David Gaughran: ‘Don’t believe the spin’ in Amazon vs. Hachette affair

David Gaughran has a great blog post looking at the Amazon/Hachette affair in a less “poor little Hachette” light. It’s good to see this piece join this other blog piece and this Forbes story pointing out that there’s another side to the matter than the one Hachette’s partisans are pushing.

Gaughran points out there are multiple possible explanations for what we’re seeing. The problem is that we haven’t really heard any of them. Indeed, apart from a couple of non-detailed, PR-laden emails from Hachette, we haven’t heard much of anything from either side.

And if we don’t know the exact nature of the dispute, we can’t pronounce judgments as to whether Amazon is being unfair or using their market power in anti-competitive ways. If the latter is true, Hachette has a remedy open to it: the courts.

Gaughran also points out that the big-five publishers are almost all part of major media conglomerates that have the ability to put whatever unfavorable spin they want on the matter in a decent-sized chunk of the press, Hachette included. These are the same publishers who felt the need to collude illegally because Amazon wasn’t playing ball with them. It’s not surprising they would take a hard line of their own in further negotiations.

There’s some interesting discussion in the comments, too, as Gaughran discusses some of the arguments over the dispute and about the anti-trust case. For example, he points out:

This meme about the “bias” or “incompetence” of Judge Cote is one put about by the large publishers and their supporters. It fails to recognize that this was an open-and-shut case. It also fails to recognize that the publishers’ actions (and Apple’s actions) have led to similar antitrust investigations in jurisdictions all over the world – which Judge Cote has nothing to do with – and which have led to similar outcomes.

It’s worth a reminder that, in December 2012, Apple and four publishers came to a settlement with the European Union to end an antitrust investigation there into agency pricing and most-favored-nation clauses, agreeing to legally binding conditions to ease pricing restrictions. Judge Cote didn’t have anything to do with that…

Given that this is the first negotiation between Amazon and a publisher after the agency pricing fallout, it’s going to set a precedent for the negotiations with the other publishers down the line. Hence, both sides must be feeling a lot of pressure to get the best deal they can for themselves for the effect it will have on their, and other publishers’, futures. It will be interesting to see where it goes from here.

6 Comments on David Gaughran: ‘Don’t believe the spin’ in Amazon vs. Hachette affair

  1. Thanks for this Chris, it is a great blog post by David Gaughran. It’s been interesting to see all the “news articles” popping up all over the place when there are no real facts and neither side is talking. Most of them include revisionist history on what actually happened in 2010. The only real fact I’ve seen is that Amazon replaced the pre-order button on some Hachette books with a request to email me when it’s available. Oh the horror! Fire up the presses, heat up the tar, gather the feathers.

  2. When I lived in Seattle, one of my jobs had me walking though a less-than-safe neighborhood late at night. I did my best to deter muggers, walking like I was mean, tough and ready to eat them from breakfast. But better still would have been to walk with someone who actually was mean, tough, ready to eat muggers for breakfast.

    That’s how I feel about this A v. H dispute.

    * Amazon pays me half the royalties that Apple pays for one of my ebooks and less than Apple for all the others. They are taking money that in a free and competitive market would be mine. They are behaving like a bully and a mugger and should be regarded as such.

    * In contrast, Hachette poses no threat to me. It takes no money from my pockets. My ebooks are so unique, I doubt they have a single one that competes. And even if one did, we’d be competing on a level playing field. I’d take some sales from them. They’d take some from me. Hachette isn’t an ebook retailer, so it can’t alter how my ebooks are sold. It can’t dictate my prices or what royalties I get. It can only compete and in a most distant way. In many ways, it’s more an ally than a competitor.

    http://www.amazon.com/gp/search/ref=sr_adv_b/?search-alias=stripbooks&unfiltered=1&field-publisher=inkling+books&node=&field-p_n_condition-type=&field-feature_browse-bin=618073011&field-subject=

    ——-

    The linked article is also a bit too differential to authority figures: “To prevent the parties illegally acting in concert once more, Judge Cote ordered that retailer-publisher negotiations be staggered. Hachette is first up. It’s that simple.”

    No it isn’t. Rule one is law is not to believe what anyone says, not the lawyers and certainly not the judge.The truth lies elsewhere. If the court wanted to prevent these major publishers from working together, it’d force them to negotiate separately, in secrecy and at the same time. The only imaginable purpose for serial negotiations is to benefit Amazon. Why?

    1. Negotiating at the same time would prevent leaks between publishers in the tight-knit world of Manhattan publishing. Negotiating serially almost certainly means that Hachette’s terms will leak to the next in line, etc. That’s the very collusion this court claims to oppose.

    2. Negotiating serially means that Amazon gets to bully each publisher in turn rather than all at once. That is critical. Amazon’s already getting a lot of flack for the mess this dispute has created. If popular books from ALL the major publishers were difficult to get at the same time, the public would not only be outraged, it’d clearly place the guilt on Amazon.

    Also, this remark from the article is foolish “It’s almost like it’s the result of a very smart PR campaign. It’s almost like Hachette is part of a giant mass media conglomeration with billions of dollars of revenue and hundreds of outlets in which to push its message.”

