Is it time to chop down Amazon?

24 October 2014

From The Globe and Mail:

Amazon has knocked a hole in the book publisher’s barricade, agreeing to a new contract with Simon and Schuster, a CBSowned company. A settlement of the row between Hachette and the e-retailer over book pricing cannot be far off. Yet, in political terms, the jury is still out as battle rages between Amazon’s enemies, who accuse it of predatory pricing and of killing off bookstores, and its supporters, who say Amazon’s disruptive business model supports a community of self-publishers and offers consumers cheaper books.

. . . .

A thousand authors (not all of them with Hachette, and, notably, Stephen King) protested that writers were being held hostage by Amazon and, oddly, the American political Left has taken up the cause of big publishing. Paul Krugman, the New York Times columnist, accuses Amazon of behaving like Rockefeller’s Standard Oil – bullying suppliers and competitors by cutting prices. Franklin Foer, editor of New Republic magazine, calls for government and regulatory action to stop a new golden age of monopoly led by Amazon, Google and Wal-Mart.

It is difficult to feel sorry for big publishers. They have been digging their own graves for decades, ignoring new technology, relying on antiquated marketing and a small cabal of blockbuster authors to support a lifestyle business that employs college arts graduates from nice families.

That a community of established authors supports the big publishers is hardly surprising; the writers’ deepest fear is loss of the cash advance, a payment by a publisher that allows a trusted author to spend a year writing a book without the need of a day job to pay the bills. Amazon promises the radical low-budget, self-publishing solution to the untested, untried new author and Jeff Bezos, Amazon’s founder and chairman, has proposed a deal that splits the cover price thus: 35 per cent each to the author and to the publisher and 30 per cent to Amazon.

Needless to say, it doesn’t appeal to Hachette, which would doubtless prefer not to hand over a third of publishing income to authors, compared with the usual maximum royalty of 10 per cent. But the real fear is that the Amazon model, pushed to its logical conclusion, would remove entirely the cost of publishers from the equation, replacing them simply with an agent or manager or nothing.

. . . .

But the fundamental question is whether we think fair competition is just about consumers getting a good price or whether we think that diversity of supply is a good in itself, something that we experience in healthy economies. If we think that more and better books are written when authors have financial backing, then we may need well-capitalized publishers. Better still would be a new model for the writing business, a new kind of Amazon that is prepared to risk capital on human creativity and not just suck the cash flow out of a river of cheap goods.

Link to the rest at The Globe and Mail and thanks to Tudor for the tip.

Amazon’s Spending Leads to Biggest Quarterly Loss in 14 Years

24 October 2014

From The Wall Street Journal: Inc. ’s soaring ambitions are coming at a steep cost, dragging the e-commerce giant to its largest quarterly loss in 14 years.

A surge in spending on new-product development, music and video licensing, and other parts of the Seattle company’s expansion strategy led to a net loss of $437 million in the third quarter, worse than its year-earlier loss of $41 million. The wider loss came despite a 20% jump in revenue to $20.58 billion.

In another stumble, Amazon took a $170 million charge on its Amazon Fire smartphone, which was released in July but is selling poorly, analysts say. The company also issued a lukewarm sales forecast for the current quarter, its most important of the year because of holiday-related spending.

. . . .

Amazon’s chief financial officer, Tom Szkutak, struck a more cautious tone in a conference call with reporters than he has in the past, suggesting that the fast-moving company might be forced to get choosier about where it invests.

“We do have a lot of opportunities in front of us,” he said. “We certainly have been in several years now of what I will call an investment mode, but we know that we have to be very selective about which opportunities we pursue.”

. . . .

So far in 2014, Amazon has released its first smartphone, the Amazon Fire, and a new set-top box. It began a streaming music service and spent heavily on video programming, expanded its same-day delivery service and now plans to open its first brick-and-mortar outlet. The company is adding warehouses to speed delivery and data centers to support its rapidly growing business as the computing center for other companies.

“Clearly, they’ve been spending money everywhere,” said Michael Pachter, a Wedbush Securities analyst. “They’ve been releasing these new products—the phone, the set-top box, streaming originals—but it’s not clear how that leads to sales.”

Amazon said its spending on “technology and content,” which includes new-product development, licensing for music and videos, and the data centers, rose 40% in the latest quarter—or twice as fast as revenue. Spending on technology and content consumed 12% of revenue.

. . . .

