clause might look like, not provide a comprehensive cut-and-paste example of everything that might be listed in one.

This clause probably doesn’t replace any other clause in a standard publishing contract. It’s added to the contract. What the author is doing is making a list of things that he/she is worried about and negating the publisher’s right to do those things.

The fundamental purpose of this clause is to conflict with hidden clauses that say something different. If you’re sure you’ve found all the gotchas, you may choose a different negotiating tactic to deal with them. However, it still may be a useful approach to set forth some clear and reasonable items in a For Avoidance of Doubt paragraph and make the publisher justify something much more restrictive.

The style of this clause should be simple and straightforward, both for clarity for the author and for clarity for a judge. I’ll talk more about the judge later.

What are some possible responses of a publisher to a clause like this?

Response 1: This is our standard contract and we’re not making any changes.

What you’ve learned from this response is that the publisher’s contract has at least one provision and probably more than one provision that conflicts with the Smoke ‘Em Out Clause. If the Smoke ‘Em Out Clause doesn’t make any changes in the standard contract, there is no cost to the publisher in accepting it.

By virtue of the blanket refusal to discuss changes in the contract, you’ve also learned that, as the author, you are not a respected partner for this publisher. Instead, you are an indentured servant. The only reason you’re not a slave is that slavery is prohibited by the 13th Amendment to the United States Constitution (and similar laws in another countries), so the publisher will have to be satisfied with indentured servitude.

A variation on this response is, We have dozens of contracts and the administrative issues involved in modifying our standard form for an author would be overwhelming.

Bogus. Hundreds of large companies have thousands of contracts that are completely different from one another and they manage to deal with them.

Response 2: We can agree to paragraphs 1 and 3, but can’t accept the rest.

Now you know where to look for gotchas. The ones you talked about in your paragraphs 1 and 3 are probably not in this contract, but you need to hunt through the contract for the rest.

Response 3: We can’t agree to your proposed addition because it conflicts with other parts of the contract.

Bingo! Your immediate response is, “Which parts of the contract do my proposed language conflict with?” You will then receive a nice little map to a flock of gotchas. If the publisher refuses to tell you where the conflicts are, see Indentured Servitude above.

Response 4: We can agree to your proposed addition with some minor changes to your language.

Watch the changes like a hawk. Analyze the contract until you are certain you know which contract provisions the changes leave in place. Once you think you know what contract provisions are involved and if they don’t bother you, generate another Smoke ‘Em Out Clause that just skirts around those provisions. If the publisher says OK to the new clause, you’ve probably found all the gotchas. If the publisher wants more changes to your language, analyze those carefully or, alternately, ask why the changes are necessary and which contract provisions are conflicting.

Response 5: Your addition is acceptable to us.

This may mean you have a clean contract. This may also mean your Smoke ‘Em Out Clause missed the hidden landmines. This may also mean the publisher will be relying on its standard contract language to override the Smoke ‘Em Out Clause. This reliance is, I believe, risky for the publisher.

As mentioned earlier, the Smoke ‘Em Out Clause is designed to conflict with objectionable provisions hidden in the contract. If your language does conflict and both remain in the contract, you’re looking at a fight somewhere down the road. The Smoke ‘Em Out Clause is not a guarantee of victory, but it should help you out.

When a judge is presented with a contract that includes unclear or conflicting language, the judge will first try to find an interpretation of the contract that honors all the language. One of the reasons for simple and clear statements in the For Avoidance of Doubt (FAOD) clause is to make it difficult for a judge to construe the contract in a way contrary to this clause.

The language of the FAOD clause (“For the avoidance of doubt, no provision of this contract shall”) is designed to tell the judge that if something else is floating around the contract that conflicts with it, the FAOD provision will govern.

Another reason for simple and clear statements is that, comparing those with the complex and roundabout wording necessary to conceal a good gotcha, the judge has more opportunities to construe the gotcha language in a way that preserves the fundamental intent of the FAOD language.

A general rule of copyright law is that an author is presumed to retain all rights not expressly granted to a publisher. Some of the FAOD provisions sound like retained rights.

Finally, a judge will understand the publisher was trying to distract or deceive with a hidden gotcha and will be aware of the great disparity in resources between a big publisher and an individual author. If the FAOD language gives the judge something to hang his/her hat on, he/she will come down on the side of simple, clear and fairer to the author 9 times out of 10.

An FAOD clause is not a replacement for carefully reading and understanding a publishing or agency contract. An FAOD clause is not a replacement for a competent attorney.

An FAOD clause is not many things, but it is a lovely way to set a cat among the pigeons in a negotiation.

Since Passive Guy has been more specific about clauses, language, etc., than he is in most of his contract posts, he will remind you that nothing in this blog is legal advice. People who want PG’s legal advice need to hire him or be a very close relative.

 

How to Read a Book Contract – For Avoidance of Doubt

31 May 2011

Contract clauses beginning with the phrase, “For the avoidance of doubt” are a common feature of business contracts.

For example, Company A is negotiating a three-year contract with Company B to purchase twenty different products from Company B. The contract includes ten pages outlining minimum purchases, pricing and quantity discounts, price adjustments for changes in raw materials costs, methods of calculating credits for returns, etc., with variations for each product.

Company A carefully analyzes all the different combinations of prices, refunds, etc., but wants to make certain it doesn’t receive a big bill as a result of unanticipated future permutations.

Company A might insert a clause in the contract that says, “For the avoidance of doubt, Company A will never be required to pay Company B more than $2 million during any calendar month.” (PG has somewhat simplified the likely language.)

With this clause in place, as Company A’s CFO manages cash flow, she knows she will never have to write a monthly check for more than $2 million to Company B.

Last week, Passive Guy blogged about an important essay from Kristine Kathryn Rusch discussing borderline fraudulent contract practices of publishers in recent contracts with authors.

The practices Kris mentioned included embedding important contract provisions in difficult-to-decipher e-rights clauses or obscure clauses in the Warranties section of publishing contracts, traditionally the home of routine boilerplate. An example of one buried warranties restriction Kris identified would “warrant that the writer will not write anything until this particular book under this particular contract is published.”

So, how is an author to respond when the publisher or agent-turned-publisher offers up a shady contract?

An intelligent (and the recommended) response would be to hire a competent attorney to review the contract.

Now, to be completely truthful, is it possible for a clause to be hidden from a competent attorney? The answer is “Yes.” Not likely, but possible. Passive Guy would love to assure you that all attorneys sprinkle themselves with fairy dust each morning so they never make mistakes, but this is not the case. (Besides, fairy dust makes PG sneeze.)

In the absence of fairy dust, an approach to buried gotchas PG might consider if he were still practicing law would be to expand the familiar For Avoidance of Doubt clause into a Smoke ‘Em Out Clause.

The purpose of the Smoke ‘Em Out Clause is to:

  1. Reveal where the gotchas are buried, and/or
  2. Provide a reasonably good method for avoiding the effects of buried gotchas

Here’s an example, based in part on Kris’ essay, of what a Smoke ‘Em Out Clause might look like (with legalistic style amped up a little). The term, “Work” is a defined term identifying the book that is the subject of the publishing contract. Reservation of rights would be handled in a separate clause.

For the avoidance of doubt, no provision of this contract shall:

  1. Give Publisher any rights to any present or future work of Author other than new books with the same characters as the Work.
  2. Prevent Author from publishing any of Author’s present or future books with another publisher or self-publishing such books except for books with the same characters as described above.
  3. Give Publisher any rights to electronic versions of the Work except for an ebook version of the Work with features substantially identical to those being sold at retail by Publisher on the date of this contract.
  4. Give Publisher any rights to versions of the Work in electronic or other formats that are not being sold commercially at retail by one or more major book publishers on the date of this contract.
  5. Give Publisher any rights to past, present or future creations of Author that are not books, including adaptations by Author or others of the Work into a form that is not a book or ebook.
  6. Give Publisher any rights to modify the content of the Work as initially accepted for publication by Publisher without Author’s express written consent in a document separate from this contract.