    “Bravo for Hachette,”! I say. As someone who is not ” part of a giant mass media conglomeration,” I’m delighted to have one on my side, working to cripple a company that utterly dominates ebook sales in the U.S.–70%, over three times that of its closest competitor. It’s like being accompanied in that night time walk by a Navy SEAL team, armed and uniformed.

    I’ve started noticing something recently. It’s people who think good and evil is determined by power factors. If Hachette can just be shown to be powerful, this article assumes, then it becomes a bad guy.

    Not so. Right and wrong aren’t decided that way. One of the most interesting points in the D-Day invasion came when an unfortunate German officer looked out as the sun was coming up and saw what was merely the leading edge of a 100-mile long fleet of ships in the invasion fleet. Shortly afterward, allied warships began to pound his position. Does that predominance of the Allies over that little group of Germans mean that we should take a more even-handed approach toward that battle?

    Not at all. It’s great that the Allies landed with so powerful a force and with such air superiority, that only two German aircraft dared to overfly the beaches on the first day. Unfortunately, some today seem to think that way. They think that all one needs to do is show that one party in a dispute is large make it into something evil. That is the essential point of the article.

    That’s why it is great that Amazon is running headlong into the media forces that other major publishers can marshall, as detailed in the article. A few years back I realized that Amazon’s attempts to bully, directly or though the DOJ, had the potential to backfire. Amazon, located in Seattle, has almost no influence on the press in this country. The major publishers do in a host of ways. That could prove Amazon’s undoing. Drawing a parallel to my mugging analogy, this like being accompanied in my walk by a platoon of uniformed, armed SEALs. It is a good thing. Not being a fool, I like it.

    Editing Lily’s Ride made me realized something else important. Just after the Civil War, there was the distinct possibility that poor blacks and whites would form a common cause to get better schools and more honest government. My co-author, Albion Tourgée was living in NC at the time and witnessing just that.

    But wealthy planters and the vile-as-ever Democratic party managed to split off the poor whites. How did they do that? By stirring up envy that some freed slaves might do better than whites and by feeding white hatred of blacks. There’s a disturbingly large slice of the population, people I call ‘little haters,’ who get duped by that trick.

    In this Amazon dispute, some authors also seemed to be driven by their envy and hatred of large publishers, negative attitudes that are so great they seem unable to see that they have a lot in common with large publisher fighting Amazon and that they should find common cause with them. The fact that Hachette is large and has a host of media connections is a good thing for authors and small publishers.

    –Michael W. Perry

  3. Uh, like negotiating at the same time back in 2010 kept publishers from asking for the same supposedly-secret concessions that other publishers were getting from Amazon, right after they got them? Seems like if negotiating at the same time was a panacea, Amazon wouldn’t have had cause to complain to the FTC about the way those secrets kept leaking from one publisher to another.

    They’re staggered not so the details can’t leak, but so that the publishers can’t all gang up and demand the same thing at the same time. If a publisher wants to go back to agency pricing and higher prices, and can talk Amazon into it, then so be it, but their e-books are going to be that much more expensive than all the other publishers’ until the other publishers catch up. Perhaps those other publishers might even decide not to go with agency pricing at all in order to scoop that competitive advantage. Random House made out like a bandit during the year it could let Amazon price its books lower than everyone else’s.

  4. Mr. Perry, did someone put a gun to your head and make you sell books on Amazon? If not, you are doing so of your own free will and you have no one to blame but yourself for agreeing to the royalty payments that they offer. If you don’t like it, don’t sell there. I fail to see the problem.

  5. Quote: “Mr. Perry, did someone put a gun to your head and make you sell books on Amazon? If not, you are doing so of your own free will and you have no one to blame but yourself for agreeing to the royalty payments that they offer. If you don’t like it, don’t sell there. I fail to see the problem.”

    No, Amazon is to blame for Amazon’s misbehavior, Amazon and perhaps all the little fan boys who’re apparently happy to get shortchanged rather than make trouble. Remember, at some prices levels Amazon pays you half what Apple pays you. It that isn’t worth fighting about, what is?

    I am not that way. If I don’t like something, I do my best to make it change. I don’t take my toys (meaning books) elsewhere and sulk like a spoiled child. Apple pays 70% at all price levels with no download fees. Amazon can easily afford to do the same. I’ll keep pounding on that until they do. And if someone launches a class action lawsuit to make them change, I’ll join it in an instant. They would have a good case. There’s no business rationale for paying half the royalty rate for a $10.99 as is paid for a $9.99 one. It’s simply abuse of near-monopoly power.

    I’ve been taking on Amazon for about a decade now, The first came when I dealt with one of their lawyers about their deceptive search results. Amazon hides some products to show identical (or even lower quality) products that earn them more profit. That still hasn’t changed. Just a few days ago, I saw search results for a Bluehead headset from a third-party for $120. Applying a few tricks I know, I was soon viewing other third party vendors, including the manufacturer, who were selling that exact same headset for about $70. Amazon is that dishonest. It isn’t just ripping off authors. It rips off customers. And that’s no accident. As that Amazon lawyer told me, that’s their policy.