Also increasing Amazon’s expenses are its needs to staff new warehouses in Florida, California and Texas. In the third quarter, the company boosted its employee count 36% to 149,500.

Link to the rest at The Wall Street Journal (Link may expire)

Speculation Begins on Amazon, S&S Deal

24 October 2014

From Publishers Weekly:

When Amazon and Simon & Schuster confirmed on Tuesday that they had reached new sales terms on the publisher’s print and digital titles, scant details about the deal were revealed. Nonetheless, a raft of stories has appeared about the situation, with many in the press speculating on who benefits, and who loses, from the agreement.

The deal, a multi-year one, is something that S&S CEO Carolyn Reidy said gives the publisher a “version” of the agency model. Reidy explained that the deal allows S&S, with exceptions, control over the price of its e-books. Supposedly, according to Reidy, S&S authors will not take a hit because of the agreement, either; Reidy claimed the agreement allows the house’s writers to maintain “their share of income generated by e-book sales.”

. . . .

Some insiders–all who spoke off the record, and with the caveat that they had no inside knowledge of the specifics–speculated that S&S may have agreed to give Amazon more coop money.

. . . .

At the Wall Street Journal, Jeffrey Trachtenberg quoted a person with knowledge of the deal saying that, through it, S&S’s titles would get more prominent promotion on Amazon’s homepage. This, certainly, speaks to the possibility that S&S offered Amazon higher coop fees.

. . . .

One high-placed executive who spoke to PW said it’s interesting to note that S&S’s deal is a multi-year agreement, since Amazon is notorious for demanding short term deals. This exec felt that, perhaps, S&S was able to take advantage of Hachette’s situation, getting Amazon to agree to slightly better terms. Under this theory, Amazon was more eager to strike a deal in order to combat some of the bad press it has received of late.

Link to the rest at Publishers Weekly and thanks to Jan for the tip.

Vox on Amazon: Way off-base, not entirely wrong

24 October 2014

From Salon:

The battle between Amazon and the Big Five publishers is complicated by the fact that neither “side” is exactly easy for authors and readers to be on. No one who cares about a diverse and healthy literary marketplace, where new ideas and writers can reach a wide audience — and even non-blockbuster authors are paid enough for their work so that they can continue doing it — can reasonably side with Amazon.

But the publishers have botched so many opportunities in recent years, and have been so maddeningly slow to adapt to the digital marketplace, that it’s hard not to feel that they deserve some kind of comeuppance. So when Matt Yglesias writes a Vox explainer about how we shouldn’t feel sorry for publishers, who are “superfluous” and “terrible at marketing” and deserve to go out of business, it’s excruciating to read not because it’s so off-base — which, for the most part, it is – but because it’s not entirely wrong.

Publishers’ interests aren’t always aligned with those of authors, or readers, and a lot of their business practices don’t make, and have never made, much sense. In spite of that, though, there are a few great reasons why writers and readers need to stay on their side.

. . . .

Unfortunately, publishers seem uninterested in investing those [higher profits they're earning from ebooks] in ways that would help them break free of Amazon’s market dominance. But to figure out why they’re so reluctant, it helps to shake off the Yglesias-y paradigm wherein books are interchangeable widgets.

. . . .

So why haven’t publishers, as Yglesias suggests, made their own e-reading apps and e-bookstore? I don’t think it’s because they or their parent companies “don’t really care.” For publishers to do that, they would likely have to forgo selling their books on Amazon entirely, or at least forgo selling them effectively. If Amazon reacts to holdups in pricing negotiations by delaying a book’s shipping by three weeks and directing readers to similar, more available titles, you can imagine how it would react to publishers’ competing with them directly. While a publisher’s e-bookstore launched and got its footing, all the books published that season would be essentially doomed.  All publishers, in theory, want to wean themselves off of Amazon. But none of them can bring themselves to imagine letting years’ worth of their and their authors’ hard work go up in flames.

Because – oh, right! – the editors and marketers and salespeople and publicists who work at the major publishers work incredibly hard and care deeply about books, and for all their flaws, this is the best argument for their survival.

Link to the rest at Salon and thanks to Al for the tip. Announces Third Quarter Sales up 20% to $20.58 Billion

23 October 2014

From the Amazon Media Room:, Inc. today announced financial results for its third quarter ended September 30, 2014.