Passive Guy could go on, but the purpose of the sample clause is to demonstrate what a Smoke ‘Em Out Clause might look like, not provide a comprehensive cut-and-paste example of everything that might be listed in one.

This clause probably doesn’t replace any other clause in a standard publishing contract. It’s added to the contract. What the author is doing is making a list of things that he/she is worried about and negating the publisher’s right to do those things.

The fundamental purpose of this clause is to conflict with hidden clauses that say something different. If you’re sure you’ve found all the gotchas, you may choose a different negotiating tactic to deal with them. However, it still may be a useful approach to set forth some clear and reasonable items in a For Avoidance of Doubt paragraph and make the publisher justify something much more restrictive.

The style of this clause should be simple and straightforward, both for clarity for the author and for clarity for a judge. I’ll talk more about the judge later.

What are some possible responses of a publisher to a clause like this?

Response 1: This is our standard contract and we’re not making any changes.

What you’ve learned from this response is that the publisher’s contract has at least one provision and probably more than one provision that conflicts with the Smoke ‘Em Out Clause. If the Smoke ‘Em Out Clause doesn’t make any changes in the standard contract, there is no cost to the publisher in accepting it.

By virtue of the blanket refusal to discuss changes in the contract, you’ve also learned that, as the author, you are not a respected partner for this publisher. Instead, you are an indentured servant. The only reason you’re not a slave is that slavery is prohibited by the 13th Amendment to the United States Constitution (and similar laws in another countries), so the publisher will have to be satisfied with indentured servitude.

A variation on this response is, We have dozens of contracts and the administrative issues involved in modifying our standard form for an author would be overwhelming.

Bogus. Hundreds of large companies have thousands of contracts that are completely different from one another and they manage to deal with them.

Response 2: We can agree to paragraphs 1 and 3, but can’t accept the rest.

Now you know where to look for gotchas. The ones you talked about in your paragraphs 1 and 3 are probably not in this contract, but you need to hunt through the contract for the rest.

Response 3: We can’t agree to your proposed addition because it conflicts with other parts of the contract.

Bingo! Your immediate response is, “Which parts of the contract do my proposed language conflict with?” You will then receive a nice little map to a flock of gotchas. If the publisher refuses to tell you where the conflicts are, see Indentured Servitude above.

Response 4: We can agree to your proposed addition with some minor changes to your language.

Watch the changes like a hawk. Analyze the contract until you are certain you know which contract provisions the changes leave in place. Once you think you know what contract provisions are involved and if they don’t bother you, generate another Smoke ‘Em Out Clause that just skirts around those provisions. If the publisher says OK to the new clause, you’ve probably found all the gotchas. If the publisher wants more changes to your language, analyze those carefully or, alternately, ask why the changes are necessary and which contract provisions are conflicting.

Response 5: Your addition is acceptable to us.

This may mean you have a clean contract. This may also mean your Smoke ‘Em Out Clause missed the hidden landmines. This may also mean the publisher will be relying on its standard contract language to override the Smoke ‘Em Out Clause. This reliance is, I believe, risky for the publisher.

As mentioned earlier, the Smoke ‘Em Out Clause is designed to conflict with objectionable provisions hidden in the contract. If your language does conflict and both remain in the contract, you’re looking at a fight somewhere down the road. The Smoke ‘Em Out Clause is not a guarantee of victory, but it should help you out.

When a judge is presented with a contract that includes unclear or conflicting language, the judge will first try to find an interpretation of the contract that honors all the language. One of the reasons for simple and clear statements in the For Avoidance of Doubt (FAOD) clause is to make it difficult for a judge to construe the contract in a way contrary to this clause.

The language of the FAOD clause (“For the avoidance of doubt, no provision of this contract shall”) is designed to tell the judge that if something else is floating around the contract that conflicts with it, the FAOD provision will govern.

Another reason for simple and clear statements is that, comparing those with the complex and roundabout wording necessary to conceal a good gotcha, the judge has more opportunities to construe the gotcha language in a way that preserves the fundamental intent of the FAOD language.

A general rule of copyright law is that an author is presumed to retain all rights not expressly granted to a publisher. Some of the FAOD provisions sound like retained rights.

Finally, a judge will understand the publisher was trying to distract or deceive with a hidden gotcha and will be aware of the great disparity in resources between a big publisher and an individual author. If the FAOD language gives the judge something to hang his hat on, he’ll come down on the side of simple, clear and fairer to the author 9 times out of 10.

An FAOD clause is not a replacement for carefully reading and understanding a publishing or agency contract. An FAOD clause is not a replacement for a competent attorney.

If Passive Guy were still practicing law and decided to use a Smoke ‘Em Out clause in a contract, he would probably adjust it for the particular contract involved. One of the principles of good negotiation is to fight about what’s worth fighting over and let the rest go. A laundry list of FAOD provisions may include some that pick a fight about an issue that’s not really important to you.

The Obligatory Disclaimer: As you may already know, a blog and a lawyer are two different things. A lawyer gives legal advice to his or her clients. A blog does not have clients and does not give legal advice. Even a blog written by a lawyer does not give legal advice. This particular blog includes informed and uninformed opinions, good and bad ideas, but it does not include legal advice. For all other disclaimers that apply to this blog and everything in it, click here.

 

Atria Books And Paragraph To Launch Crave

11 December 2015

From PR Newswire:

Paragraph and Atria Books, an imprint of Simon & Schuster, today announced the launch of Crave (ThisIsCrave.com) – a new app that matches bestselling authors with the hottest actors to offer romance fans an entirely new reading experience. Crave will be available for download on iOS at launch with Android to follow shortly after.

The first books to launch on Crave are Atria’s November 9, from #1 New York Times bestselling author Colleen Hoover, followed by books from #1 New York Times bestselling author Abbi Glines, and USA Today bestselling author K.A. Tucker.

Subscribers will receive one installment from the book each day, and every new segment of the story is coupled with instant notifications, videos and photos from the lead character.  Books are released serially, typically in advance of their official publication date, creating a new reading paradigm where the only place to experience the enhanced story will be in the app.

“The way we consume information has changed dramatically in the past few years,” said Ziv Navoth, Paragraph’s CEO. “We took the romance novel and asked ourselves how can we create an experience that fits the way people like to experience stories these days. The result is Crave.”

The Crave Studio scours the world and polls fans to discover actors who resemble the actual book characters so much that they might have well been the inspiration for them. Crave then turns them into real-life stand-ins for their characters, turning the audience’s fantasy into reality.

“Today’s romance reader isn’t satisfied with simply reading a story,” said Colleen Hoover. “She wants to be immersed in the story and get closer to the characters, while also building a relationship with the author who created them.”

“This is an exciting endeavor for us.  Truly the way readers consume, share and talk about books has changed greatly, and with Crave we are able to marry new methods of delivery with high-quality, value-added content to engage readers in an entirely new type of experience,” says Judith Curr, President and Publisher, Atria Publishing Group.

Crave is a subscription-based service. Fans subscribe to an author’s channel for less than a dollar a week ($3.99/month) and receive daily installments from their newest books over a period of 90 days.

Link to the rest at PR Newswire and thanks to Joshua for the tip.

PG is reminded of one of the most common provisions in any publishing contract: All rights not specifically granted herein to the Publisher shall be reserved to the Author or something similar. 

Sometimes this provision is accompanied by Any rights not specifically granted in this contract shall not be deemed to have been granted by implication.

For the avoidance of doubt, PG is not expressing any legal opinion with respect to this story.