    Last year, I wrote letters to about a dozen of Amazon’s top executives over their not always well-hidden hard-core porn ebooks, both their existence and their spilling over into ordinary page displays. A friend who works for Google in Seattle told me that she knew Amazon programmers who be tasked with finding ways of hiding the stuff. Amazon ought to just drop them. Ah, but Amazon is most greedy.

    And I’m now taking them for how they cheat authors out of royalties. Will my hounding make a difference? Probably not, but taking them to court will, which is what someone I know did. That’s how they were forced to end their policy of dropping the Buy Button for POD publishers who were using Lightning Source rather than CreateSpace. That’s illegal bundling and they were headed for a big loss in Maine federal court when they backed down and settled out of court.

    I’m quite aware that ethical and moral arguments get nowhere with Amazon, but I stay in the fight to help inspire legal actions that will. Amazon isn’t Pure Evil, but it is Evil As Long As It Can Get Away With It. It can change, but only if it is made to change.

    No, what’s wrong isn’t me. In one sense, it is all the little spineless little writers who put up with whatever Amazon does under the sad illusion that being on Amazon means they’ve ‘arrived’ as a writer. No it isn’t any more true that all the cheap made-in-China plastic trash on Amazon means a company has arrived as a manufacturer. Considered as a publisher, there’s no publisher on the planet that is less discerning and no publisher that 99.999999% of the time does less for it’s authors than Amazon. It simply posts a web page.

    ——-
    Those who’d like the inside scoop on what is happening in the Hachette dispute should visits Mark Croker’s remarks at:

    http://blog.smashwords.com/2014/05/amazons-hachette-dispute-foreshadows.html

    No one knows the inside of ebook publishing like the head of Smashwords. Here’s what he says to independent authors:

    —–
    The dispute with Hachette foreshadows what comes next for indie ebook authors at Amazon who have grown comfortable to KDP’s 70% royalty rates.

    Think about my divide and conquer reference above. Indies are already divided and conquered at Amazon, but most don’t realize this. These indies all have direct-upload relationships with Amazon. They don’t have the collective bargaining power of a large publisher to advocate on their behalf. As the unfolding events indicate, it’s questionable if even a large publisher has leverage over Amazon.

    If Hachette doesn’t have the power to maintain 70% earnings, how will million-copy-selling New York Times bestselling indie authors have any power when Amazon decides to put the squeeze on them? And how about the rest of the indie community which has even less leverage over Amazon?

    How long until Amazon puts on the squeeze? The squeeze may already have started. In February, Amazon gutted the royalty rates they pay for audiobooks, as Laura Hazard Owen reported at GigaOm in her story, Amazon-owned Audible lowers royalty rates on self-published audiobooks. Previously, authors earned up to 90% list. Under the new terms, authors earn from 25% to 40% list. Amazon can do this because they dominate audiobooks.

    At any time, Amazon could choose to eliminate the 70% royalty option at KDP. They could offer the same terms as their Audible division: 25% list if you’re non-exclusive, and 40% list if you’re exclusive.

    If Amazon tightens the screws, indies will face the same painful decision Hachette now faces. Either swallow the bitter pill, or remove your books from Amazon.

    _______

    I’ll comment on what he says. If Amazon can slash its author royalties even lower, say in the 40% range. It can undercut other retailers paying 70% and, with the possible exception of deep-pocketed Apple, drive them out of business. That is why it wants agency pricing eliminated. Agency pricing means authors can keep Amazon from cutting prices and destroying almost every ebook retailer but itself.

    No, Stacy this isn’t the sort of situation where it makes sense to run away and sulk. This is a situation where it makes sense to stand and fight. I might add that all is not glumness. Independent authors are, at this moment, fighting alongside publishing giants who have lunch with the heads of major networks. They can make Amazon a bit uncomfortable. You can see the results of than as Amazon fanboys lament the ‘spin’ the press can put on a story.

    Mark Coker agrees with me that the answer isn’t to leave Amazon and sulk. It is to “Diversify your income stream by distributing everywhere. Every retailer reaches new readers you otherwise won’t reach. Each retailer, and each store they operate in each country, represents its own unique micro-market of readers.”

    Read what Mark Coker has to say. No one knows ebook publishing better than he and no one is more on the side of independent authors. And he’s saying that we need to fight not run and hide and certainly not refuse to take sides in a dispute that is of ultimate importance to what we are doing.

    –Michael W. Perry, co-author of Lily’s Ride: Rescuing her Father from the Klan (Very inspirational!)

  6. @Michael W. Perry

    I’m sorry, i can’t let that comment pass. If you feel Amazon is underpaying your royalties, then by all means, pull your books from them and sell through Smashwords, Gumroad, or some other more accommodating entity that will provide files for Kindles. In fact, for various reasons of my own, I’m unlikely to buy an E-book from Amazon and would only buy from such an entity instead.

    What you say? Then you would lose sales and make even less money??? In the real world, we call that money Amazon earned, not money they mugged from you.

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