Big Publishing

Why Amazon Terrifies Publishers: Let’s Look At Royalty Statements

22 July 2014

From Forbes blogs:

Like many authors, I’ve been struggling to decode all the noise coming from Amazon and traditional book publishers, in hopes of figuring out which side is right in this long-running quarrel. The breakthrough moment for me came earlier this month, with the arrival of a new royalty statement from my New York agent.

Clearly, there’s a tug-of-war going on right now about what books should cost — and how the revenue should be divided between authors, publishers and retailers. The immediate battleground involves Amazon’s pricing of e-books published by Hachette, one of the publishing industry’s “Big Five” players. Amazon wants lower prices and leaner terms for Hachette; the publisher prefers the opposite.

While the battle rages on, distribution of Hachette books on Amazon is getting snarled.

. . . .

I’ve been writing books since the early 1990s. That’s provided opportunities along the way to write for three of the Big Five publishers, as well as to see Amazon emerge as an important marketplace for my own books about everything from Wall Street to talent selection. To date, both sides have provided fair terms and good value for what they do. But it’s a fast-changing world, and the message hit home for me when I got a new royalty statement for my very first book, “Merchants of Debt.”

. . . .

The Beard contract wasn’t my favorite, because the $34.95 price to buyers seemed quite steep, and because my royalties per copy were only 15% of the purchase price. But that 15% royalty rate has long been the norm for print-publishing contracts.

. . . .

Then, in 2013, my agents, Inkwell Management, arranged to have Merchants of Debt republished as an e-book. We created two versions: a full-length e-bookpriced at $9.99, and a condensed version, priced at $3.99. In each case, e-tailers such as Amazon or Apple’s iTunes store get 30% of sales revenue; Inkwell gets 21%; I get 49%.

You can probably guess what’s happened to sales trends. Overall sales of the book have more than tripled, and nearly 90% of the sales are coming from e-books. We’re still talking about small amounts of money, but the checks now pay for getaway weekends, rather than an occasional lunch or two. Customers are getting a much better deal. And the e-books’ royalty formula means that I make almost exactly as much on a $9.99 e-book as I would have on a $34.95 paperback.

. . . .

Amazon believes it has figured out how to keep its book business vibrant in such changing times. I’m starting to think that the old guard’s ferocity in the current Hachette-Amazon tussle reflects deep anxieties — perhaps even outright terror — about what to do next.

Link to the rest at Forbes blogs and thanks to Hugh for the tip.

‘Authors United’ promises long-term Amazon strategy

21 July 2014

From The Bookseller:

Authors United, the group of writers who signed a letter calling on Amazon to resolve its dispute with Hachette, has said it is “developing a long-term strategy”.

. . . .

Preston has now written to the signatories to say that a full-page advert will soon be published in the New York Times, funded by a dozen authors, which will include the letter and the names of the signatories.

Preston also wrote: “This struggle with Amazon may go on for a while. Our group, which we call Authors United, is developing a long-term strategy in case our effort here is not effective. I will be in touch with you about that.

“Together, our group comprises many of the finest writers in the English language, with billions of books sold, and we include journalists and authors in every field and genre imaginable and from all levels of success. I would particularly note that many debut authors have courageously signed this letter. Amazon’s recent attempt to dismiss us as a bunch of rich, bestselling authors trying only to protect our income is not going to work.

“We have many loyal and committed readers. They listen when we speak. That represents power; perhaps even enough power to face down one of the world’s largest corporations.”

Link to the rest at The Bookseller and thanks to Diana for the tip.

PG tried to remember the last time he read the print edition of The New York Times. He was unable to do so.

Undoubtedly Publishers Weekly will join with The Bookseller in noticing the ad, however.

Apple prepared to pay $450 million for e-book price fixing case

17 July 2014

From Cult of Mac:

One year after being found guilty of e-book price fixing, Apple has reached a conditional settlement with the U.S. State to pay $450 million for its role in the price fixing conspiracy that involved five major publishers.

Apple’s settlement could bring $400 million back to consumers’ wallets, reports Reuters, but the court documents filed on Wednesday reveal that the company isn’t quite ready to throw in the towel yet, with hopes that its appeal will shrink that fee down to just $70 million.