The Amtrak Writers Program

10 March 2014

Passive Guy has received lots of email about the terms and conditions of the newly-announced Amtrak Residency Program for writers. If you’re not familiar with it, Amtrak is offering free tickets for authors, presumably on train trips that will last for at least several hours, encouraging them to write about their experience.

The email has focused on the following paragraph in Amtrak’s Terms and Conditions:

6.   Grant of RightsIn submitting an Application, Applicant hereby grants Sponsor the absolute, worldwide, and irrevocable right to use, modify, publish, publicly display, distribute, and copy Applicant’s Application, in whole or in part, for any purpose, including, but not limited to, advertising and marketing, and to sublicense such rights to any third parties. In addition, Applicant hereby represents that he/she has obtained the necessary rights from any persons identified in the Application (if any persons are minors, then the written consent of and grant from the minor’s parent or legal guardian); and, Applicant grants Sponsor the absolute, worldwide, and irrevocable right to use, modify, publish, publicly display, distribute, and copy the name, image, and/or likeness of Applicant and the names of any such persons identified in the Application for any purpose, including, but not limited to, advertising and marketing. For the avoidance of doubt, one’s Application will NOT be kept confidential (and, for this reason, it is recommended that the writing sample and answers to questions not contain any personally identifiable information – e.g., name or e-mail address – of Applicant.) Upon Sponsor’s request and without compensation, Applicant agrees to sign any additional documentation that Sponsor may require so as to effect, perfect or record the preceding grant of rights and/or to furnish Sponsor with written proof that he/she has secured any and all necessary third party consents relative to the Application.

PG has the following responses:

1. He is exceptionally pleased that authors and others are carefully reading terms and conditions relating to their writing and encourages the continuation of this practice.

2. PG is also pleased that authors and others are raising the alarm about problematic terms and conditions and hopes this practice continues and grows.

3. For attorneys who are writing terms and conditions, PG suggests it’s a good idea to consider public response before pulling out the moldy boilerplate paragraph covering a Grant of Rights. Amtrak should be asking uncomfortable questions of its counsel about this public relations disaster. Because it is counsel’s fault.

4. This language is, in fact, a rights grab. Amtrak officials have issued statements saying this isn’t what they meant, they would not use any materials without consulting the author, etc. As with all “we would never do that” responses to contract concerns, PG’s response is, “Great. Let’s change the contract to reflect what you just said.”

5. While this is a rights grab, it only covers the Application that would-be train-riding authors submit to Amtrak, not the stories and books the authors write while they’re on the train. So it’s a baby rights grab.

6. However, babies grow up, so authors who are selected to receive free train travel will want to carefully review any other terms and conditions or contracts that Amtrak requires them to sign before the conductor says, “All Aboard!”

The State of the Blog Report

28 June 2011

It’s been five months since Passive Guy started this blog. The original business purpose was to build a platform to support some PG works of fiction that won’t see the light of day for awhile (PG has issues with letting go of backstory).

Since his readers are his constituency, PG decided to provide a State of the Blog report. Since almost every author blogs, perhaps some of what PG has learned will be helpful to you.

When the blog was birthed, PG was researching self-publishing, so he started posting interesting items he discovered during his research. He picked up a few readers (Thank you!), but unique visitors were bouncing along in a generally unimpressive manner.

Following is a graph showing daily unique visitors to The Passive Voice for the first two months of its existence:

This is a slow upward path, but nothing very impressive. At best, about a hundred visitors per day.

If we look at the most recent two months (approximately), we see a nicer trend developing.

For the first few days, we were in the 150-175 visitor range, then on May 7, visitors spiked to over 500. What happened?

On May 6, I wrote my first post on contracts, entitled Don’t Sign Dumb Contracts. This post commented on an essay Kristine Kathryn Rusch wrote about hinky contract practices by agents and publishers. Kris was kind enough to mention my post and readership went up and stayed on a 300-400 visitors per day plateau. I’ve picked up 41 comments on that post, which was the first to generate significant commenting.

I continued to write regular posts about contracts in the last two months. During that time period, I also started paying more attention to Twitter, actively trying to recruit additional followers.

The next big spike came on May 28, when the blog hit 929 visitors. What happened?

On May 27, I wrote a post entitled Strip Mining the Authors, once again starting with an essay by Kris Rusch. Kris mentioned my post, Dave Farland picked up on the strip mining metaphor and Dean Wesley Smith had emphatic posts on May 27, May 28 and May 31 pointing to the Strip Mining and a follow-on contracts post, For Avoidance of Doubt as must-reads. On May 31, the blog punched up above 1,000 daily visitors for the first time.

Since that time, The Passive Voice has hit a new plateau, although this last Friday and Saturday were each new daily visitor records and the last four days have each had over 1,000 unique visitors. The last month has also brought more visitors from outside the United States (Thank You!).

Here are some general blog stats:

  • 511 posts since I started – Generally I try to have 4-5 posts per day. I quite often write posts for 1-2 days at a single sitting, then schedule them to appear during the day so repeat visitors will see something new.
  • 2069 comments (Thank You!) – Heavily-commented recent topics include J.K. Rowling’s Pottermore announcement, PG’s upcoming book on contracts, Harlequin, plagiarism on Amazon and Keyboard vs. Longhand.
  • The average visitor spends about 4 minutes on the site. In PG’s experience, this a high number and may reflect the number of new visitors who come and read multiple posts about contracts.

The four most-visited posts are:

1.  Strip Mining the Authors

2.  Publishers and Agents are Trying to Figure Out How to Skin Their Own Authors

3.  You Just Signed with a Big Agent? Oh, I’m So Sorry. (Snarkiness sometimes pays)

4.  Write More for Harlequin, Receive Less Money

In the last month, PG has made the blog feed more prominent and this has substantially increased the feed numbers. Currently 591 people subscribe to the feed, up from less than 100 a month ago. 165 subscribe via email, the remainder via feedreaders.

Twitter is the real deal. PG should go over the 3,000 follower mark today or tomorrow. Clicks from Twitter comprise about 25% of new visitors to the blog, about twice as many visitors as Feedburner delivers.

Some of you are familiar with Technorati. For those who aren’t, it’s like the Social Register for techheads. Technorati ranks blogs by their “Authority” based on a complex algorithm combining traffic, links, quotes, etc. For a tech type, a high ranking on Technorati is almost as cool as being mentioned in Wired magazine or standing next to Steve Jobs.

Among book blogs, The Passive Voice is currently ranked #12 by Technorati. If PG manages to push up two more spots, he’ll have more “Authority” than the Tor publishing blog, which seems very strange and makes him question the whole Technorati ranking method.

Let PG know if you have any questions about any of this, how to do something he mentioned, etc.

As far as the future is concerned, PG knows he needs to do more with Facebook and will begin to build a presence there, starting with an automated feed of blog posts.

PG also plans to provide updates on his contracts book as it progresses, likely asking for feedback on content areas, unmet needs, etc. He appreciates all the comments already made on this topic and has modified his outline based on several.

Thanks to all who support The Passive Voice with visits, comments, emails and links. Passive Guy highly values the intelligence of and interaction with the people who come here.

The Gathering Storm of Indie Publishing

22 June 2011

The Alexander G. Public Relations blog has an interview with author Jason McIntyre. Jason is a hard-core indie writer.

Excerpts:

AlexanderG Whiz Blog: What led you to being an indie author–did you try the “traditional” route?

Jason McIntyre: As mentioned, I’ve been writing for a long time, going to writers’ groups and honing my craft. Erroneously, I always thought that if you write a good book then publishers would want it, then readers would buy it and read it and either like it or loathe it. What I was hearing is, “Jason, you tell a mean story. You really understand how to engage the reader and get me excited. What I’m not seeing here is a clear-cut way to sell this book in a book store. You don’t stick to one genre and your characters aren’t always perfectly likable. I’m afraid we’re going to pass.”

