The Shatzkin Files


The new Amazon offer to Hachette


I was at 8,000 feet on a mountain hike in Colorado when a reporter called my cell phone, told me about Amazon’s latest “offer” to “resolve” the dispute with Hachette, and asked for my reaction. My first thought was, “wow, what a brilliant move by Amazon and it seems, at first, like a win all around.” I might have heard this wrong, but I think the reporter was under the impression at that point that Hachette would accept the offer. That was wrong, and so was my first reaction.

What Amazon proposed was that instead of paying Hachette its normal (and presumed 70%) cut of ebook sales, Amazon simply pay the authors 100% of the proceeds. That ostensibly has both sides just giving up its margin and having the authors get more. Seems a reasonable temporary compromise, until you do the math. I didn’t do it on the mountain, but I’ve done it since.

It’s a terrible deal for Hachette; one they can’t possibly accept. And most of their authors, if they were honest, would admit they couldn’t benefit so much from it either.

What the deal elides — as does almost all the “analysis” about how authors fare with big publishers versus how they fare with Amazon — is “unearned advances”. For the biggest authors with the biggest sales of print and ebooks, Hachette has already paid the ebook royalties at more than the contractual “25% of publisher revenue” rate.

So we have a $10 ebook. Normally, Amazon would pay $7 to Hachette and keep $3. Hachette would notionally divide the $7 as $5.25 to Hachette and $1.75 to the author. What Amazon proposed was that the author would get the whole ten dollars, Amazon would give up its $3 and Hachette would give up its $5.25. Not quite fair, and, to be honest, I hadn’t even done that math when I spoke to the reporter.

But the math is worse than that because Hachette has already paid the author’s $1.75 in the advance for the lion’s share of the sales that would be made under this deal if it were agreed to. So Amazon is giving up $3 and Hachette is giving up $7 on most of the books. And many of the authors, frankly, aren’t entitled to even their own share on those sales (they already got it), let alone Hachette’s (or Amazon’s).

It would already seem that Amazon holds the high cards here. They are apparently around 60 percent of Hachette’s ebook business. But Hachette’s ebook business is a smidgen of Amazon’s, almost certainly less than 10 percent. And the percentage of its total operating margin Amazon loses in the Hachette dispute is a fraction of the percentage of operating margin that Hachette loses, even before this latest gambit. From the outside, it would appear that Amazon’s “staying power” during this dispute was already much greater than Hachette’s.

This “offer” would further tilt that ground to Amazon’s advantage. It is a deal that Hachette couldn’t accept, but it makes Amazon look good to some authors, particularly to many of the indie authors who have never fully taken on board the “unearned advance” part of the author revenue piece. Since I came to the wrong quick conclusion, I find it easy to understand how anybody else could do the same thing.

Pardon the brief and unlinked piece. I’ve got a plane to catch.

 

 

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  • Kate Barsotti

    Thanks. I appreciate your analyses of the complex industry.

  • http://josephratliff.com/ JosephRatliff

    As far as I understand this…

    Amazon negotiated it’s original terms with Hachette before all of this. Terms which guide the math you’re using in this post, Mike.

    The result of this “offer” by Amazon is more money for the author, less of a loss by Amazon, and more of a loss by Hachette because … wait for it …

    Terms that were negotiated long before this was necessary.

    Of course Hachette loses, math is math. But as the old saying goes… “You made your bed, now you gotta sleep in it.”

    IF Hachette were going to take the offer, that is. They have already rejected it though. So no one has “lost” or “won” anything yet … except solid PR for Amazon no matter which way the ball bounces.

    • http://idealog.com/blog Mike Shatzkin

      Without being too self-congratulatory: if Amazon’s offer could lead me to the wrong conclusion for a few hours, I have no doubt it is a PR triumph. I don’t quite follow the rest of your comment, but I’m pretty sure I don’t agree with it.

  • Matthew

    Jef Bezos is on record as saying he’s happy if Amazon.com only makes a couple of cents profit per transaction. Given the millions of transactions they undertake, Amazon and Bezos will still make millions.
    But considering Amazon can probably make a couple of cents profit on an ebook transaction of 10 cents under an agency model, publishers (and self publishing authors) would be mad to let Amazon.com have the final say on the price of a book. If he’s happy to take the price of books this low and stil make a profit – he will – and no one else will make any money. Not authors and not publishers.

    The industry needs to resist Amazon’s attempts to control prices if they want to preserve a lanscape of quality literature.

    • http://idealog.com/blog Mike Shatzkin

      Bingo.

    • anon trade author

      The underlying assumption is that publishers are needed to create quality literature.

      That’s the difference between the Indies and the others. The Indies don’t think corporate publishers are needed for the creation of quality literature.

      The exact wording should be, “The industry needs to resist Amazon’s attempts to control prices if they want to preserve their existence.”

      Just saying. Not that this is a bad thing. I’d want to continue to exist, too, if my job were at stake.

      But to equate a person’s job or corporation with the continuation of quality literature is not a viewpoint as widely shared as publishing insiders think it is, and entirely discounts the writer as capable of producing and publishing quality literature (through hiring editors, obviously, but with much less overhead and a lot of executives out of work.)

      • http://idealog.com/blog Mike Shatzkin

        That’s YOUR straw horse allegation of what is the “underlying assumption”. You ride the straw horse very well. But it is still a phony straw horse. And the indie-others dichotomy is a phony one too. The lion’s share of the most successful “indies” are either hybrids who got their start from publishers or genre writers who are very prolific. The world of writers is much bigger than that. And, of course, most of these “indies” are almost entirely dependent on Amazon for revenue. So how “indie” is that?

      • Robgb

        Certainly more indie than belonging to Hachette and having no control over the property you created.

      • http://idealog.com/blog Mike Shatzkin

        I don’t know. You owe what you owe to the source of all or most of your revenue. I think the claim “indie” is way overblown. The Hachette authors who have good deals have agents who can get them a deal somewhere else.

      • Robgb

        I have deals with places other than Amazon. But Amazon isn’t my publisher, so they control nothing but their online real estate. The book is mine. The content and cover are mine. And the profits are mine minus a small percentage to the retailer.

        I went the traditional route for many years. I’m not some green idiot. I know how it works. And most traditionally published DON’T have good deals. They have deals the publisher was willing to make based on its desire to own and distribute their book.

        I, on the other hand, now own all of my books, with the ability to put them up or take them down, as I see fit, without Amazon making any demands of me whatsoever.

        THAT’S independence. Certainly more so than signing with Hachette.

      • http://idealog.com/blog Mike Shatzkin

        You won’t have much “independence” to self-publish if Amazon decides to pay you less. You won’t find substitute revenue elsewhere. And your position is far more dependent than you seem to think it is on Hachette’s position. Remember where that 70% royalty came from. And remember that there’s no guarantee that it stays forever, even for the life of books you have already put into the market.

        I am NOT suggesting your personal strategy is wrong. It may very well be precisely right. I think self-publishing is a perfectly sensible strategy in many cases. I think one can believe that without believing publishers are evil and without believing that self-publishing will work well for most authors.

      • Robgb

        Don’t make the mistake of thinking that I think publishers are evil. I don’t. I was happily published by traditional publishers many times and I worked with some terrific, dedicated people. But let’s face it, because of their overhead, they are incapable of paying me the kind of royalty that competes with Amazon’s retailer’s cut, even if Amazon raises their cut.

        If you think we’re going to suddenly go back to the old model and indies will be left in the cold, then you aren’t paying attention to the obvious trend—the same trend that has been driving the music industry for ten years now, where indies are more profitable and more independent than ever. In those years, indie websites like bandcamp and CD Baby have appeared and are doing quite well. I expect the same thing to happen with ebooks.

        Authors aren’t going to get LESS independent, but more.

      • http://idealog.com/blog Mike Shatzkin

        I agree with that last statement.

        But the music experience is only relevant for a small percentage of the book biz. Too long an explanation for a comment string.