Link to the rest at Cult of Mac and thanks to Joshua for the tip.

Barbarians at the Gate! Indies vs Big Publishing

16 July 2014

From author Amy Erie:

The Fall of Rome is still debated. How could such an empire fall? Various theories are floated; taxes were too high, barbarians joined the army, borders became too porous, corruption and incompetence were rampant.

But I would argue that these were mitigating factors. Empires always fall for the same reason.

They stop adapting.

Adaptive Capacity is the technical term for an ecological or social system’s response to changing conditions in the environment.

A system that cannot adapt, self destructs.

Traditional publishing is just such an empire, built over half a millennium (if we go by the invention of the Gutenberg press) the industry has had a long run. Now, e book publishing and print-on-demand technology have changed the landscape. Within a short amount of time, the book market has transformed. Some of the new players are Amazon Kindle Direct Publishing, Kobo, Apple iBookstore, Barnes & Noble Nook Press and distributors like Smashwords and BookBaby.

. . . .

The Amazon/Hachette debate is not just a negotiation, it’s a skirmish between the new world and the old. The latest salvo comes in the form of a letter signed by a number of brand-name authors who support Hachette’s point-of-view. In response, a petition was circulated and signed by the indie writing community supporting Amazon.Why did a simple business exchange create two opposing camps? Because the argument represents deeper, more treacherous currents between a crumbling empire and an evolving system.

. . . .

Before Nielsen’s BookScan arrived in 2001, the only data publishers collected was the zip code of the brick & mortar store selling the book. Bookscan was initially greeted with skepticism, then suppressed. Publishers had already seen what happened when Nielsen’s Soundscan hit the music industry in 1991, irrevocably shifting the power base and heralding the rise of previously ignored music genres like rap and christian. The new data threatened publishing’s control of perceptions. By 2004, publishers were purchasing data at $100,000 per year and not letting anyone see it, including authors. Writers in the system report being stonewalled or receiving book sales reports that were six months old. This careful parsing of data served publishers well, allowing them to control the perceptions of writers and readers.

They were continuing an old tradition pioneered by the New York Times Best Seller List, which releases rankings, but not actual sales figures. These rankings are based on a mysterious process of unverifiable estimates and surveys of secret reporting bookstores.

. . . .

When JK Rowling’s book sales unexpectedly overwhelmed the list in 2000, taking all the top spots, they needed to take Rowling off the adult list because her sales undermined a system that brought in tremendous revenue from publishers who bought ads. So the NYT Children’s Bestseller List was created in order to accommodate Rowling’s swelling numbers. As the NYT editors at the Book Review put it at the time, “The change (in the NYT Bestseller List) is largely in response to the expected demand for the fourth in the Harry Potter series of children’s books.”

So by the time barbarians showed up at the gate, publishing had built a bloated, convoluted system that relied on manipulation of data, brick & morter bookstores and an antiquated remainder’s system.

What could go wrong?

. . . .

Publishers did not understand the technological frontier. The Internet was just another way to sell books. Amazon was an outlet, not a competitor. But Amazon’s CEO Jeff Bezos did understand the potential of the Internet. He was playing the long game and was willing to explore innovative programming, algorithms, data-mining and exciting new ways to track reader habits.

On the surface, the Internet was a communications curiosity, but revolution was in the air. In 1993, the year Amazon appeared, the Internet only communicated 1% of the information flowing through two-way telecommunications networks.

By 2000 (when JK Rowling was being tossed into the kiddie pool) that communication figure grew to 51%.

By 2007 the Internet carried 97% of tele-communication information. 2007 was also the year Amazon introduced The Kindle, offering free e books in the public domain and cheap downloads of new books.

The Kindle sold out within five hours.

. . . .