Operating cash flow increased 15% to $5.71 billion for the trailing twelve months, compared with $4.98 billion for the trailing twelve months ended September 30, 2013. Free cash flow increased to $1.08 billion for the trailing twelve months, compared with $388 millionfor the trailing twelve months ended September 30, 2013. Free cash flow for the trailing twelve months ended September 30, 2013 includes cash outflows for purchases of corporate office space and property in Seattle, Washington, of $1.4 billion.

. . . .

Net sales increased 20% to $20.58 billion in the third quarter, compared with $17.09 billion in third quarter 2013. The favorable impact from year-over-year changes in foreign exchange rates throughout the quarter on net sales was $13 million.

. . . .

“As we get ready for this upcoming holiday season, we are focused on making the customer experience easier and more stress-free than ever,” said Jeff Bezos, founder and CEO of “In addition to our already low prices, we will offer more than 15,000 Lightning Deals with early access to select deals for Prime members, hundreds of millions of products across dozens of categories, curated gift lists like Holiday Toy List and Electronics Holiday Gift Guide, new features like #AmazonWishList, and a great new lineup of products like Kindle Voyage and Fire HD Kids Edition. And if you order your gifts on AmazonSmile, we’ll donate a percentage of your purchase price to your favorite charity.”

Link to the rest at Amazon Media Room

Amazon Does Everything

23 October 2014

Nothing to do with books, but you can order Thanksgiving Dinners and Desserts from Amazon

Amazon is doing the world a favor by crushing book publishers

23 October 2014

From Vox:

Here’s a little real talk about the book publishing industry — it adds almost no value, it is going to be wiped off the face of the earth soon, and writers and readers will be better off for it.

The fundamental uselessness of book publishers is why I thought it was dumb of the Department of Justice to even bother prosecuting them for their flagrantly illegal cartel behavior a couple of years back, and it’s why I’m deaf to the argument that Amazon’s ongoing efforts to crush Hachette are evidence of a public policy problem that needs remedy. Franklin Foer’s recent efforts to label Amazon a monopolist are unconvincing, and Paul Krugman’s narrower argument that they have some form of monopsony power in the book industry is equally wrongheaded.

What is indisputably true is that Amazon is on track to destroy the businesses of incumbent book publishers. But the many authors and intellectuals who’ve been convinced that their interests — or the interests of literary culture writ large — are identical with those of the publishers are simply mistaken.

. . . .

Wisdom on this subject begins with the observation that the book publishing industry is not a cuddly craft affair. It’s dominated by a Big Four of publishers, who are themselves subsidiaries of much larger conglomerates. Simon & Schuster is owned by CBS, HarperCollins is owned by NewsCorp, Penguin and RandomHouse are jointly owned by Pearson and Bertelsmann, and Hachette is part of an enormous French company called Lagadère.

These are not tiny, helpless enterprises. Were their owners interested in the future of books and publishing, they could invest the money necessary to make their own e-reading apps and e-book store and render Amazon entirely superfluous. But the managers of these conglomerates don’t really care. If they can get famous authors to lobby the government to stop Amazon from killing them for free, then they’re happy to take the free labor.

But they don’t want to invest actual money and energy in competing with Amazon, they’d rather wring whatever remaining profit there is out of book publishing and dedicate the money to dividends or other industries they’re also involved in.

. . . .

When I was a kid, my father was a novelist as were both of my grandparents. So I heard a lot of stories about how useless publishers are at marketing books. Then I got to know other people who wrote books and they had the same complaints. Then I wrote a book, and their complaints became my complaints. But it’s easy to whine that other people aren’t marketing your product effectively. It took the Amazon/Hachette dispute to conclusively prove that the whiners are correct.

After all, imagine a world in which publishers were good at marketing books. Then it would be almost trivial for Hachette to get what it wants out of Amazon. It could just not sell its books on Amazon! Unlike in the old days when it might have been inconvenient for someone who lived in a town with a Borders but no Barnes & Noble to go get a book that Borders didn’t sell, it’s trivially easy to click on some non-Amazon website to order a book. But you do need a customer who actually wants to buy the book.

. . . .

The real risk for publishers is that major authors might discover that they do have the ability to market books. When George RR Martin’s next iteration of the Game of Thrones series is released, I will buy it. If I can buy it as an Amazon Kindle book, I will buy it that way. If he decides that the only way people should be able to read the book is to get Powell’s to mail them a copy, then I will buy it that way. And I am not alone. Nor is Martin the only author with the clout to not worry about the terms of distribution.