      • Steven Zacharius

        I keep hearing about this trend but I have yet to see one. I have yet to see a huge author leave traditional publishing and we have more manuscripts coming in to be published than we could ever possibly handle. So we select the titles we like avid the others go to other places, get self published or put in a drawer.

      • Steven Zacharius

        If you have a deal with kdp I would guess they are 85% of your revenue so you are totally dependent on them.

    • Bardic

      The one thing I disagree with is that you say noone else will make money. If Hachette sells Amazon a book for $5.00, and Amazon sells it for $5.02, neither Hachette nor Amazon has lost anything, regardless of the MSRP(be it $9.99 or whatever.) How is anyone losing money?

      • http://idealog.com/blog Mike Shatzkin

        Because no other ebook retailer, not subsidized by selling other things, can survive selling at $5.02. And Amazon keeps demonstrating that their next move as others go away is to say “$5 is too much.” Is this really so hard to understand?

      • Bardic

        Ah, okay, if you’re referring to other retailers, then the point makes more sense. The argument I usually see (and maybe is just poorly worded) is that publishers won’t/aren’t making money at those prices, but publishers are paid their price regardless of where the retailer sets their price. What I’m understanding y’all to be complaining about is predatory market pricing between distributors/retailers, which is a different can of worms from how I was interpreting the OP. That’s definitely a thorny discussion. On one hand it gives good prices to consumers, but also creates a vacuum in the retail market, usually forcing one ore more companies out of business.

      • http://idealog.com/blog Mike Shatzkin

        Publishers want prices up to protect a diverse retail network. That’s the primary reason.

      • Elliot1234

        When prices are designed to protect suppliers, consumers lose. If one supplier falls, another steps up to take his place.

        I’d say people want prices up to protect the specific incumbent suppliers who are in business today. They can leave the market, and somone else will enter.

      • http://idealog.com/blog Mike Shatzkin

        Nice application of free market principles. But the market for intellectual property is not best served by allowing markets to set prices. If they were, we wouldn’t have copyrights, patents, or trademarks, all of which are designed to allow their owners to manage supply and influence pricing in markets.

      • Elliot1234

        Intellectual property?

        Our stores are full of patented goods. The market sets the price. The patent holder doesn’t set retail price ar Walmart. It works just fine.

        Does copyright apply to paper books? Seems the market has been doing a good job setting those retail prices for a long time. The copyright holder doesn’t set the bookstore price.

        How about used books? Copyright? The used bookstore sells them for fifty cents. Once again, those free market principles triumph.

        The computer in front of me has a bunch of patented gizmos inside. Yet Amazon set the price.

        CocaCola has a highly valued patent and trademark. But the market sets the retail price, not the CocaCola company.

      • http://idealog.com/blog Mike Shatzkin

        Tiresomely wrong. If you don’t think Apple’s patents raise the price of goods they make and goods others make, you need a more patient blogger to explain it to you. (And Apple is chosen as one of hundreds or thousands of examples because they’re an obvious one, not because they’re exceptional or unusual.) You think you might be able to buy a cheaper printer somewhere if HP didn’t control some patents? I do!

      • Matthew

        Bardic – publishers are NOT “paid their price regardless of where the retailer sets their price” under the agency model. That’s the point. Under the agency model publishers are paid a cut of the retailer’s price. If the retailer sets the price really low the (self) publisher gets very little.

      • http://idealog.com/blog Mike Shatzkin

        No, actually. The publisher sets a price in agency and gets 70% of that. The Court allows discounting but it comes out if the retailer’s share. There is no “agency” for self-publishers. There is a 70% cut from Amazon under certain conditions. Not the same thing.

      • Matthew

        Surely that isn’t the agency model but the wholesale model.

      • http://idealog.com/blog Mike Shatzkin

        Uh, no. The retailer could always discount all they want in the wholesale model. Agency was created with the intention to transfer control of pricing to the publisher and make it uniform across retailers. The court left “agency” in place but required discounting to be allowed, with meaningless limits.

      • anon trad author

        So you really think Bezos is this stupid? Do you really think that his plot is to lower book prices well below 5.00 so it will be impossible for any authors, including Indies, to earn a living?

        The man is a lot of things, but stupid he isn’t. And a plot to make sure that all books are priced close to free would put an abrupt halt to writing books.

        Whereas Bezos has nothing but contempt for publishers, he (believe it or not) has respect for writers and does like books. His wife is a writer, isn’t she?

        Now I understand where the conspiracy theories (Jeff Bezos is out to destroy literature) come from, but once again, it’s based on an assumption that Bezos wants something he has never said he wanted.

        He wants ebooks priced less than physical books, and he wants ebooks priced under 9.99, which logic tells consumers is plenty. If publishers can make a profit selling mass market paper backs for under $10, why not ebooks?

      • http://idealog.com/blog Mike Shatzkin

        I can’t respond to this. You make up conspiracy notions about what people think of Bezos and then attack them. I will respond to people who are responding to what I write. I am not going down rabbit holes with other people’s conspiracy theories.

      • Steven Zacharius

        Let’s keep in mind that when he wanted to be in the diaper business and wanted to buy diapers.com, he told them he would lower the prices to zero to force them to sell to them. And they did finally have to sell. Amazon now has it’s own sort of traditional publishing operation. They as a distributor and retailer are now directly competing against their suppliers. And they are competing against indie authors as well. This is not a good thing.

      • Elliot1234

        “Because no other ebook retailer, not subsidized by selling other things, can survive selling at $5.02. “

        So what? Lots of goods are sold by retailers with a wide range of offerings. We don’t need retailers that specialize in only butter, or books. Books can be sold very well by those who also sell other stuff. It works for thousands of other goods.

      • http://idealog.com/blog Mike Shatzkin

        Yes, but democracy is served by having multiple retailers of books. That’s ultimately why it matters. It doesn’t make nearly the same difference whether there is diversity in the purveyors of butter. And we now have one retailer blasting past half the book sales with no end of market share growth in sight.

      • Elliot1234

        OK. Democracy is served by having multiple retailers of just about everything. But democracy does not demand a retailer specialize in a single product. We can have lots of retailers who sell books in addition to other stuff.

        Who cares if the retailer sells somehting besides books? Democracy doesn’t.

        I agree very little about the future is in sight, especially market share.

      • http://idealog.com/blog Mike Shatzkin

        It doesn’t make a damn bit of difference to democracy how many suppliers we have for eggs or fertilizer. Controlling the suggestions to the customer for those things don’t affect what people know or think. But if Amazon decides that a book calling for a $20 minimum wage is bad for business (even though it might be good for the economy), that would be very damaging to democracy. It’s FINE to have hundreds or thousands or buyers or merchandisers making decisions like that based on their beliefs. It is getting to the point now where the concentration in the book business poses a threat we’ve never seen before. And all Amazon would have to do is behave as corporations do, as a self-interested entity (without, I might add, any religious beliefs or principles!)

      • Elliot1234

        ” Controlling the suggestions to the customer for those things don’t affect what people know or think. “

        Democracy depends on freedom, and that freedom is expressed in free markets. Those eggs and lots of other foodstuffs are vital to the health and welfare of every citizen.

        Given a choice, I suspect the citizens of the democracy would choose the availability of food over books.

        And it’s pretty hard to say we are short on exposure to ideas today. Just click around.

        I’d say the threat is to the specific incumbents in publishing today. But they can go. Someone else will take their place.

      • http://idealog.com/blog Mike Shatzkin

        You are much better at making arguments than at making sense. You’ve overstayed your welcome here. That’s it for you on this post.

    • Steven Zacharius

      I guess he’s not too happy today with the loss reported and the stock dropping 10% and 10% after trading.

  • anon trad author

    So the authors just turn the money over to Hachette. What’s the big deal?

    If Hachette really wants to help it’s authors, Amazon is facilitating a way to do that. If the negotiations are concluded in 3 days, as they would be if Hachette were not stonewalling the talks, not that much money would be at stake.