In late 2007, Amazon was also beta-testing a structure for writers to self publish, offering 70% royalties. In publishing circles, this was heresy. A cold war started on the Internet. The old guard released a torrent of saber rattling blog posts, warning aspiring authors not to self publish. It’s dangerous! Reckless! they shouted, insulting Indie writers, calling them vanity press, substandard and illiterate. Like priests defending their temple, publishers, writers, agents, trade organizations and bookstores closed ranks. There was no way e book writers would cheat their way inside the hallowed gates of publishing. Publishers even fought for out-of-print back-lists previously left to rot. Bookstores refused to stock indie books or anything from Amazon’s Publishing Imprints.

The most unsavory aspect of this predictable reaction was the marked lack of concern for art. But publishing had jumped that shark a long time ago. (Anyone who’s ever walked into a Barnes & Noble and witnessed the geegaws and novelty books piled high on the bargain tables knows what I mean).

. . . .

So far, Big Publishing’s reaction to the brave new world of e books shows a lack of adaptive capacity. They have tried to force Amazon into capitulation with their old system rather than adapt to new market forces.

When technology is involved and those in power lack vision, a deadly form of myopic denial can develop. This denial of reality pervades the publishing industry at a time critical for its health. The more publishing refuses to look toward the future, the bigger the chance it will decline and collapse. Instead of Visigoths, Vandals and Huns, the publishing industry is defending itself from a strange and wily opponent, the future. The problem is publishing companies see this paradigm shift as an opponent rather than an opportunity.

Link to the rest at Amy Erie and thanks to Robert for the tip.

Amazon Is Now in Talks With Simon & Schuster

16 July 2014

From The Wall Street Journal Digits blog:

Hachette isn’t the only book publisher facing down Amazon.com.

The country’s largest bookseller is also in talks with Simon & Schuster, said Leslie Moonves, CEO of the publisher’s parent at the Fortune Brainstorm Tech conference in Aspen, Colo. Moonves added that he’d personally met with Amazon CEO Jeff Bezos at a recent conference in Sun Valley, Idaho.

“Amazon has a definite point of view about what should be done in the publishing business,” said Moonves. “It’s going to be a very interesting thing to watch.”

It wasn’t immediately clear what the nature of Amazon’s talks with Simon & Schuster are, and a spokesman for the book publisher declined to comment. An Amazon spokeswoman didn’t respond to a request for comment.

Link to the rest at The Wall Street Journal (Link may expire) and thanks to Patricia for the tip.

The Publishers Are as Bad as Amazon

16 July 2014

From The Huffington Post:

In recent months, America’s publishing giants have been up in arms about the predatory practices of Amazon.com. Their outrage would be less hypocritical if they weren’t guilty of conduct that’s just as bad.

I’m an author. One of my books (Muhammad Ali: His Life and Times) was on theNew York Times best seller list. Another (Missing) served as the basis for an Academy-Award-winning film. I’ve learned over the years that big-name writers might be treated fairly by the media conglomerates that dominate publishing today. But the average author isn’t.

Publishing is a business. It’s about squeezing every last dollar out of every available source, and the most vulnerable source is the author. No clearer proof of that exists than the “standard” book contract.

Many clauses that are imposed on authors throughout the industry today bear no relationship to any economic reality other than the best interests of the publisher. Yet these clauses flourish because virtually every major publisher insists on them and the average author has no recourse.

. . . .

As for traditional options, publishing contracts now often contain the following provisions:

1) The author must submit his next book in completed manuscript form to the publisher before it is considered by any other publisher;

2) The first publisher need not consider the manuscript before publication of the work currently under contract; and

3) Even if the first publisher declines to bid on the manuscript, the author must subsequently offer the publisher the chance to match any offer received at a later date from any other publisher. Thus, an author who has a book under contract to a publisher can find his career put on hold indefinitely.

In sum, just getting published is an adventure in contract law for most authors. And when authors are published, they find that their royalties have been cut precipitously by today’s standard publishing contract.

For example, most publishers now require a clause to the effect that, if the publisher increases its discount to a particular book-seller beyond a certain percentage, the author’s royalty is cut in half. The logic underlying this provision is that, if a publisher has to give a giant like Amazon.com a break in order to sell books, then the author should shoulder part of that burden. However, the way the formula works in practice, a publisher can sometimes increase its discount to the bookseller on a twenty dollar book by, say, forty cents (two percent of list price) and cut the author’s royalty in half (from $3.00 to $1.50). In other words, the publisher takes $1.50 out of the author’s pocket, gives forty cents to the bookseller, and keeps the remaining $1.10 for itself.