I knew that readers would connect with my work but it wasn’t until last year when the iPad was introduced that I realized a writer like me could establish a connection with an audience on my own terms and with my own energies. I could do the editing, proofing, design and distribution in a grass roots way and use social media to get the word out. It began as an experiment of sorts and I found a decent footing so I continued. First I was a bestseller at a book distribution site called Smashwords.comand then, in October of 2010, I shared a couple books on Amazon’s Kindle, currently the biggest distributor of ebooks. Now my books are available on all the major ebook sites and selling well.

AlexanderG Whiz Blog: You enjoy a robust fan base. You have a great website. What do you do to market your work?

Jason McIntyre: The biggest thing I do for marketing is one-on-one communication with readers. I use Twitter and Facebook and Goodreads to connect with people I believe will have an interest in what I’m writing, then I offer discounted copies and discuss the books directly with them. After years of hearing other authors and agents and publishers telling me what I was doing wrong, it’s a breath of fresh air to hear directly from a reader who has had heart palpitations from reading a particularly engrossing scene or chapter. They are the audience. I believe in letting them decide what’s good and what isn’t. For the most part, I’ve found tremendous enjoyment in interacting on such a close level with these readers. They’ve made short stories better when I’ve offered them beta copies to read and told me that an idea sucks when it actually did. Generally, they get very excited over small discounts, free copies, and especially advanced access to a story as I’m working on it. You can’t pay for the kind of publicity you get from a genuinely interested reader who tweets or brags about a book they liked.

AlexanderG Whiz Blog: What is your biggest challenge when it comes to getting the word out about your novels?

Jason McIntyre: Finding readers as opposed to other writers who also read is a big challenge. Don’t get me wrong, the writers’ communities on the net are a joy and a value in terms of camaraderie, spirit, knowledge and help. But readers are harder to come by. Generally, they are living their lives, reading books, going to their jobs and spending their social media time with their friends and families and coworkers. Their goal isn’t to help you by reviewing or advertising your book. You can’t hit them over the head with a sales pitch or they will bolt. (Have we mentioned he has a great blog? It’s called The Farthest Reaches. Check it.)

Link to the rest at Alexander G. Public Relations

Passive Guy thinks it likely that Mr. McIntyre is a client of Alexander G. One of the PR services Alexander G. can provide is to have a widely-read blog and use it to spread McIntyre’s fame.

For the avoidance of doubt, PG has no problem with this.

UPDATE: Alex has commented on this post and clarified that Mr. McIntyre is not a client and that Alex discloses the relationship when he blogs about a client. Sorry for the misunderstanding on PG’s part.

The Bookseller Hires Author Solutions Exec To Spout Propaganda

7 June 2013

A response to Author Solutions and Penguin Random House – The Real Deal? from the indispensable David Gaughran:

[Author Solutions uses] a multi-pronged strategy:

1. Author Solutions runs a multitude of faux-informational websites purporting to provide independent advice to inexperienced writers. After filling out a questionnaire, these sites then present a selection of publishing “options” – all subsidiaries owned by Author Solutions, all terrible. Author Solutions spends a lot of time and money to ensure that these sites appear at the top of Google’s search results for any generic terms that a publisher-hunting newbie would use (I’m not linking to these sites as that will help their SEO, but you can Google anything like “I need a publisher” to see what I mean. Running variations of those searches will bring up more than 20 different fake sites, all operated by Author Solutions).

2. Author Solutions operates fake social media profiles of “independent publishing consultants” which are manned by Author Solutions staff, target the most inexperienced writers, and only recommend Author Solutions companies.

3. Author Solutions pressures customers into writing positive testimonials before releasing their books for publication. I received one such complaint the last time I posted about Author Solutions, from an AuthorHouse UK customer who said that they wouldn’t publish the book she had already paid for until she wrote the testimonial here (second from top).

4. Author Solutions partners with supposedly legitimate and independent organizations to give a veneer of respectability to their scammy operations (like Hay House, Writers Digest, Simon & Schuster, Lulu, HarperCollins, the Authors Guild, Harlequin, and various writers conferences).

. . . .

While I regularly read both The Bookseller and FutureBook, I’ve had plenty of issues with their editorial line, particularly with regard to their policy of never printing anything critical about Author Solutions – or, at least, not since they were purchased by Penguin.

In the last few months, this policy has extended to censoring comments critical of Author Solutions on their blogs, a policy they now share with Digital Book World – whose parent company has its own Author Solutions-powered vanity press.

Both of these companies depend on income from advertising and running conferences, and it appears they don’t want to be critical of a huge player like Author Solutions’ owner Penguin – especially with their impending merger with Random House, which will create the largest (by far) trade publisher in the world.

Link to the rest at Let’s Get Visible and thanks to Geoff for the tip.

Passive Guy says the vanity press business is just another variation on the contract scams that the “legitimate” operations of some big publishers foist on unwary authors.

Without spending time blowing his own horn or claiming to be the smartest guy around, PG has negotiated a lot of contracts with a lot of large organizations – Microsoft, Apple, Oracle, Citicorp, Goldman Sachs, JP Morgan, Fidelity, Disney, etc., etc., etc. He’s currently negotiating contracts with companies that are household names for some of his non-literary clients. Suffice to say, PG has a sense of what’s generally considered reasonable in American business contracts.

When he first focused on a plain-vanilla publishing contract from a large New York publisher a few years ago, PG was astounded at how unfair some of the standard contract terms were for authors. As he saw other publishing contracts, he learned that publishers copied onerous terms from one another. The wording might be different, but the meaning was the same.

Additionally, it was not unusual to find what, to PG’s jaded eyes, were drafting techniques designed to disguise some of the more egregious contract provisions from authors who did not have experience dissecting contracts.

After having reviewed many, many agreements and proposed agreements between traditional publishers and authors, PG is prepared to say these contracts, as a group, stand apart from the general run of business agreements as conscience-shocking monstrosities.

No, they do not reflect the special snowflake nature of publishing. They’re simply designed to screw authors and give publishers control over authors and their work that is far beyond what is regarded as reasonable in the rest of American business.

So, when David justifiably rants about how Random Penguin’s Author Solutions and other vanity presses screw authors, PG suggests this is just the other side of the same coin as the non-vanity part of the business. Each side reflects the same attitude toward authors — geese to be plucked.

PG hasn’t written longer posts on specific publishing contract provisions for some time. You can find examples here, here, here, here, here, and here. If you use TPV’s blog search function to look for How to Read a Book Contract and cursor down, you’ll find more.  You can also search on the Contracts category to pull up everything, but this category covers much more than contract problems for authors.

How to have an Amazon-free Christmas … and save money

12 November 2012

From The Guardian:

Amazon, Britain’s biggest online retailer, is undeniably cheap. But in the three years in which it amassed £7bn in UK sales, it paid no corporation taxon any of the profits from that income. So can consumers worried about tax avoidance – albeit entirely legal – shop elsewhere without having to face higher prices? Money went shopping and found it is surprisingly easy to enjoy an Amazon-free Christmas, yet still save money.

We tested prices on what are expected to be this year’s top-selling Christmas toys, from LeapPad computers to Lego. In almost all cases we found a retailer cheaper than Amazon, although we cannot vouch for each retailer’s tax position – some may engage in similar tax avoidance practices used by Amazon.

. . . .

But ethically minded shoppers then hit a conundrum: when it comes to tax, is shopping at Smyths any better than shopping at Amazon? The most recent UK accounts for Smyths Toys UK at Companies House show turnover of £97.4m in the nine months to the end of December 2011, an operating profit of £2.4m and corporation tax paid of £610,857. It may not be much, but it does appear to be paying more tax in Britain than its giant competitor.