    You go on about the big advances that don’t earn out. All my traditional contracts have earned out, and have been intended to earn out.

    Your claim that vast majority of authors earn large amounts of money doesn’t comport with my reality or any other writer I know.

    The huge earning authors can tell Amazon to shove it.
    I’m sure the vast majority of little authors are salivating at the idea of a little extra money. We’re hearing from a few hundred of the big authors, but not those at my level.

    By the way, here’s a fact: When SS was in its dispute with BN, SS told its authors not to say anything bad in public about BN. When my friend’s book, published with one of the big 5 wasn’t stocked by BN, she put something negative about BN on her blog and her publisher told her to take it down.

    Watching a publisher wage a public PR fight against it’s biggest distributor is really head shaking. Encouraging its authors to come out publicly against the biggest supplier (yes they are) is also head shaking.

    Also, if Amazon is truly continuing to sell books without a working contract (they say the contract expired) they are actually bending over backward not to disrupt the author’s sales. I’m a lawyer (major law school for what that’s worth) and any lawyer can tell Amazon is engaging in charity if they extended the contract in the face of a supplier stalling negotiations.

    • http://idealog.com/blog Mike Shatzkin

      I’ll stick with the answer in this post.

      And I think you should take on board that generalizing from one’s personal experience is a very dangerous practice.

  • Daniel Knight

    Obviously, Hachette would feel pain if they took this deal – but how is this a bad deal for the authors? You claim that if most Hachette authors were honest with themselves this wouldn’t benefit them. How does collecting 100% of the sale price of their ebooks not benefit them?

    Are we still supposed to believe that Hachette’s primary concern is the well being of their authors after they refuse a deal like this?

    • ljndawson

      Daniel, I believe that’s the whole point. Aside from this being a truly stupendous bit of trolling from Amazon, it is also deliberately meant to point out that Hachette is not as concerned about its authors as their PR would have everyone believe. So…trolling, but having the added benefit of foementing dissatisfaction among Hachette authors, who might choose to publish directly with Amazon next time.

      Now that the cat’s out of the bag, even though Hachette would and will never agree to this, the Hachette authors have to make a decision – am I loyal to my publisher, or are all these companies just giant monoliths who don’t really care about me, so I’ll work with the one who gives me the most payoff? And if a James Patterson or other marquee authors begin leaving Hachette, that will obviously affect their revenue and they’ll have to begin building up another stable of bestselling authors, which might be difficult if they have the reputation of “not caring” about them.

      In the short term, Amazon loses nothing and takes a swipe at Hachette.

      • http://idealog.com/blog Mike Shatzkin

        So far, at least, it seems like the authors on “Amazon’s side” are the “independents” who are, in fact actually the most dependent on Amazon. The published authors, particularly those with big contracts, seem to understand the realpolitik of this whole situation. That could change, but it seems to be there now.

      • ljndawson

        Yes. It’s rather shortsighted of the vocal indie authors, but then again, they’re not exactly going to bite the hand that feeds them.

      • http://idealog.com/blog Mike Shatzkin

        I always expect people to kiss the hands that feed them. It is normal human behavior.

      • Robgb

        Neither of you are wrong in this instance. Indie authors are, of course, loyal to Amazon partly because they make our independence possible. But also because, when you look objectively at the facts as they’ve been presented to us so far by both parties (whether there’s spin going on or not), Amazon comes out on the side of authors and the future of literature. The fact that Amazon empowers authors is not bad for literature.

      • ljndawson

        I agree with your final statement. But I don’t know if Amazon comes out on the side of anything except profit.

        ETA: IOW, that may just be a side effect of Amazon’s, not a purpose.

      • Robgb

        Well, of course. They have shareholders. But don’t for a minute think that Hachette has any other motive.

        The difference is that if Hachette loses this battle, I doubt they’ll change their royalty structure to make up for their authors’ added loss. They COULD raise royalties, if they so chose. But I’d be very surprised if they did.

        Amazon, on the other hand, has done nothing but help authors over the last several years. So while both companies may be in it for the money, I tend to stick with the one that has a history of looking out for my best interests. If that changes in the future, I’ll look in another direction.

      • ljndawson

        I used to work for a publisher AND an ebook retailer, so yes, I know. Which is why I said in my original comment: “or are all these companies just giant monoliths who don’t really care about me, so I’ll work with the one who gives me the most payoff?”

        I don’t know, in this era of abundant content, if anyone consuming it actually loses.

      • http://idealog.com/blog Mike Shatzkin

        I agree with that. It’s a bountiful time for readers. “Discovery” is a *seller’s
        *problem; the buyers are finding more and more to choose from.

      • http://idealog.com/blog Mike Shatzkin

        Of course both companies pursue their own interests. And each of them positions authors differently in that interest. They’re “good” for *different *authors. I really believe the “one or the other” paradigm is coming from the indies. I have never heard Hachette or any other publisher attack the motives or ethics of independent authors. What motivates all these authors to paint Hachette (and the rest of the big publishers) as villains? And don’t they have enough sense to know that if big publisher books are priced higher, it means indie authors can gain more success by using price to their advantage?

      • Steven Zacharius

        Publisher’s responsibilities are to make money for their company. It’s not to make authors money. They try to negotiate the best deal for their house to acquire that author. Competitive situations tend to increase what the authors would get. In a perfect situation the publisher will make money and so will the author, especially from royalties. Publishers can be laying out huge sums of money years in advance of completing a contract and getting the books published. They are taking a risk on investing their capital in new authors who may or may not make money. And in return for this at the end of the day they end up with profits in the single digits.

      • http://idealog.com/blog Mike Shatzkin

        They certainly come out on the side of Amazon! (Not that that is surprising, but it seems like it would surprise some of their supporters, who position them as the selfless defender of the independent author.)

      • http://idealog.com/blog Mike Shatzkin

        Amazon USES authors in their fight with publishers. Do indie authors EVER acknowledge that the 70% share to indie authors was driven by the publishers’ moving to 70% shares on agency? Check the dates when those things happened sometime. Indie authors have publishers to thank for the 70%, and when Amazon beats back those terms — if they succeed in doing that — it would be really amazing if they continued to pay those with the least leverage more than they pay the biggest suppliers of product. Beyond amazing. It would defy gravity and common sense.

      • Robgb

        And if it was, so what? I also have traditional publishing to thank for abandoning many of my friends in the middle of their careers when they had mortgages to pay and kids to put through college.

        And the “Amazon will lower the percentages” argument is old and tired and just needless fear mongering. Even if they do lower them, we’ll still be making more than the average midlist traditional publishing contract, INCLUDING the advance.

      • http://idealog.com/blog Mike Shatzkin

        SOME of you will. And congratulations to those of you who do. The alternative is a good thing. But there are *many *writers who don’t want to be businesspeople and marketers too; they want to be writers.

      • Elliot1234

        There are indeed those who want to write and only write. i wonder if they will be able to compete in the future against the entrepreneurs who write.

      • Industry Observer

        See http://www.authorearnings.com.

        Increasingly, the answer is “no.”

      • http://idealog.com/blog Mike Shatzkin

        The weaknesses of the analysis linked have been covered in many places, including here.

      • Elliot1234

        I wuld be very interested in a link that trashed the Howey analysis from a statistical perspective. Anyone have one?

      • http://idealog.com/blog Mike Shatzkin

        Oh please! Exert a tenth of the effort finding those as you do trolling here.

      • Industry Observer

        I think Dana Weinberg, the DBW writer, attempted one. You can read both and judge for yourself. Mike’s pointed out that the analysis uses royalty rates and doesn’t factor in unearned advances. Still, there’s no better on the breakdown of Amazon sales out there.

        Relevant to this Hachette negotiation, it’s worth looking at: http://authorearnings.com/the-effects-of-the-amazon-hachette-negotiations/

        The data shows that Hachette represents only 7.7% of Amazon’s gross-dollar ebook business and accounts for fewer than 5% of Amazon’s ebook unit sales.