But for a publisher to team up with a celebrity author in this way to bypass Amazon would merely reveal how easy it would be for a celebrity author to bypass the incumbent publishers. In the old days, even the most famous author would need a publishing partner to actually make the physical books. Today that’s not the case. Martin needs a software platform to sell books, but publishers don’t have one. He could easily hire one or more editors to work with him on the copy if he wants to.

Link to the rest at Vox and thanks to Morgan for the tip.

Nice Dragons Deserve Numbers

23 October 2014

From author Rachel Aaron:

My favorite thing about the indie publishing community is its transparency. I could not have made my decision to self-publish without the sales numbers and analysis posted by the authors who came before me. As all of you who read my blog regularly know, we are big big fans of paying it forward here at Casa de Aaron/Bach, and so it was a foregone conclusion that I would do the same once my own numbers started coming in.

Below, you will find the complete sales numbers/Kindle Universe borrows for Nice Dragons Finish Last followed by a few conclusions and observations I’ve drawn from my self pub results so far. Please know that I am not doing this to brag. While I did admittedly have a fantastic, amazing, beyond my wildest expectations two months, I’m still nowhere near the top of the publishing heap for either the traditional or self-pub side of the fence.

. . . .

Make no mistake, having an established fan base was a huge help, especially at the beginning. Many of my reviews for NDFL reflect that these were readers who’d followed me over from Paradox or The Legend of Eli Monpress (to these people, I LOVE YOU ALL). But an equal number of the reviews that mentioned how the reader found my book claimed they’d never heard of me before this and only clicked because the cover/blurb/title looked interesting. And while review counting isn’t a precise measure of whether the above sales are from new fans or old, going by my royalty statements, I think it’s a pretty safe bet to say that I don’t have that many die-hard fans who run out and buy my book in the first two months. Many of these sales (and I’d wager the majority of my KU readers) seem to be new fans who found and decided to buy NDFL purely on its own merit, and (as you see from the numbers above) primarily on Amazon.

. . . .

I did practically zero promo for this book. I mean, I did the basics–tweeted the release to my followers, sent an email to my (then very tiny) mailing list, passed out a few eARCs to reviewers I’d worked with in the past–but compared to the relentless promo I did for my Orbit titles, I phoned this release in. Why? Well, frankly I was busy and I didn’t actually expect the book to start selling until there were sequels.

That’s one of the great things about self-publishing, though. There’s no release week. You don’t live or die by getting people into bookstores to buy your book during the 2-3 months it’s actually on the shelves. You have time to let a title sit and gain readership organically.

. . . .

At this point in the release, I was so caught up in writing and other work that I was barely tweeting, yet my book was doing fantastic, and I had no idea why. But I could see the stair steps already. I knew something was going on, and so I started trying to predict when the jumps would come. Sure enough, I was able to predict the jump on July 30th, not through any promo or efforts on my part, but simply by looking at the patterns that had come before. And then, just before the infamous 30 Day Cliff, the stair steps suddenly ended, and I returned to a normal, up and down sales graph.

An inexplicable climb is almost as frustrating as an inexplicable fall. If my books were doing this well, then dammit, I wanted to know why. So my programmer husband and I looked at all the data, and while we can’t presume to put forward any real answers based off such limited information, we did come up with a pretty cool theory, which is that this stair step progression pattern is actually an unwitting picture of the Amazon algorithms at work.

My book came into the Amazon system under pretty much the best possible circumstances. I was an already established author with other, proven titles for sale. I had several positive reviews, including one from a Top 1000 reviewer right off the bat (thank you, Mihir!), I was already selling thanks to the support of my fanbase, and I was competitively priced.

To an Amazon bot, all of that combined makes me look pretty good. On paper, at least, I looked like a winner, and it’s my theory that because of this, I was given extra visibility by Amazon in the form of a fixed ranking. And I don’t mean fixed as in illegally fixed, I mean they stuck my rank on me with digital glue. That’s why my rank didn’t move, because it wasn’t actually my rank. It was a bonus Amazon automatically attached to a book they predicted would do well, but that hadn’t actually been out long enough to get the also-boughts and link ups that actually drive the Amazon sales engine.

. . . .