. . . .

But one ray of hope does exist. The antitrust laws of the United States are sometimes enforced. And in addition to outlawing predatory monopolistic practices, those laws provide that “every contract, combination, or conspiracy in restraint of trade is illegal.”

Quite possibly, what now passes for “standard” in the publishing industry is an illegal restraint of trade.

Publishing today is characterized by powerful corporate entities acting in concert to the detriment of essentially powerless authors. Something must be done to remedy the situation because it’s driving a lot of good writers out of publishing. They simply can’t make a living writing books anymore.

Link to the rest at The Huffington Post and thanks to Elizabeth for the tip.

Are There 5 Reasons to Stick With Major Publishers? No, There Are Zero Reasons

15 July 2014

From The Huffington Post:

A HuffPost blogger with expertise in publishing suggests there are still 5 reasons to get a deal with a New York publisher: partnership; quality; legitimacy; distribution; and advances.

Respectfully, there aren’t five reasons to go with New York. Actually, there are zero reasons.

If they can’t do a good job with Hillary Clinton’s new book, and that release is generally viewed as a flop, why would they do any better with a book written by a mere mortal?

. . . .

 1. Partnership. Um, really? What kind of “partner” gets 85 to 90 percent of the pie, and has a long, sorry history of illicitly keeping much of the rest? Yes, the editorial staffs work hard to create well-edited books. But otherwise, what exactly does a New York publisher do? They don’t do marketing or even share their marketing expertise with authors. Publication of books is delayed as much as a year after they’re completed, by which time the information in the book may no longer be useful, current or actionable for readers. And editors get fired so often these days that they often aren’t even around when a book they edited gets published.

. . . .

 3. Legitimacy. This used to be true but is no longer the case. As a ghostwriter, I constantly hear from my clients, “But in MY field, I need the legitimacy of a major publisher.” It’s not legitimacy; it’s an ego trip for the author, a pat on the head from a bunch of smart people in New York City. Here’s why: if I made a list of ten publishers, of which five were imprints of the major houses and five were names I made up, most non-publishing industry could never tell which was which. It’s an ego trip pure and simple.

. . . .

 5. Advances. Here’s how advances work: some authors will get big ones, but not you. Why? Because advances only go to authors who have (all together, class) big social media presences, national media footprints or their own TV shows. Dr. Phil, who looks like he’s 60 pounds overweight, got a diet book.

Link to the rest at The Huffington Post and thanks to Donna for the tip.

Elites or freedom fighters: How the Amazon-Hachette battle took on the rhetoric of class warfare

14 July 2014

From GigaOm:

One side defends the ideals that this nation was founded on: Independence and freedom from tyranny. The other side is made up of elites who keep the little people down and take the money that is rightfully theirs in an attempt to control the message and maintain the status quo.

I’m talking not about the Tea Party and big government, but the worlds of self-publishing and traditional publishing. Yet the rhetoric in both debates often sounds very much the same. In 2009, the Tea Party movement took shape in the United States. At just around the same time, ebooks began gaining in popularity, and as the digital publishing revolution took off, so did the once-stigmatized practice of self-publishing. Authors were suddenly able to get their ebooks to large audiences without going through traditional publishers. On January 20, 2010, Amazon began offering 70 percent royalties on self-published Kindle books (priced between $2.99 and $9.99.) In doing so, it opened up a new revenue stream for thousands of people.

. . . .

The wildly differing rhetoric used on each side provides some insight into why the negotiations seem so momentous, and it is one explanation for why it can be so difficult for the supporters of each side to find any common ground. Some of the most outspoken leaders of the self-publishing movement have adopted Tea Party-like rhetoric benefiting Amazon that can make it difficult for those from the “elite” world of traditional publishing to sympathize. Those traditional publishers, bestselling traditionally published authors and literary folk, on the other hand, tend toward anti-Amazon arguments that the self-publishing movement finds preposterous.