      • http://idealog.com/blog Mike Shatzkin

        Thanks. I’d only add that Dana Weinberg is a professor at Queens College and a data scientist.

      • Industry Observer

        Appealing to authority to mask a lack of substance is a logical fallacy.

      • http://idealog.com/blog Mike Shatzkin

        Just data. Use as you wish. Others will.

      • http://idealog.com/blog Mike Shatzkin

        They always have.

      • Elliot1234

        I don’t think we have had nearly the level of entrepreneurs who write in the past.

        Who were they in the past? How did they distribute? How widespread were they?

        Did they clisk the Amazon upload button? How much market share did they have?

      • http://idealog.com/blog Mike Shatzkin

        Read about Ringer and Dyer. And Patterson is a helluva entrepreneur. You don’t have to self-publish to be one.

      • Steven Zacharius

        Does anybody have stats on how many KDP authors there actually are versus the 150 or so we always hear from? There’s probably 50,000 selling 100 books per year or less.

      • Elliot1234

        Thank you, Hachette.

      • Elliot1234

        Absolutely. Doesn’t matter if the hand is attached to Walmart, the US Post Office, Hachette, or the New York times.

      • Elliot1234

        I’d add the authors on the publishers’ side are mostly published authors who are in fact most dependent on publishers.

        Those who understand realpolitik understand they fare better when the hand that feeds them prospers.

      • http://idealog.com/blog Mike Shatzkin

        D’uh.

      • Elliot1234

        Fair and balanced.

      • http://www.bellbridgebooks.com Deborah Smith Author

        This statement is a good example of the problem in attempting a dialogue with the extremists among self-pubs. They view trad pub authors as hostages, sycophants, etc. There’s no middle ground.

      • http://idealog.com/blog Mike Shatzkin

        In FAIRNESS, I should say that I’ve deleted several posts from Eliot1234 because I just ran out of patience for his persistent subtle misrepresentations of what I said. Not every time, just too often for me to keep bothering with the answers. He outposted his welcome. I love lots of POVs, but I also expect people not to be rude and dominating a conversation as he did. So now he may be responded to by others and not have the ability to answer back in this forum. That isn’t fair, but it is the way it will be for the balance of this particular comment string. The privileges of ownership…

      • Robgb

        Unfortunately, Hachette’s authors have no choice but to be loyal. They are under contract and have no say in the matter. They are at the mercy of whatever Hachette decides within the parameters of that contract, so it’s probably in their best interest to either support Hachette or shut the hell up. Most people who work in (and around) the traditional industry are in the same or a similar boat.

      • ljndawson

        If it’s a multi-book contract, that is true. And, of course, if they publicly view Amazon’s offer as a positive one, others in the Big Five will take notice (and they will). It’s CYA time all around.

      • http://idealog.com/blog Mike Shatzkin

        It’s the paradigm. “Indie” authors are pure and not driven by self-interest, but anybody in “the industry” is corrupt and motivated by greed and fear. Kinda boring and naive…

      • agclaymore

        A bit of reductio ad absurdum, Mike. I didn’t see anything in Rob’s post about indie purity, just an acknowledgement that contracted authors need to consider their publishers interests before speaking publicly(perhaps you recall a certain publisher issuing takedown orders to authors during a dispute with B&N). Indies, if anything, are the very definition of self interest.

      • http://idealog.com/blog Mike Shatzkin

        I think it is a bit disingenuous to say that “indies” have no “self-interest” in defending Amazon and attacking publishers!

      • agclaymore

        It certainly would be disingenuous. I don’t think there’s any disagreement there, unless it’s farther upthread and I missed it.

      • http://idealog.com/blog Mike Shatzkin

        No problem. This comment thread is so ridiculously long I can’t recall it either and I’m sure not going through it again!

      • Robgb

        The difference is that indies don’t work for Amazon. We don’t publish with them. We pay them a fee to carry our books, just like a lawn mower company. Just like Hachette does.

        So our defense doesn’t spring from any kind of fear of offending our corporate overlords. We see that Amazon is unjustly being targeted, so we feel the need to set the record straight.

        What’s hilarious is that three years ago we wouldn’t even be having this conversation. Indies were considered completely irrelevant by everyone in the industry (and I was part of the industry and heard a lot of disparaging things). Times have certainly changed.

      • http://idealog.com/blog Mike Shatzkin

        For MOST indie authors, NOT “just like Hachette does”. Because Hachette is collecting more money from the rest of the world than it is from Amazon. And from lots of different sources. Anybody with a single principle revenue source is beholden and very few people in that position won’t put a favorable spin on the source of their bread and butter. I can’t see how that could even be a contentious point.

      • http://www.bellbridgebooks.com Deborah Smith Author

        The tone and structure of the indie arguments against all traditional publishers on all issues of any kind pretty much says they believe an ideology they consider pure.

      • agclaymore

        I doubt any argument is ever polarized to such an extreme. I’m an indie, but I’m not following any kind of pure ideology that I’m aware of. I have no axe to grind, I just visit Mike’s blog to stay informed on how both sides of the industry are thinking.
        Granted, there are some who want to see an end to the traditional model, just as there are those who’d claim that Indies produce nothing but garbage. The trick is to ignore the extreme fringe on both sides and conduct the dialogue in the middle ground.

      • Anonymous

        Deborah, if the world were as simple as you make it sound, then some of Belle Bridge’s best authors wouldn’t privately be telling friends they plan to indie-publish their next book.

      • http://idealog.com/blog Mike Shatzkin

        Well, THAT sure sounds like conclusive evidence of something. How persuasive!

      • Anonymous

        Sorry if that was unclear. Let me spell it out so it’s less confusing for you. Most authors, however they are published, will choose a path for their next project not based on imaginary “ideologies” that vocal trolls ascribe to them, but rather based on simple business economics.

      • http://idealog.com/blog Mike Shatzkin

        It’s not hard to agree on *that*.

      • Steven Zacharius

        Yes and in the overwhelming numbers of cases those economics come down to the amount of money they are being advanced.

      • Robgb

        Absolutely. If publishers start offering five hundred thousand dollar advances rather than the typical 5K-15K, I’m sure many authors will come running. For $500K, I probably would, too. I’m not stupid.

        And there will always be those who are afraid of the idea of starting their own business, so they’ll take a small advance and be happy they’re published. It’s like any other business. Some people take jobs and others start companies.

      • http://idealog.com/blog Mike Shatzkin

        And the ratios across most endeavors are that more people are in jobs than starting companies. It’s not a 50-50 thing very often, if ever.

      • Steven Zacharius

        If a publisher thought a writer was worth $500,000, they would offer it. There are many writers at that level.

      • http://www.bellbridgebooks.com Deborah Smith Author

        Gosh, Anonymous, 1. I know that already and 2. those are authors who aren’t doing very well and probably won’t do well at self-publishing, either and 3. if you want to be taken seriously, have the courage to use your name when you publish a squeezy note.

      • http://www.bellbridgebooks.com Deborah Smith Author

        And now for the official response to the Anonymous Mice of the world, LOL: There are many paths to successful publishing and those paths work differently for different authors at different times. As the landscape continues to shift from the gold rush days of 2009 to 2012 to the flatline competition-heavy days we face now, small presses as well as indie and hybrid authors face a whole new set of challenges. For most authors, especially those outside the hot arenas of sexy/erotic romance series, surfacing books is a long-term prospect, requiring patience and hard work. We have many many authors who come to us as indies and hybrids, and who continue to work as hybrids. We totally support their goals. And for those whose paths are better served by the fast pace of self-publishing — we encourage them to take that path. Our book list covers a wide array of genres and authors. By far, our authors are happy to be supported by a quality publisher, whether they are solely traditional or hybrid. As always, we work toward long term goals, not short-term results.

      • Steven Zacharius

        Funny, I said the same thing about logging in with a name like anonymous. And hearing that two authors might go indie is different than seeing it happen. We’re they low list authors or stars?