It’s worth noting that Smyths’s parent group is based in Galway, Ireland, where the corporation tax rate is 12.5%. Ireland has come under fire from campaigners who say multinationals use its generous rate to minimise their tax bills elsewhere. For example, Apple is estimated to have avoided more than £550m in tax on more than £2bn of underlying profits in Britain by channelling business through Ireland, according to a Sunday Times analysis.

Help is on the way from accountant Richard Murphy of Tax Research, an anti-poverty campaigner and tax expert who is preparing a guide for consumers naming the shops where you can buy safe in the knowledge that tax is being paid, while shaming the tax avoiders. 

Link to the rest at The Guardian

PG will remind visitors that he doesn’t always agree with everything he posts.

PG will also note that tax evasion – violating tax laws – is different than tax avoidance – utilizing the tax laws to minimize the amount of tax paid.

The United States Supreme Court has expressly approved tax avoidance, stating that “The legal right of an individual to decrease the amount of what would otherwise be his taxes or altogether avoid them, by means which the law permits, cannot be doubted.” Gregory v. Helvering, 293 US 465 (1935)

PG doesn’t know if Great Britain provides a similar opportunity, but any US citizen desiring to make a free-will donation to the United States government can go here to learn how to do so.

Self-Pub Suicide – Yet More Angst

8 November 2011

An anonymous blogger called AE started lots of discussions on The Passive Voice. See the original PV post here and a follow-up post here.

Basically, AE chastised indie authors for publishing bad books and predicted this would be professional suicide. AE was somewhat ambiguous, but it appeared AE was planning to be an indie author and didn’t want the indie well polluted with second-rate trash before taking a drink.

Lots of good comments appeared.

Passive Guy wanted to highlight a few of the comments (please don’t be offended if yours isn’t included):

From Thomas E:

I think the simple answer is that indie publishing is no different than traditional publishing in one important respect: if you write a bad book, no one will read it.

It’s hard for me to contemplate any scenario where self-publishing a bad book would actually have the effect of ending a career. Firstly, the nature of samples means that no one would buy it. And, in general, they won’t remember flicking through a sample and rejecting it any more than I remember the books I didn’t buy from a bookshop.

Secondly, if you are afraid of that why not self-publish under a pen name?

No, I think the only thing that can kill a writing career is to stop writing or not put your work up for sale. That’s it.

Bad books will not sell, regardless of sales tricks. Good books will. Write good books.

From David Gaughran:

The argument about how much of self-published work is “crap” is pointless. It doesn’t matter. Crap books (whether self-published or not) have no effect on my books. Just like Snooki’s books have no effect on Stephen King or John Grisham.

The only books that have an effect on the sales performance of my books are my other books.

Anyone who tries to make the argument that readers are becoming tired of self-published “crap” and that it is somehow reflecting badly on all indies and that readers are becoming wary of anything self-published needs to be pointed towards the Kindle bestseller charts.

For the last three months since I have been casually tracking it, self-published work has captured roughly a third of the top five hundred or so bestselling e-books on Amazon. That proportion has stayed relatively stable.

If you look at the genre bestseller lists (where readers first switched to e-books and started reading indies), the success of indies is even clearer – on the science fiction, romance, and thriller bestseller charts, indies regularly capture 50% or more of the top spots, beating out the biggest books from the biggest writers.

This would seem to indicate that indie books are getting more popular, not less.

That simple fact should bury this “crap” argument once and for all.

J. Tanner wrote:

The way the argument is presented is distractingly circular, and hyperbolic.

But in my experience there’s a grain of truth.

Trade published books are almost uniformly written to some minimum standard of readability. I’d bet even the Snooki book that is the self-pub punching bag de jour is competently written. By a ghostwriter overseen by a decent editor and followed by a copyeditor. The content is almost certainly vapid given where it originates from, but I don’t doubt the prose is workmanlike, grammatically correct, and free of typos.

Self-pub stuff is all over the map. There is absolutely stuff indistinguishable from trade published work in the prose department. But there is also stuff one would not be surprised to encounter scrawled in a public bathroom stall. That bit is what so many latch on to and there are enough examples of it that you could read it until you die (and it might end up being the cause.)

However, it’s not a significant problem for the discerning reader who won’t be interested in 99% of trade pubbed or self-pubbed books anyway. The scrawled ones are easily noticed and rejected in seconds. The trade-pubbed ones can be more insidious in a weird way–you might need to read several chapters of reasonably written prose before you can determine this book really isn’t for you after all.

It sounds like both the author and the anonymously quoted friend are discerning readers. (I am as well.) It seems pointless to me to call out “you suck!” to only an easy target subset of stuff they don’t like while ignoring all sorts of other stuff they don’t like either but that’s their choice and they can try to defend it (and fail I expect.)

Kat J. found a deer hunting parallel:

Aren’t we a twitchy bunch? Have we been slammed for so long we jump at the slightest sound like deer in hunting season?

It’s been said here by a number of people – there is plenty of crap out there – both Trade and Indie.

We all know that publishing is a mean, nasty business where insults are slung like mud in all directions.

We also know the Steve Jobs biography was pulled because it contained formatting errors.

There is no such thing as perfection. It is a goal for which we all strive. Therefore – I thank God for the NitPicking readers!

And I’m very interested on what she has to say about ‘Swallow the Moon’ – not because I think it’s perfect, but because I want my next book to be better.

Isn’t that what all this is really about????

C.S. Splitter made a confession:

How’s this for honesty:

“Suck” is subjective, but…

I put out my first book too soon and I got very good reviews from review blogs and readers. I put it out too soon because I did not know any better. The technical aspects of the writing could have and SHOULD have been better. That was the bad news.

The good news was that the story and characters were good enough to, apparently, make the readers and reviewers overlook the avoidance of em dashes, semi colons, colons, and just plain poor punctuation. And the occasional typo. And beginning too many sentences with conjunctions. lol

Honestly, I just put the book out and didn’t do much marketing because when I wrote it, I never expected anyone to read it. Then when people did read (nope, not friends and family) and like it, I wanted to get more opinions on it.

After all, if I had ZERO talent, I wanted to know before I spent any more time writing bad stories. One can learn to write better, but I think you can either tell a good story or you cannot.

Now that I know there is something there, I got an editor and a professional artist for the cover. I just got the edited file back from the editor. Yeah, I apparently suck. I know that because of the rainbow of colors she used to point out writing mistakes or where it could be made better.

If I could pull the book from publication without losing the great reviews, I would do so. Thankfully, I can just continue to let people ignore the book until I get the edits done.

So, yeah, as a writer I sucked. I think I suck less now and I hope I suck even less in the future. I am exploring this indie/self pub thing and figuring things out as I go. It is fun, but there are mistakes to make along the way.

The beauty of self pubbing, especially where eBooks are concerned, is that you can fix your mistakes.

Yes, there were better ways to get the feedback I was originally seeking, but I did not know that “then.” I know now. That I put the first one out too soon is an endless source of embarrassment to me even though no one else seems to notice.

My re-release and new book will not be perfect either. I console myself by opening up a random, recently traditionally published book from my shelf and finding error upon error there too lol.

As self pubbed/indie writers we DO need to be honest with ourselves and understand that much of the work out there is bad in some way. Maybe even our own. We can, however, get better.

From David Gaughran again, responding, in part to a suggestion that indie books need something like a Consumer Reports to filter out the poorly-written ones:

Don’t Amazon reviews fulfill this function already? And Goodreads? And LibraryThing?

I know there are issues with sockpuppets, spiteful reviews, false reviews, and review swapping, but I would bet anything that’s a tiny fraction of overall reviews.

While readers may suspect a book with a handful of reviews, do they feel the same way about when with 50 overwhelmingly positive reviews? I don’t think so.

I get messages from readers all the time who said they picked up one of my books because of the good reviews.

Don’t forget there is also a whole book blog ecosystem out there. Readers really do trust reviews from sites like Big Al’s BooksAndPals, Sift, Red Adept, and lots and lots more. I remember getting a really huge boost from Pixel of Ink when they recommended one of my books (not a spot I paid for, they just decided to recommend it).