. . . .

Amazon’s ability to pull this off reflects an underlying trend in the self-publishing movement: Its reliance on Tea Party-esque, “freedom fighter” rhetoric. Earlier this year, self-publishing site Smashwords published “The Indie Author Manifesto,” modeled after the Declaration of Independence and including the line “I shall not bow beholden or subservient to any publisher.”

. . . .

Meanwhile, statements that Hachette and Amazon released last week illustrate the ways in which Amazon has picked up on the voice of the self-publishing movement, while Hachette’s language is stilted and formal:

Hachette:

“Amazon has just sent us a brief proposal. We invite Amazon to withdraw the sanctions they have unilaterally imposed, and we will continue to negotiate in good faith and with the hope of a swift conclusion. We believe that the best outcome for the writers we publish is a contract with Amazon that brings genuine marketing benefits and whose terms allow Hachette to continue to invest in writers, marketing, and innovation. We look forward to resolving this dispute soon and to the benefit of the writers who have trusted their books to us.”

Amazon:

“We call baloney. Hachette is part of a $10 billion global conglomerate. It wouldn’t be ‘suicide.’ They can afford it. What they’re really making clear is that they absolutely want their authors caught in the middle of this negotiation because they believe it increases their leverage. All the while, they are stalling and refusing to negotiate, despite the pain caused to their authors. Our offer is sincere. They should take us up on it.”

“We call baloney” is the master stroke: Brief, folksy and eminently tweetable. “Our offer is sincere. They should take us up on it.” Just 51 characters — easy to share that!

Hachette’s statement is written with more complex language and can’t be distilled into a single phrase; there is nothing there that you want to tweet and I had to think for a second about what they meant by “sanctions.” Both sides argue this is war, but Amazon is more charming about it and makes its message easier to spread.

. . . .

One of the main reasons that charges of “elitism” rankle the traditional publishing world, I think, is that most people who work in the industry — whether they are publishers, independent booksellers, editors or authors — don’t feel like one-percenters. And most of them aren’t: Book publishing pays notoriously low salaries and most authors — whether they are traditionally published or self-published — will never get rich.

Supporters of Hachette and traditional publishing fear Amazon’s growing power. They worry that its business practices will drive publishers into the ground, forcing them to consolidate or go out of business, and leading to a less competitive and vibrant marketplace for books.

But I think that many members of this group fear the loss of the “right” kinds of books. Thus far, all of the greatest self-publishing successes have been in genre fiction – thrillers, mystery, romance, science fiction — rather than literary fiction or narrative nonfiction, the types of books that win the biggest prizes and get serious reviews. There is a fear that in a world dominated by self-publishing and Amazon, it’s not just “books” that wouldn’t get published, it’s the “important” books that wouldn’t get published. (Robert Caro, anyone?)

There is, too, a fear that Amazon does not value or respect books as cultural objects. “To our knowledge, Amazon has never clearly and unequivocally stated (as traditional publishers have) that books are different and special, that they can’t be treated like the other commodities they sell,” the Authors Guild’s Richard Russo wrote last week. “This doesn’t strike us as an oversight.”

Link to the rest at GigaOm and thanks to Sharon for the tip.

PG understands the use of the term, Tea Party, in the article for timeliness, but suggests that Populist is a better description of some of the characteristics of the indie publishing community. Populist movements have arisen on both the right and the left in American politics.

Additionally, the self-publishing viewpoint is international and a uniquely American political term probably doesn’t describe similar feelings overseas.

Is Selling Direct Worth It?

14 July 2014

From Publishers Weekly:

The relaunch of the HarperCollins website, redesigned with an emphasis on direct sales to consumers, has revived a longtime debate in the book industry. In the new world of pervasive digital communication, social media, and easy direct access to consumers—not to mention the disruptive presence of Amazon—how aggressively should publishers use their websites to sell to consumers?

Today virtually all publishers, from the smallest indie press to large general trade book publishers—with the very interesting exception of the Hachette Book Group—sell directly to consumers in some fashion. But while most publishers offer some form of direct sales to consumers, the big houses prefer to avoid competition with retailers. Indeed, in a time when physical retailers are under intense competition from Amazon and other online outlets, many publishers remain leery of even appearing to undermine booksellers.