      • Robgb

        I’ve come to the conclusion that reductio ad absurdum is Mike’s stock in trade.

      • http://idealog.com/blog Mike Shatzkin

        Always nice to get insults from the good people who drop by.

    • http://idealog.com/blog Mike Shatzkin

      I didn’t say it didn’t “benefit” authors. I said the authors for MOST of the sales that will be made of Hachette ebooks have ALREADY BEEN PAID for those sales. One Hachette author I saw posting somewhere said “I’d be obliged to give what I get from Amazon to Hachette.” I believe that is morally right. It is possibly also legally correct.

      I suspect Hachette’s primary concern is their own business. I suspect that’s Amazon’s primary concern as well. I suspect that anybody who thinks otherwise about either is wildly unrealistic.

      • Elliot1234

        “I didn’t say it didn’t “benefit” authors. I said the authors for MOST of the sales that will be made of Hachette ebooks have ALREADY BEEN PAID for those sales.”

        Could be. What percentage of all Hachette authors are in that class? What percentage of all Hachette authors represent “MOST of the sales that will be made of Hachette books?”

        Should we care about the others?

        I’d also add that while they may have been paid for the sales, Amazon is proposing paying them much more. I accept the deep concern Preston and Patterson have expressed for Hachette authors. Wouldn’t it be wonderful to actually increase the welfare of those special people?

      • Anon trad author

        NO!!! NOT THAT !!!

        Haven’t you caught on yet? It doesn’t benefit Hachette.

      • http://idealog.com/blog Mike Shatzkin

        Nope, just dumb. Haven’t “caught on”. Find a comment string with a blogger with a higher IQ. Don’t waste your time here!

      • anon trad author

        I was replying to Elliot :)

        You keep thinking I’m replying to you. The little arrow shows I was telling him that he hadn’t caught on yet.

        I was being a little sarcastic, admittedly, but to him, not you.

      • http://idealog.com/blog Mike Shatzkin

        Sorry.

      • Elliot1234

        Replying to me? OK. Then I guess my thoughts are summed up as follows:

        Nope, just dumb. Haven’t “caught on”. Find a comment string with a blogger with a higher IQ. Don’t waste your time here!

      • http://idealog.com/blog Mike Shatzkin

        Probably a minority. But that doesn’t change the commercial reality. And, in fact, neither of us know the answer to that question, posed because the formulation I presented can’t really be challenged.

      • Elliot1234

        OK. So how about the majority? .It sounds like the Amazon 100% offer is a pretty good deal for the majority.

      • http://idealog.com/blog Mike Shatzkin

        Well, of course. It was intended to be. But it is also sort of irrelevant. The reality is that the “offer” weakens Hachette’s negotiating position with Amazon (in CASH) and, at the same time, creates real complications in their relationships with their authors. And MOST of the dollars would go as unearned benefit to the wealthiest players already in the game. Is that supposed to be a good thing?

      • Elliot1234

        Sure. But we should remember the focus of Hachette and the folks who signed onto the Preston letter. They kept telling us how authors were being directly targeted by Amazon. They didn’t seem too concerned with Hachette.

        Now Amazon really is directly targeting them, and trying to hurl gobs of cash at them.

        Suddenly, the welfare of those authors fades, we learn they have already been paid, and the welfare of Hachette pushes them off the stage.

        And if we accept that there is some damage done to authors beyond mere dollars, that money from Amazon can compensate for it.

      • http://idealog.com/blog Mike Shatzkin

        Not entirely untrue but not persuasive. This is a negotiation between Amazon and Hachette. The author grandstanding isn’t sincere, is questionably relevant, and creates all new complications.

      • Elliot1234

        Preston and Patterson weren’t sincere? Didn’t really care about authors being directly targeted by Amazon? Hachette didn’t really care about those poor authors being damaged by the fickle pre-order button?

        Say it ain’t so…

        Given that level of grandstanding, what should we make of claims of damage from that preorder button?

      • http://idealog.com/blog Mike Shatzkin

        I don’t write for Preston and Patterson. I do understand the damage of the pre-order button. I defend my writing, not theirs.

      • http://www.bellbridgebooks.com Deborah Smith Author

        I was just thinking that. The authors have only created a distraction that hurts their best interests in the long run. Now they’ve become PR pawns.

      • http://idealog.com/blog Mike Shatzkin

        Welcome to the discussion, Deborah. If you look at the string, you’ll see I need you here!

      • Daniel Knight

        Mike you wrote “And most of their authors, if they were honest, would admit they couldn’t benefit so much from it either.” From reading the rest of your comments I think what you meant to say is you think they “shouldn’t” benefit because you think it wouldn’t be moral and/or legal. The glaring flaw in your logic though is that for the deal to proceed – Hatchette would have to say yes – thus removing any moral or legal objections.

      • http://idealog.com/blog Mike Shatzkin

        Correct on the “edit”. And you make a good point: actually explains why Hachette can’t agree, although they could agree with the condition that advance against royalty agreements be honored as they were written. Nice catches both.

      • anon trad author

        There is no law against giving writers extra money. I’ve seen people interpret contracts that way. “I can only give you $10 because that’s what the contract says. I can’t give you more.” Wrong.

        In fact, the idea was that giving the writers a windfall would compensate authors for the harm being done by stalled negotiations involving two parties. Hachette’s insistence that all the problems are all Amazon’s fault doesn’t ring true, as anyone who has conducted negotiations knows. One party can feel it’s all the other’s fault, but that’s generally subjective and flawed.

        Also, who are Hachette’s lawyers? Didn’t they take basic negotiating classes? Offers are meant to be counter offered. Maybe Amazon thought Hachette should pay a bigger share of the author windfall because they were doing more to drag their feet.

        So instead of rejecting the offer, Hachette should have counter offered.

        It isn’t immoral or illegal to give writers more than they are entitled to.

        It’s hard, though, to see someone being damaged or harmed by the removal of a preorder button when that is a privilege Amazon offers to some publishers and not others (KDP users don’t get it.)

        I understand they feel damaged, but removal of a privilege usually isn’t a punishment.

      • anon trad author

        The million dollar earners can opt out, give their windfall to Hachette, or charity.

        But the hoards of smaller earners I’m sure are salivating at the idea of a little extra money.

      • http://idealog.com/blog Mike Shatzkin

        Uh, yeah…if that constitutes a persuasive argument, I’m missing it.

      • anon trad author

        I don’t know what you mean by persuasive.

        It was tactically very smart. It reframed the discussion. Instead of Hachette saying, “Amazon is harming authors,” it forces Hachette to say, “Why should we give a windfall to authors if it benefits Amazon more than us?”

      • http://idealog.com/blog Mike Shatzkin

        It certainly gives energy to the already-persuaded! Whether it will do much more than that is certainly debatable. But that’s about all..

      • Steven Zacharius

        Anyone who doesn’t see the Amazon offer as anything more than a publicity stunt is naive.

      • http://idealog.com/blog Mike Shatzkin

        I am not sure where in this argument you explain why Hachette should agree to something that strengthens the hand of their negotiating adversary and at the same time causes renegotiation (or at least confusion) problems with key trading partners (their authors). Arguing that “somehow they *can*” doesn’t explain why they *should*.

      • anan trad author

        They “should” because it benefits the authors.

        That’s why it was so brilliant.

        Hachette has been framing the public discussion (and it should never have gone public) that “Amazon is harming our authors.”

        So Amazon comes up with a proposal that puts a windfall into the pockets of the authors. When Hachette rejects it because it isn’t in Hachette’s best interest, Hachette looks bad.

        For whatever it’s worth, I got a good grade in negotiating in law school. Reading between the lines, it looks like a clever way to get Hachette to come to an agreement quickly, because that’s the only way Hachette can get out of this without looking really really bad.

        As far as general PR, this isn’t hurting Amazon. Most people aren’t paying attention. A very intelligent college educated man asked me yesterday the difference between a publisher and a printer. Amazon’s customer base doesn’t care.