There are lots of sites out there trusted by readers that recommend books all the time and drive a huge amount of sales. I remember Amanda Hocking saying that book bloggers were crucial to her early success.

Finally, I would caution on making generalizations based on a small and noisy group of forum regulars. I don’t think they are representative of the general reading population, and several there seem to have axes to grind for whatever reason.

By any metric, indie sales are increasing. They are taking over the bestseller lists (around a third of the top-selling e-books on Amazon at any given time).

And, if you look at the genre bestseller lists, it’s even more stark. These are the readers that switched to e-books first and encountered indie books first. Half of the romance, thriller, and horror bestseller lists are self-published work. Surely if anyone was going to get “sick” of wading through “crap” it would be the readers who switched first.

However, it seems these readers are reading more indie books, not less.

Passive Guy thinks some online discussion boards (and comment threads) can turn into echo chambers.

Is there a crisis for indie books and indie authors? Are we on the brink of destruction?

PG thinks not.

Amazon ebook sales are going through the roof.

Are indie ebooks all being ignored? No, they’re a substantial and growing presence on Amazon’s bestseller lists. Look at the post immediately below this one for the latest evidence.

Do indie ebooks suffer from terrible quality problems? The ones that don’t are selling. The ones that do are not selling.

To traditionally-published books suffer from terrible quality problems? The ones that don’t are selling. The ones that do are not selling. (Talking to you, Snooki.)

Both Amazon Publishing and a large number of agents are trolling through indie ebooks in search of authors/clients. They’re not trolling because indie books are a sea of mediocrity. PG has had several clients who have been so contacted because of their indie books. Some indie authors are accepting the resulting invitations to traditional publishing and some are not.

If you think about it, an agent is much more likely to find a quality unrepresented author by checking the indie bestsellers than by wading through the email slush pile.

PG believes the overwhelming majority of readers who don’t spend half their lives making comments on Amazon forums are discovering good books through a wide variety of sources – friends, online discussions among people they respect, Amazon reviews, other online reviews, formal reviews in traditional publications, etc., etc., etc.

PG thinks a very small percentage of readers care whether an ebook is published by somebody in New York or not. Readers focus on the book, not the provenance. If they think about a brand, the author is the brand, not the publisher. Ask John Locke. People outside of the writing/publishing world generally ignore publishers. More consumers know ShamWow, Slap Chop and Snuggie than Simon & Schuster.

If you want to get into conspiracy theories, the indie-haters who spend so much time on various forums could well be unemployed editors laid off from traditional publishers or agents who are losing their clients to indieworld.

Buying an ebook, indie or othewise, is about the most risk-free way you can spend your entertainment money.

First, you can read a sample before buying. Second, you can immediately get a refund if you decide you made a mistake with your purchase. You don’t even have to find your receipt or take your book back to the bookstore.

Nobody’s forcing any reader to pay for and/or read an ebook that’s poorly-formatted and filled with grammatical errors.

Almost all authors are subject to bouts of angst. PG thinks we need to examine whether some authors are projecting their anxiety onto the world of self-publishing and whether such projection is distorting their view of of that world.

As long as PG is being psychological, he would also point out a geyser of all-or-nothing cognitive errors floating around about self-published books.

The sun is rising for indieworld, not setting.

Amazon – Threat or Menace?

30 September 2011

A comment to one of the many Amazon posts Passive Guy has made recently included a link to Borderlands Books, a San Francisco fantasy, science fiction and horror bookstore selling new and used books.

Of specific interest was an essay written by owner Alan Beatts entitled Amazon is Nobody’s Friend, Part One 

Excerpts from a much longer piece:

The reason that I’m finally being truly critical about Amazon is two-fold.  First, at this moment a huge number of book buyers are facing a choice.  All the former Borders customers out there have to decide where they are going to get their books now that Borders is closed.  There are three choices:  1)  Barnes and Noble.  2)  Amazon.  3)  An independent bookstore.  At first glance, it will seem that I’m trying to deter customers from shopping at Amazon (and, it won’t break my heart at all if you choose to avoid Amazon after reading this).  But what is more important to me is that I provide you with information so you make as informed a choice as possible.  Your dollars are your economic votes.  Where, how and with whom you spend your money determines what businesses survive and thrive.  Just like any election, I think an informed group tends to makes wiser choices.

. . . .

(A) “Been a deceptive and pervasive influence on ecommerce.”

Amazon is much bigger and more pervasive than one might think.  They have a fondness for buying companies in fields that they are interested in and then continuing to operate them under their original names while changing the back-end and fulfillment over to Amazon’s systems.  Notable web-retailers that they own are: Zappos.com, Diapers.com, Soap.com, Pets.com.

All of those companies are big retailers in their specialties and, by buying them out and keeping the names, Amazon eliminates competition while maintaining the illusion of consumer choice in the marketplace.

. . . .

Another hidden Amazon property is of one of the best ebook reader applications for EPUB format files.  (EPUB is the free and open-sourced ebook format supported by many publishers.  It is not the format Amazon uses for the Kindle nor is it one that is very easy to read on the Kindle.)  Lexcycle makes Stanza, which is a great program that I used to use all the time.  It’s simple, clean, fast and works on Mac, Windows, and iPhone/iPad.  Now it’s 100% owned by Amazon and still the top EPUB reader.  As in the case of companies like pets.com and soap.com, Amazon maintains the illusion of consumer choice while actually owning their own business and their seeming competition.

In a slight variation from their usual habits, Shelfari.com is an interesting case in that here Amazon lets their name be seen associated with the site.  My bet on the reason is that, if you click on a book, you end up on a page with exactly the sort of “buy-now” feature I suggested would work on IMDb.  Hard to hide the company’s involvement with that sort of connection.  Though it is nice and provides some sense of impartiality that Shelfari also provides a link to Abebooks.com, a major used bookselling site with an excellent reputation among collectors . . . or at least it looks impartial.  By owning Shelfari Amazon is also getting one of the benefits that I suggested relative to the IMDb, since Shelfari is all about book recommendations and making connections between books, it’s a hugely valuable source of data for Amazon’s marketing.

. . . .

(B) “Consistently tried to eliminate other businesses to increase their hold on the book market.”

If the foregoing wasn’t a clear enough indication that Amazon is interested in controlling all the good parts of on-line bookselling and ecommerce in general, the pattern of Amazon’s business expansion also indicates that they are trying to fill all the niches in the book business, from publishing all the way down to selling.  There hasn’t been any sign that they are going into the writing business, thank goodness, but there really isn’t any conceivable reason that they would want to do that.  (It’s always been best for publishers to let anyone try to be a writer who wants to and then pick and choose what they want to pay for).

When Amazon started, they used the Ingram Book company as their major supplier.  Ingram is one of the two national book distributors in the US.  They buy books in large quantities from publishers and then sell them to bookstores.  One of Amazon’s early moves was to kick Ingram to the curb and start running their own distribution centers and warehouses.  At that point, the sales chain went from the publishers to Amazon to the customers.

. . . .

(C) “Pricing designed to cripple competition and manipulate its suppliers and customers”

Pricing products is a complex process and the ethics of it are even more complex.  The idea of having “loss leaders” in business (i.e. items that are sold at below cost to attract customers who, one hopes, will buy other items as well) is a well established practice.  I think it falls into a sort of grey area in terms of ethics, though there are places where it’s prohibited — for example, in France is it illegal to sell books, specifically, for less than cost.

However, when a business engages in pricing with the intention of manipulating the market for their long term benefit, when pricing is used to eliminate competition and therefore consumer choice, or when prices are fixed to manipulate suppliers — to my mind, all those cases slip from the soft, dove-gray of well-it’s-probably-alright into the more charcoal-gray of I-don’t-think-that’s-OK-at-all.