“I’m sure HarperCollins is well-intentioned,” said Jack McKeown, a former executive at both HarperCollins and Perseus Books and now president of Books and Books, a bookstore in Westhampton, N.Y. “Publishers do need to engage consumers and offer buy buttons for their convenience. But an aggressive pursuit of direct sales, I think, is misguided and a misallocation of resources.” While publishers with deep expertise in specific genres, such as Tor or Harlequin, can do well selling direct, McKeown said an overemphasis on direct selling is a mistake for large general interest publishers. “Consumers are not looking for publishers, they’re looking to retailers to aggregate and recommend titles. Harper is disaggregating our audience. They can’t offer an array of topics and publications. While I do understand what they are trying to do, they should be working to amplify their existing retail channels.”

. . . .

Doug Seibold, publisher of the independent publisher Agate, said the house has been selling directly since 2008. “The biggest challenge for a small publisher is distribution and making people aware of us. Our website works like a sales catalogue and we take it very seriously.” But he acknowledged that selling isn’t really the point. “It’s not a big revenue channel,” he said. “But it helps us stay alert to the market, helps us to be fast on our feet.”

Link to the rest at Publishers Weekly

Amazon-Hachette: The Sounds of Silence

14 July 2014

From regular TPV commenter William Ockham via Joe Konrath:

Everybody’s talking about Amazon’s latest move in the Amazon-Hachette kerfuffle and the reactions have been pretty predictable. Lots of confirmation bias going around. While the public broadsides, grand offers, and nasty anonymous leaks are full of sound and fury, I’m fond of looking for the truth in the silence. What the companies aren’t saying is as important to understanding the situation as what they are saying. I’m not sure if anyone has noticed, but neither side has denied any of the specific factual claims the other has made. In fact, if we read between the lines, we can cut through the noise and see what’s really happening. I have learned* the best way to do that is to make a timeline. Our brains have a tendency to remember the order in which we learned a set of facts and it has a hard to reassembling the chronological order of how things actually happened. We should be continually re-evaluating our understanding of this situation based on new information.

. . . .

What does the timeline tell us?

1. Hachette did not negotiate in good faith before the end of the contract.

They didn’t negotiate at all. Amazon and Hachette agree on this crucial point. The first Hachette offer was in April. Amazon says the original contract ran out in March and Hachette hasn’t denied it. In my view, the party that makes no attempt to negotiate during the term of the original contract is the instigator of the stand-off.

2. Hachette knew for months that their authors were being harmed and they did nothing.

Sullivan noticed that the usual Amazon discounts on his titles were gone on February 7. He saw the inventory issues on March 9. He let Hachette know about both issues. At that point Hachette had let their contract expire without so much as a counter-offer.

. . . .

4. Hachette was able to pull off a complex, multi-million dollar acquisition of a smaller publisher, but unwilling to fund either of Amazon’s offers to help the affected authors.

The publishing half of Perseus was estimated to have revenues in the $100 million range. That’s a pretty big deal in the publishing world.

5. Since the dispute became public, Hachette has essentially abandoned the negotiations in favor of a concerted public relations campaign.

Hachette’s last offer was in May around the time the affair became public. Amazon sent them another offer on June 5. Hachette has orchestrated a high-profile publicity campaign with big name authors, a popular TV host, and the publishing industry press taking up Hachette’s cause. Hachette has even enlisted the New York Times to play stenographer for them.

6. Hachette has a powerful incentive to drag this out.

To achieve its goal, Hachette needs to delay the final agreement until late 2014 or early 2015. That is the earliest time they will be able to conclude an agreement with Amazon that restricts Amazon’s ability to discount ebooks. Moreover, developments in Apple’s ongoing appeal could substantially impact Hachette’s negotiating position. An Apple loss or settlement would make reaching an agency deal (with no discounting) almost impossible because Amazon is not going to agree to let Apple underprice them on ebooks.

Link to the rest at Joe Konrath

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