        But every author is watching this, Indies, trad authors, newbies, people like me straddling the fence (I have trad contracts, and am actually signing a new one any day, and I self publish under a pen name.) Authors are the audience now.

        From a negotiating viewpoint, Amazon’s offer was a brilliant stroke — forcing Hachette to come to an agreement quickly, and take the wind out of the “Amazon is harming authors” war cry.

      • http://idealog.com/blog Mike Shatzkin

        Congratulations on your law school accomplishments! They may add some apparent credibility to your arguments, but they don’t strengthen them.
        It is apparently failing at forcing Hachette to a quick agreement and I doubt it will have much meaningful impact on authors. Authors should, and do, decide on their publishing arrangements by their perception of what’s best for them. With Hachette, that will largely revolve around the size of the advance, not on Amazon’s PR.

      • anon trad author

        I don’t believe that’s the only consideration. I recently accepted an offer from a major publisher, and size of advance wasn’t my concern. My circumstances are unique, though.

        In the past, the major attraction of the established publishers was bookstore placement. With bookstores losing importance, and Hachette in the middle of a very public feud with a major distributor, I’d think doubts about possible bookstore advantages will creep in. All this discussion on the boards about Hachette is now forever part of the public record.

        Given the unique distribution of my traditionally published books, I’m not much affected if my publisher has a falling out with Amazon, but others would be.

      • http://idealog.com/blog Mike Shatzkin

        I was making a generalization — that the advance would be most important for *most *authors. The more “unique” one’s book or distribution requirements are, the more likely one would be to be an exception to the generalization.

        The observation about publishers’ importance diminishing as bookstores do is correct. They will either replace that value with digital marketing capabilities at scale or they will have a steadily diminishing importance. That’s been said on this blog for a long time, probably going back to 2009 when I started it.

      • http://www.bellbridgebooks.com Deborah Smith Author

        This is an Amazon stunt, not Amazon expressing luv for authors. Amazon stands to benefit. Hachette stands to lose. Amazon makes over 100 billion dollars a year. Hachette USA Book Group makes approx. 650 million. What’s best for authors is the longterm outcome of this contract negotiation, not the bribe money offered by Amazon to shut them up.

      • http://idealog.com/blog Mike Shatzkin

        I would say Amazon “grosses” $100 billion and Hachette $650 million. Those are *sales *numbers. To say they *make *that would imply “profit”. Amazon reinvests just about everything they can to zero out profit in return for future growth so the sales differential is a more accurate reflection of their difference in size. You are using the right numbers, but I’m just suggesting re-labeling them.

  • Liza Dawson

    At first I was distressed when I heard about Amazon’s proposal to Hatchette’s authors. How evil and dastardly of Amazon! Then it seemed like brilliant negotiating — separate authors from their publishers. But I’ve concluded that this is Bezos having fun. It’s a very amusing notion. What a wonderful distraction Amazon has offered up. Suddenly we’re all talking about it and analyzing it and giving it credence. Now Amazon can come back with a counter proposal– one that is not as “radical” as giving all authors 100% of all profits. In comparison it will appear that they are now being reasonable. Here’s what I suggest: Laugh and walk away, publishing friends. There’s nothing to see here.

    • anon trad author

      It was really brilliant, coming out of left field, throwing everyone into a dither, forcing people to really assess their assumptions about who wants what’s best for authors.

      I took a negotiating class in law school, and my first react was that was absolutely brilliant. Whatever happens Amazon wins, and future attempts to paint them Amazon evil start to seem contorted and contrived.

      Funny that you were distressed though. It’s all gone topsy-turvy when when agents are distressed by the idea of authors getting a windfall at the expense of the publisher. Actually, topsy turvy doesn’t begin to describe it :)

      • http://idealog.com/blog Mike Shatzkin

        You may be misunderstanding something. I am not an agent. I’m an independent consultant and I own a conference business (proudly featuring Russ Grandinetti of Amazon at this year’s Digital Book World 2015, and put Hugh Howey on the stage 18 months ago) and a digital marketing business. I have sold books to publishers myself and as an agent over the many years I’ve been in the business, but it is a negligible proportion of my activity.

      • Anon trad author

        Liza Dawson posting above is an agent

      • http://idealog.com/blog Mike Shatzkin

        Which from the point of view of some is “outing” her as some sort of interested party but from my point of view is crediting her with an informed perspective.

      • anon trad author

        Since she used her real name, I didn’t think it was a secret. I was admonishing her, not outing her or holding her up as an authority. Agents *should* be looking out for their clients and not the publishing houses. If the best interest of the publishing house and the best interest of the author were always perfectly aligned, we wouldn’t need agents. I believe she understood what I was saying.

      • http://idealog.com/blog Mike Shatzkin

        Sorry to have confused things. I meant that ironically. Of course Liza is known to be an agent; I’m sure she’s proud to be an agent; and I am quite certain she has no problem being identified as an agent. I was making a joke that apparently wasn’t obvious enough.

    • http://idealog.com/blog Mike Shatzkin

      It’s just hard to “laugh” because the situation isn’t funny. It’s really painful.

    • Elliot1234

      Amazon’s proposal was just as reasonable as all the folks telling us how Amazon was directly targeting Hachette authors. It is a perfectly appropriate respnse.

      But Mike reminds us that the authors are not being harmed because of those advances.

      • http://idealog.com/blog Mike Shatzkin

        Eliot, I will start to delete your comments if you want to continue to mischaracterize what I say. And I won’t explain it or justify it. I don’t have the interest.

      • Elliot1234

        “And they are damaged in other ways.”
        Mike Shatzkin, this thread.

        Well can you clarify? In what ways are authors being damaged? In what ways are they not being damaged? How does the fact that they have already been paid for their books affect the damage status?

        I think the advances were the point of your post. We learned you were almost misled, but rallied back when you factored those advances into the mix. I do congratulate you. Intersting idea to explore.

      • http://idealog.com/blog Mike Shatzkin

        Been answered.Eliot, would you mind shifting your attention to some other blogger who will appreciate you more?

    • Peter Turner

      One of the only bits of sane advice to come out of this meshugass. Thank you!

  • Lucy B.

    It’s a smart PR move by Amazon and they’ve done a good job at having a lot of people looking at the shiny surface without thinking about what the offer really means.

    Amazon is saying that it wants to take authors out of the middle of this negotiation and wants to compensate them for the harm they’re suffering during the negotiations. Why are authors suffering harm? Because they’re sales are decreasing through Amazon due to the delayed shipments, lack of pre-order buttons, and lack of the usual discounting. Who controls whether there are pre-order buttons, discounting, and adequate warehouse stock? Amazon (as they seem to have made clear in making this offer).

    Amazon is now saying that if Hachette accepts their offer, they’ll return Hachette authors to status quo ante — they’ll reinstate discounts, pre-order buttons, and adequate warehouse stock. Which means Hachette authors will no longer be harmed… so why do they then need compensation?

    If Amazon truly wants to take authors out of the middle of this, they can treat Hachette books the way they treat all other books. But that would undermine their negotiating position. This isn’t to cast Amazon as evil or Hachette as without blame — Hachette could also take authors out of the middle by accepting Amazon’s 100% revenue to authors offer. Though that too would undermine their negotiating position.

    • http://idealog.com/blog Mike Shatzkin

      I’m pretty much with you on this. It’s a brilliant PR move and each side is really defending its own position. That’s right.

      • Lucy B.

        I’ll be curious to see if it shifts the PR tide since that seems to be what it’s intended to do. Which is surprising on its own — that Amazon felt the need to step up their PR efforts says to me they’re concerned. I wouldn’t have expected that.

      • Industry Observer

        See my other comment, Lucy.

        It’s likely a pre-emptive strike to pave the way for what comes next:

        Removal of all Hachette titles from their store.

      • http://idealog.com/blog Mike Shatzkin

        Almost certainly not quite that.