Amazon has a big vested interest in moving the reading public towards ebooks.  Aside from the obvious reasons (the size of their market share and so forth) there is a bigger and more compelling one.  Regardless of its advantages, Amazon labors under a huge handicap compared to physical bookstores.  For many readers there is no possible substitute for looking at actual books on an actual bookshelf, just browsing along and looking at whatever catches your eye.  But when it comes to ebooks, there is no difference between looking at them on Amazon’s website and looking at them on any other website.  So, the move towards ebooks eliminates Amazon’s handicap versus physical bookstores.  The other big advantage for Amazon is that ebooks take up no space and they require no investment in inventory.  All you have to have are some big computers and some good data connections, both of which Amazon has more than they know what to do with.

Kindle ebook readers are sold at a loss and always have been.  I honestly wonder if they were ever meant to make money; I’m betting not.  But the Kindle has done exactly what Amazon planned.  It’s caused ebooks to take off in a major way and it’s changing the behavior of consumers.  That’s perhaps not an unethical way to do business but it certainly is ruthless and profoundly manipulative.

Also on the topic of pricing at a loss: Amazon was so committed to building its business that for years and years they lost money at a awe-inspiring rate.  Between 1993 and 2003 they lost 3 billion dollars.  In fact, in 2001 alone they lost 1.4 billion.  But during that time they set a permanent expectation in the minds of consumers that they always had the lowest price.  And during that same period Amazon was responsible for countless independent bookstore going out of business.  And the real reason that those stores closed wasn’t that Amazon was doing a better job at bookselling than they — it was just because they couldn’t afford to lose as much money as Amazon.  It’s interesting to notice that Amazon’s discounts from retail are much smaller and less universal than they used to be.  The preceding is a textbook example of predatory pricing: “predatory pricing is the practice of selling a product or service at a very low price, intending to drive competitors out of the market, or create barriers to entry for potential new competitors”. (3)

$9.99 is a magic number in retail.  It’s a price that makes people think, “That’s cheap, it’s not even ten bucks!”  So it’s no wonder that Amazon decided that was the right price for ebooks.  For quite a while, that was the price that an ebook at Amazon sold for, regardless what it cost Amazon (often, much more than $9.99).  Publishers became concerned that Amazon’s pricing of ebooks was causing a perception on the part of the public that any other price was inflated and unfair.  The question of what an ebook actually costs, compared to a physical book, is a topic for another time, but certainly there are some novel length works of fiction that cost the publishers more than that to produce.  But more importantly, it is the right of the publisher to set the price of their books.  They can blow it, set it too high, and the book won’t sell.  In which case they learn better the next time.  But the publisher is the entity “making” the book.  They can set their costs, decide what sort of quality is needed for what elements (editing, cover art, and so on), estimate what the market will pay and so forth.  They control the process of “manufacture”, if you will, and that means they get to set the price.

But it’s certainly not Amazon’s place to set the price that publishers can charge for books, electronic or not.  They have the right not to buy something if they think it’s overpriced and won’t sell, but that’s about it.  And in this case, Amazon wasn’t trying to set the price for one book or even all the books from one publisher.  They were trying to set the price for _all_ ebooks.  Based on the specific laws regarding price fixing, what Amazon was doing wasn’t illegal since they weren’t collaborating with any other sellers.  But, since they represented around 80% of the ebook market at the time, they really didn’t need to collaborate with anyone.

Regardless of the legality of it, thanks to a risky action on the part of John Sargent, the CEO of Macmillan (one of the six major US publishers), at the beginning of last year, Amazon doesn’t get to set ebook prices for the big publishers at all anymore and neither does any other retailer.  The short version is that Sargent went to Washington state to meet with the folks at Amazon to talk to them about ebook pricing.  After months of discussions regarding publisher concerns that Amazon’s low prices were damaging the public perception of the value of ebooks, Sargent had come with an ultimatum.  He told them that Macmillan was switching to the “agency model” for ebook sales.  What it meant was that publishers would set the price and retailers would take a commission on the sale to readers rather than the old model in which publishers sell to retailers, who then sell to readers at a price that the retailer determines.

. . . .

(D) “Avoiding sales tax a cardinal part of their business model”

I don’t like to pay taxes and I understand that other people don’t like to either.  But if I am going to have to pay them, it’s important to me that they’re applied equally and fairly across the board.  Amazon has made part of their business model the avoidance of sales tax practically from day one.  Jeff Bezos, the founder, has even stated publicly that reducing sales tax was on the forefront of his mind, both when planning the company and when choosing Washington state as a location.  In fact, their systematic avoidance of sales taxes has been so aggressive that employees traveling to California have been issued business cards reading “Amazon Digital Services” (an Amazon subsidiary that doesn’t sell physical products) rather than “Amazon.com” to reduce the threat of California arguing that they were conducting business in the state.  Other tricks have included identifying states that were risky as “red” states and requiring staff to consult with corporate lawyers before traveling there on business as well as conducting employment interviews via video conference rather than in person so that the Amazon representatives weren’t actually in the state in question.  (4)

The theory of sales tax is that it needs to be collected and remitted by businesses that are active in a state.  The usual test for this is whether the business has a “nexus” within the state.  “Nexus” has been traditionally proven by having physical locations or sales staff within a state.  But there are two other underlying parts of the sales tax theory that have been conveniently ignored during the rise of ecommerce.
The first part is that the requirement of “nexus” was originally put in place based on the assumption that a business that is not located in a state won’t be conducting very much business there.  Granted, there have been catalog retailers for well over 100 years but purchasing items through a catalog was always a second-best choice when you couldn’t get something locally and the prices were usually higher (when shipping was factored in) than buying from a local merchant.  But now, that underlying assumption is deeply flawed because of the number of purchases made over the internet and the way that buying on-line is progressively becoming the preferred choice.

. . . .

And that brings us around to the principal of sales tax.  It’s there to support the costs of running the state government.  Which is going to cost just as much regardless of whether Amazon has to collect tax or not.  Moreso, as residents in the state, we’re going to have to come up with the money to pay for that government or the state will go broke.  What’s really happening here is that, to drive sales to their business, Amazon is fighting really hard to maintain their ability to look like they’re giving the average San Franciscan, for example, a 8.5% discount as compared to a local business.

. . . .

(E) “An ebook business model and format that’s bad for the consumer”

Amazon is the most successful ebook retailer in the world, by a fair margin.  Depending on whose figures you believe, they sell in-between 60 and 80% of the ebooks in the US (the percentage in the UK is even higher).  They also produce the most popular ebook reader, the Kindle.  That they are doing so well with ebooks really isn’t a surprise.  They have the best on-line store, their software gives what is arguably the best reading experience, they’ve been in the business the longest, and, perhaps most importantly, they have their existing  market position as the second largest seller of physical books in the world (Barnes and Noble is still #1).

What disturbs me and what I think should bother my fellow readers, is that their ebook format is completely unique and proprietary.  The problem there is that you cannot read an ebook that you bought from Amazon on anything other than a Kindle or a device that has a Kindle application available for it.  Granted, as of now, there are Kindle apps for Mac, Windows, iPad/iPhone, and Android.  But there’s no guarantee that Amazon will keep making them or supporting them.  Given Amazon’s fondness for competition, it wouldn’t surprise me if, at some point in the future, the Kindle apps for the iPad/iPhone vanished.  At that point, all the people out there who bought ebooks and want to use those devices are going to be pretty much out of luck . . . at least until they buy a Kindle.

On the other hand, the three other major ebook retailers — Apple, Barnes & Noble, and Google (plus all the independent booksellers Google partners with) — use some variation of EPUB format which is device agnostic and can be used with all the ebook readers, computers, and smart phones out there (except for the Kindle).  Granted, all three of them use their own sort of copy protection but, each for specific reasons, it is much less likely that ebooks purchased through any of those companies will force you to adopt a new device if you want to keep reading your books.  Also, none of those businesses are as savage about trying to dominate their industry.