Because a book’s Amazon rank is a very reliable way of determining how many people see said title while browsing, artificially fixing a new book’s rank within a set spread (say, between Amazon rank 1000 and 900) is a built in way to test how well a title performs against other books who’ve achieved the same rank naturally. It’s sort of like putting an untested horse in a race with a bunch of champions to see how the newcomer’s time compares to the veterans, who are already known quantities. If the new horse keeps up, you move it up to the next race and the next race until it starts to fall behind. At that point, you can make a pretty good guess as to how well that horse will run, or that book will sell.

If you artificially fix a book’s rank at 1000 with all the visibility that entails, and it manages to sell the same or better as the older books around it who’ve achieved the 1000 rank on their own, you know that title can run the race. If a book can’t gain sales commiserate with its artificial rank, then Amazon knows that particular book isn’t ready to be there and drops it back down. I’m pretty sure this is what happened to me at the end, because while I was outselling my daily rank all the way up according to the various rank/sales converters around the internet (ie, the kindle rank to sales calculator would say that a 1200 ranks gets 55-100 sales per day and I was seeing 130), I was not outselling my rank once I reached the 500s, which is when the stair step climb stopped for me. My horse, it seemed, had finally run out.

Link to the rest at Pretentious Title and thanks to Adrienne for the tip.

Here’s a link to Rachel Aaron’s books

What’s Next for Authors United?

22 October 2014

From David Gaughran:

Authors United has been spectacularly unsuccessful in its supposed mission to get Amazon and Hachette to agree a deal.

By contrast, Simon & Schuster was able to agree a deal in just three weeks – without the intervention of Douglas Preston’s group.

To be fair, Authors United has been very good at one thing: getting media attention.

Perhaps it’s time for Douglas Preston to widen the aims of the group and start campaigning on issues which actually matter.

It would be great if Authors United could get the media to focus on any of these problems. Alternatively, Authors United could continue to focus on propping up a broken system which only rewards those at the very top (like Douglas Preston, surprisingly).

1. Diversity in Publishing

Publishing is very white and very middle class. And, at the upper echelons, often very male too. One of the many knock on effects of this is that traditionally published books tend to be very white and very middle class. Publishing claims to want more diverse books from more diverse voices, but I don’t think that’s going to happen until more people from diverse backgrounds are representing authors and acquiring books.

2. One-sided Contracts

Contracts offered by publishers can contain awful clauses. Option clauses which unfairly tie authors’ hands. Reversion clauses which are meaningless in a POD/digital world where books never go out of print. And non-compete clauses which can pointlessly damage a writer’s career.

Some say that a good agent will negotiate those out. My experience of talking to fellow writers is that it’s often the case that even good agents can fail to negotiate these out because they don’t want to damage their relationship with the publisher. But, really, these clauses should form no part of any boilerplate. Agents shouldn’t have to negotiate them out because they shouldn’t be there in the first place. And the upsurge in digital-first imprints taking unagented submissions means this is a growing problem.

. . . .

6. Author Exploitation

The most unwelcome development in the last few years has been the huge increase in author exploitation. What’s particularly distasteful about this phenomenon is that the most predatory companies are not the fly-by-night operations of the past, but huge corporations exploiting writers on a massive scale. Oh and they are owned and operated by traditional publishers, happy to profit from this crap.

Penguin Random House bought Author Solutions two years ago and, instead of cleaning house, it has aggressively expanded its scammy operations. HarperCollins, Harlequin, Simon & Schuster, and Hay House are just some of the traditional publishers with exploitative vanity press operations being run on their behalf by Author Solutions. This is completely unacceptable. And instead of getting worked up about what Amazon might do in the future, I respectfully suggest that you should focus on what publishers are doing right now to authors.

Link to the rest at Let’s Get Digital and thanks to T.M. for the tip.

Here’s a link to David Gaughran’s books

Simon & Schuster e-book deal with Amazon closes a chapter

22 October 2014

From The New York Post:

The Simon & Schuster agreement with Amazon brought a sigh of relief to some authors, who will not have to worry about it deteriorating into an ugly, protracted battle such as the one that still pits Amazon against Hachette on e-book pricing.

“I love both Simon & Schuster and Amazon, so I’m thrilled that war has been averted,” said Walter Isaacson, the best-selling Steve Jobs biographer, who just released his latest S&S book, “The Innovators.”

“I think [S&S CEO] Carolyn Reidy and [Amazon CEO] Jeff Bezos should now be made peace envoys to the Middle East so they can save not just publishing but the world,” Isaacson said.

Link to the rest at The New York Post

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