        Remember, Amazon did not offer to give up ALL revenue from Hachette titles. In fact, their proposal would have *increased *their revenue on print titles by putting back the pre-order buttons. What they offered was to forgo revenue on ebook titles. Perhaps your suggestion is only that they’ll remove all Hachette ebooks from the store. I’d think not because a lot of Kindle owners would be very upset at what they’d be losing. But extreme predictions certainly get one’s attention.

      • Industry Observer

        We shall see. For Amazon, pulling Hachette’s titles to drive them to the table (or make an example of them) makes a lot of sense.

        The $49M/year Amazon would lose by de-listing Hachette ebooks is a small % of Amazon’s $750M annual ebook revenue. And it would be largely offset by those Kindle users buying other books instead.

        Hachette, on the other hand, stands to lose something like $190M/year, minus whatever earned-out royalties they would have paid out of that to their authors, and offset by whatever tiny portion of those lost Kindle sales move to Nook, iBooks, etc. instead. (It’ll be a tiny portion, because of Amazon customer lock-in to their Kindle devices and libraries).

        The bigger question is how much additional PR damage Amazon will suffer in their customer’s eyes. But I think, given the media coverage to date implying that Amazon has already “boycotted” Hachette titles, they may have been handed a free pass.

        Strategically, Amazon needs to make an example of Hachette to set a clear precedent for when it’s PRH’s turn in the barrel.

        *That’s* the main event. The Hachette negotiation’s just a warmup act.

      • http://idealog.com/blog Mike Shatzkin

        In my opinion, Amazon would *never *try this with Penguin Random House. PRH is more than five times bigger than Hachette and the damage to Amazon’s relationship with its customer base would be MORE than five times bigger. One of the consequences the whole Hachette-Amazon battle points us toward is that PRH will ultimately have better margins than the other big publishers precisely because they are so much harder to bully on terms. That’s a goad to Hachette and the others. But remember, Penguin Random House is about as big as the other four big houses *combined*. Even if Amazon gets them *all *to yield, it doesn’t mean they’ll get PRH on the same terms. I wrote about this a few weeks ago and I am bit surprised nobody else seems to have picked up on it. http://www.idealog.com/blog/amazon-hachette-coverage-doesnt-seem-cover-causes-implications/

      • Industry Observer

        PRH is bigger and has more negotiating leverage as you say. In dollar terms, PRH makes up roughly 25% of Amazon’s ebook business. Whatever concessions Amazon makes to Hachette now will only be the starting point for the upcoming Amazon-PRH negotiation. That seems like a strong incentive for Amazon to hold the line with Hachette now.

        The staggered Big-5 negotiations also provide Amazon more time to shift market share to the non-Big-5 portion of their ebook business (medium and small publishers, micropresses, digital presses, and self-publishers), reducing the Big-5’s negotiating leverage over time.

        I’m unfamiliar with the details of the DOJ ruling, although I’ve heard negotiations were supposed to be staggered at six-month increments: was a specific order assigned? When is PRH’s turn?

      • http://idealog.com/blog Mike Shatzkin

        For the details of the negotiating order — which a) makes my non-legal eyes glaze over and b) which everybody seems to misunderstand — I refer you to Publishers Marketplace and Publishers Lunch, where Michael Cader is the ONLY reporter who keeps all this straight. This current negotiaton apparently has NOTHING to do with the consent decree. Apparently the notion that Hachette is now “forcing” Amazon back to full agency is not possible, based on the legal realities, although it is commonly suggested that is the case. So, if you want to get into the details of this, read Cader.

        AND: I don’t really understand all the details, but PRH was two companies when the legal stuff happened. Penguin was part of the lawsuit and the settlements. Random House was NOT. Exactly what that means in the current situation, I don’t know.

        But it doesn’t make any difference.

        In my opinion, Amazon can not pull the buy buttons or pre-order buttons for PRH without doing *themselves *grievous damage. The STORY here is that PRH will soon, largely because of Amazon (although the same thing will be true of B&N), have better margins in the marketplace than their competitors. That is the critically important element of what is going on which *everybody *seems to ignore or fail to understand.

      • Industry Observer

        I’ll take another look at Cader — his past articles haven’t impressed me mudh.

        I’m not sure PRH is in as strong a position as you think, and I think it’s weakening quarter by quarter as Amazon shifts market share away from all of the Big-5 publishers. But time will tell.

        If I were advising PRH, I would tell them they should try to force the issue with Amazon now, while they still make up a fifth of Amazon ebooks sold (and a quarter of Amazon’s ebook revenue). If they wait too long, it’ll be a much tougher negotiation in the future. Especially if Amazon decides to test the waters by de-listing one of the smaller Big-5 publishers to see how many sales they actually lose by doing so.

        If I were advising Amazon, I’d recommend they run that experiment.

      • http://idealog.com/blog Mike Shatzkin

        Don’t know you and your authority and what you know about the book business. But if you don’t read Cader you don’t REALLY know what’s going on in it. It is pretty much that simple.
        And, believe me, PRH’s position isn’t weakening. They’re taking share from everybody else ongoing. And will continue to.

      • Steven Zacharius

        the indie sales are not hurting PRH. You’re just making up story lines here.

      • http://idealog.com/blog Mike Shatzkin

        They don’t need to be “concerned” to take an action they think will benefit them from a PR point of view. And I think they’ve been working on the PR all along, frankly. Why wouldn’t they?

    • JayneA

      After some consideration, I think the real point of this letter was to get the negotiation timeline out in the public because that part definitely doesn’t look good for Hachette.

      If Amazon has indeed been without a contract, why would you expect them to maintain inventories, allow pre-orders, discounting, etc.? They’re probably doing far more for authors right now than they “should” be from a legal standpoint because rarely would it would be in a company’s best interest to be working without a contract.

      • Lucy B.

        It is my understanding that the terms of the old contract continue until the new contract is negotiated. Even if that’s not the case, there must be some understanding between the parties for Amazon to still be selling Hachette books. Amazon either has the right to sell Hachette books or they don’t.

        Amazon said in its offer that if Hachette will give up proceeds from their ebook sales, they will reinstate the pre-order buttons, maintain inventories, reinstate discounts, etc. This without entering into a new contract. Therefore it seems likely to me that these are all actions that Amazon can legally take under their current contract/understanding. They are simply choosing not to at this moment as a negotiation tactic.

        I’m not saying that anyone should expect Amazon to maintain inventories and allow pre-orders — but I think it’s their choice not to do so. They even stated that they took these actions to put pressure on Hachette to negotiate.

      • anon trade author

        No, contracts do not continue until a new contract is negotiated — unless those at the specific terms of the contract, which would be unusual, and possibly illegal. Contracts cannot continue indefinitely. . If Amazon is telling the truth and the contract expired, but it is continuing to sell Hachette books after the contract has expired, the are being very charitable and kind. Most businesses would not do this.

        wanting all books to be treated equally is silly when individual contracts are not negotiated. KDP books are not treated the same as Hachette books. They cannot be priced over 9.99, there are no preorder buttons, and Amazon doesn’t stock paper items (all POD for indies)

      • http://idealog.com/blog Mike Shatzkin

        Publishers sell books to retailers all the time without contracts. All the time. To most retailers.

      • http://idealog.com/blog Mike Shatzkin

        Your answer is a more thorough answer than mine of the same question, with which I agree.

      • http://idealog.com/blog Mike Shatzkin

        Companies do what they think they need to do in a negotiation. But Amazon is simply punishing Hachette and making their authors collateral damage. You can say that’s their right to do, but it is disingenuous to deny that fact. And Amazon would not suffer any damage, except to their negotiating position, if they didn’t choose these tactics.

      • Elliot1234

        Damage to one’s negotiating position can be very damaging.

      • Steven Zacharius

        Ummmm, because they were still making money in the current terms.

  • Disgusted Hachette Author

    I wish my contract came on a roll… I feel like a sucker.