Link to the rest at Borderlands Books The article about Amazon is quite a way down the page. Use your browser’s Find command (Ctrl-F on a Windows machine) and type Amazon if you want to go straight to the article.

Where to begin?

First of all, Passive Guy has a general policy of going after big guys and leaving small guys alone. It’s clear that Borderlands Books is not one of the big guys. However, Mr. Beatts’ essay is wrong in so many different ways PG has to make some comments. In light of the small guy nature of his target, PG will not give his comments the full treatment he might for a larger target.

Point number one from Mr. Beatts’ essay is “Amazon has been a deceptive and pervasive influence on e-commerce.”

PG will parse the sentence somewhat. He has no doubt Amazon is a pervasive influence on e-commerce because it is extremely successful. Smart e-commerce companies watch what Amazon does very carefully and copy many of its techniques. Any successful organization is a pervasive influence on the industry in which it operates. Apple is a pervasive influence on the tablet, smart phone and laptop markets. The University of Alabama football team as a pervasive influence on the college football markets. Barack Obama is a pervasive influence on the United States presidential candidate market.

Mr. Beatts’ case that Amazon is “deceptive” is ridiculous. Yes, Amazon has purchased other companies. Yes, in some cases, Amazon has elected to use the brand name of the acquired company. I don’t see how any case can be made that this is deceptive. In the e-commerce world, of all places, the choices for consumers are enormous and widespread. If I don’t like Amazon, I can buy 99% of the products Amazon sells somewhere else online. If I want to boycott Amazon, a 3-second Google search will allow me to see if I’m about to purchase from an Amazon subsidiary.

In making its acquisitions, Amazon understandably chooses companies that it believes will help make it more successful. Passive Guy finds no conspiratorial motivation for doing so.

PG nearly choked when Mr. Beatts talked about Amazon kicking Ingram Book to the curb. The only reason Ingram exists is because publishers have been such inefficient organizations.

A long time ago, PG worked for a law firm representing a small book wholesaler that was later acquired by Ingram.

When PG learned what the business was, he asked the president why the company was able to buy from publishers and sell to book stores at a higher price when bookstores could acquire books directly from publishers. The answer was shockingly simple. This book wholesaler could deliver books to bookstores faster than publishers would deliver books to bookstores. There was no reason at all why publishers could not become more efficient in their shipping and put the wholesaler of the business.

Ingram typically takes 10-15% of the retail price of the book for its wholesaling services. Who pays that price? People who purchase books and, indirectly, authors who write books. PG does not believe Ingram is a friend to either readers or writers. It has simply allowed publishers to offload a task that nearly every other business does on its own – take orders and deliver products in a timely manner.

The reason Amazon got rid of Ingram is Amazon decided it could do what Ingram does for less (probably much less) money. This is one way Amazon can offer lower prices.

Mr. Beatts accuses Amazon of pricing its products in a way designed to cripple competition and manipulate its suppliers and customers.

He states, “Pricing products is a complex process and the ethics of it are even more complex.”

Here is why PG likes Amazon’s pricing practices: Amazon sells at low prices. The ethics of this are clear to PG. He likes paying low prices. He can buy more stuff if prices are low. He can spend $100 on books at Amazon and get more books than if he spends $100 at Barnes & Noble.

What’s not to like?

Mr. Beatts accuses Amazon of pricing its products for its long-term benefit. I’m certain the people who own Amazon are very happy that management does this. Is Mr. Beatts saying that he does not price products for his long-term benefit?

It is not an easy thing to compete against Amazon. It is not an easy thing to compete against any market-leading organization. Ask anyone who competes against Apple. Ask anyone who competes against BMW. Ask anyone who competes against Google. Ask Mr. Beatts.

Does this mean that Amazon is evil because it is a good competitor? Does this mean that Amazon is evil because it is a big company? PG would note in passing that Amazon has not always been a big company. It first went online 15 years ago. It was tiny. Barnes & Noble was much larger than Amazon during the early years. Barnes & Noble told Amazon that it would squash Amazon like a bug if Amazon did not agree to sell itself to Barnes & Noble. Amazon grew large because millions and millions of people liked what it did and how it did it.

Mr. Beatts says “$9.99 is a magic number in retail.” However, he takes great offense at Amazon pricing e-books at $9.99. He is even more upset that Amazon sold books to readers for less than Amazon paid for them. PG has never talked to a reader who was upset at buying a book that normally would cost $20 for $9.99.

Mr. Beatts believes it is a terrible thing for Amazon to decide how much it will charge for books. He believes it is a wonderful thing for publishers to force retailers to sell books at the price publishers specify. In Mr. Beatts’ world publishers are wonderful, intelligent and kind. They always know the best price for books. Just like they know how much an author should be paid.

It is ironic that Mr. Beatts accuses Amazon of price-fixing. As regular visitors to The Passive Voice know, multiple class action suits have recently been filed against big publishers for price-fixing arising from their united action to force Amazon to adopt agency pricing, fixing prices for books across all retailers. How many readers are happy that Amazon is no longer permitted to sell books at a discount from list price? PG doesn’t see many hands being raised.

Since Mr. Beatts sells used books, here’s an idea: Why not have the publishers set the list price for used books? After all, as Mr. Beatts says “it is the right of the publisher to set the price of their books.” Perhaps a 5% discount from the original retail list price would be a great price for used books. Or even better, may be used books should cost 10% more than new books cost. After all, they’re broken in, annotated and are an environmentally responsible form of recycling. From what PG knows of big publishers, he expects they would feel good about that price. Certainly it would support sales of more new books.

Mr. Beatts says Amazon wants to avoid sales taxes. PG likes avoiding sales taxes. PG would bet that if he took a survey of visitors, most people would prefer not to pay sales taxes if they could avoid them.

Amazon does a lot of things to avoid paying sales taxes. Famously, General Electric does a lot of things to avoid paying income taxes. In fact, General Electric did not pay any income taxes during its latest tax year. Amazon did not pay any California sales taxes during its latest tax year. Individuals and organizations are perfectly free to avoid taxes by any legal means.

Passive Guy decided to explore Mr. Beatts’ feelings about sales taxes. He decided to order a book from Borderlands Books. By mail. Borderlands Books uses Biblio to sell its books over the Internet.

PG selected a nice Harry Potter book. PG decided to have it shipped to himself at an address in a state outside of California, where Borderlands Books is located. The state where the book was to be shipped has a state sales tax.

He was about to complete his purchase from Borderlands Books when – gasp – PG noticed that Borderlands was not collecting any sales tax on this sale. He was so persuaded by Mr. Beatts’ condemnation of Amazon not collecting sales tax that he immediately cancelled his order.

PG tried another experiment. He ordered the same Harry Potter book from Borderlands Books and gave a California address. He will spare you his gasp this time. No sales tax on that transaction either.

He concludes Mr. Beatts’ sales tax rule is designed to apply only to Amazon.

What Mr. Beatts again forgets to consider is who ends up benefiting if Amazon is not legally required to collect sales taxes. You guessed it, Amazon’s customers. After all, who pays sales taxes? Is it Amazon? No, it is people who buy from Amazon.

Everybody should pay more taxes. Everybody should pay higher prices. What a wonderful world.

PG has violated his initial intent when he started this response. He will conclude his rant by simply stating that if Amazon had not made indie publishing easy, the number of people making a living and hoping to make a living from their writing would be much smaller than it is today.

This does not mean that Amazon is a perfect company nor does it mean that Amazon will always be a good friend to writers. Today, however, PG suggests that Amazon is an indie author’s best friend.

He can’t say the same about Mr. Beatts.