    • http://idealog.com/blog Mike Shatzkin

      The gambit is working! (at least it is on you…)

      • Disgusted Hachette Author

        Maybe you should go back up that 8000 foot mountain, Mike. Sounds like the fresh air up there gave you a brief moment of mental clarity before your usual muddled circular lack of logic reasserted itself.

      • anon trad author

        Mike doesn’t see the assumptions he makes, that’s all. He assumed if you feel like a sucker it’s because of Amazon’s behavior when there are other possible causes.

      • http://idealog.com/blog Mike Shatzkin

        I think I give Amazon more of the credit they are due than anybody else writing about publishing from an industry perspective, including anybody from any big house. And I refuse to demonize them even when I disagree with them. Amazon is behaving like a self-serving corporation. Unlike the Supreme Court, I don’t really think there is any other kind. (And yes, that includes the big publishers.)

      • anon trad author

        This is true. People are hard on you because you’re out here. The CEOs of the publishing houses don’t open up a comment section, so people come here to see what you have to say instead.

        I always felt puzzled at the hostility one of my publishers has toward Amazon. It never seemed appropriate in a business relationship. If I were advising publishers, I’d tell them that public disputes with their largest distributor is a bad idea, as is badmouthing their largest distributor to their authors (one of my editors is very vocal about her feelings toward Amazon)

      • http://idealog.com/blog Mike Shatzkin

        Congratulations on how convincingly you frame and deliver your “arguments”.

      • Disgusted Hachette Author

        Congratulations on being unable to comprehend the difference between “framing arguments” and venting.

  • Nalbin

    You argue that author advances which never earn out make this offer from Amazon meaningless because basically the authors already have all the money they are going to get for their books. If this is the case, then it seems safe to assume that this dispute is only hurting Hachette. But if that is true, why are so many authors publicly stating that this is somehow hurting them? If it isn’t actually, truly hurting them, why get involved? Sure, they love their readers, but wouldn’t it make more sense for them to focus all their energies on telling readers where to find their books during this dispute, rather than publicly berating Amazon? This seems inconsistent and disingenuous.

    • Nalbin

      Actually, I admit that is not exactly what you argue. It seems that your argument is more that Hachette is not being “mean” to their authors by not accepting it, since the authors already got theirs and won’t really be due another cent anyway. That’s the root of my question about the dispute itself.

      • http://idealog.com/blog Mike Shatzkin

        I am saying Hachette can’t accept this offer because it makes them give up far more than Amazon and creates an additional and secondary complication in their relationship to their authors. It weakens them in their negotiation with Amazon and at the same time introduces a whole new wrinkle of potential difficulty with their authors “reconciling” these payments against the terms of their overall agreement.

      • Elliot1234

        I agree. But it is interesting how they stressed all that damage falling on the heads of innocent authors. But now that we know Hachette is what matters, the picture becomes much clearer.

        And it’s a relief to know the authors have already been paid.

      • agclaymore

        I have to admit, this does leave me scratching my head a bit, but I don’t claim to understand the machinations of large publishing companies.
        If the majority of this offer would end up paying back advances, wouldn’t it be a huge windfall for Hachette?
        Preston has already said he’d feel compelled to hand it over, but I’d imagine it’s more because he actually still owes Hachette advance money.
        I’m certainly not an accountant, but this seems like it could be a bad move for Amazon. If they think Hachette are dragging their heels now, imagine how long this would drag out if Hachette suddenly started collecting Amazon’s share…
        Not trying to troll, I just figure I might be missing something here.

      • http://idealog.com/blog Mike Shatzkin

        Your analysis makes sense and that’s why the suggestion earlier on the string that Amazon volunteer to pay the money directly to Hachette, so it could be reclaimed if part of an unearned advance, struck me as so speculative and unlikely. That’s not what Hachette “offered”!

    • http://idealog.com/blog Mike Shatzkin

      The ebook revenue component is only one part of the damage Amazon is inflicting on Hachette and its authors. A perhaps bigger piece is the removal of the pre-order buttons which stopped several Hachette books from making bestseller lists recently that they would have made otherwise. The ebook royalty component — indeed, even their overall revenue — may not be negatively affected by Amazon supressing sales but that’s not the only thing that matters to authors. And, believe it or not, indie authors aren’t the only ones who are motivated by their feelings about business ethics and fair play.

    • Steven Zacharius

      I think the other retailers have done a good job of promoting hachette titles during this time. Many of the accounts had dedicated Hachette pages.

    • Steven Zacharius

      More importantly why are indie authors involved?

  • Elliot1234

    Preston, Patterson, and Zacharius tell us Amazon is harming authors. But you tell us that ain’t so because of those advances.

    Have Preston, Patterson, and Zacharius “never fully taken on board the ‘unearned advance’ part of the author revenue piece?” Are they just as uninformed as many independent authors? Are they wrong about Amazon harming authors?

    • http://idealog.com/blog Mike Shatzkin

      Oh, you’re back! Once again, selectively interpreting what I said.

      I didn’t say authors weren’t “damaged”. I said that the authors for most of the sales that would be made of those ebooks have already been paid for those sales and giving them extra payments directly would be ignoring that fact. And they are damaged in other ways.

      • Elliot1234

        I agree you did not say they were damaged. I noted Preston, Patterson, and Zacharius said they were being harmed.

        But now you have joined Preston, Patterson, and Zacharius in saying they are damaged. Agree?

        So, how are the authors damaged? As you say, they have already been paid. What’s the problem?

      • http://idealog.com/blog Mike Shatzkin

        Even those who are not *financially *damaged are damaged by losing positions on the bestseller lists and having broader distribution of their intellectual property.

      • Elliot1234

        Broader distribution? So what? They have already been paid. Broad distribution, narrow distribution. They have ben paid for the distribution.

      • http://idealog.com/blog Mike Shatzkin

        MOST writers want readers. Not just money. Obviously. Except to the terminally and tiresomely argumentative.

      • Steven Zacharius

        Are you kidding me? How about additional royalties from sales from other retailers? As I said above they are being hurt because on the next book amazon will buy less because they artificially sold less. Also amazon sales to the NYT and other lists drive those titles up the bestseller lists and rankings. That sells more books. And I believe the infamous author earnings report are based on those rankings. I wonder how skewed those numbers would be today if it was another slice in time being analyzed.

    • Steven Zacharius

      Thank you for putting me with such esteemed people but I don’t think I ever said amazon is hurting authors. I assure you my opinions are not misinformed. They are based on running a business and dealing with many distributors and retailers. I’ve said all along that our responsibility is to our bottom line. We try to be fair with authors and we treat them with respect. It’s a partnership. Without them we have nothing which is why we have excellent relations with the authors we publish. It’s the agent’s job to look after the author and get the best deal for them by hopefully getting multiple offers if they can.

      • Steven Zacharius

        Oh I might have said that they are hurting an author’s next book because their sales on the current book will be lower than it should have been. Buys for new books are based on prior book sales.

      • Elliot1234

        I accept that you never said it, and apologize for my mistake.

        And if you did not say it, then the comment about “never fully taken on board the ‘unearned advance’ part of the author revenue piece?” has no basis.

        You and I certainly don’t think Amazon is hurting authors, but the Preston and Patterson do. So I have to wonder if they have “never fully taken on board the ‘unearned advance’ part of the author revenue piece?” Let’s hope not. That would make them just as uninformed as many independent authors.

  • Nirmala Erway

    There is an easy solution to your objection to Amazon’s offer. If Hachette agrees to give 100% of the ebook receipts to authors, Amazon can then still pay the money to Hachette. Then if an author has an advance that has not earned out, Hachette keeps the money, but applies the full 100% to the paying down of the advance. And if an author has earned out their advance, then Hachette would just pass the full 100% along to the authors. Once the dispute is settled, then of course everything would return to normal.

    Simple to do the math and put the money where it needs to go, and probably legal if Hachette actually cared enough about their authors to accept Amazon’s offer. I am sure authors who have received an advance would think this was fair as it still moves them that much more quickly towards the day when their advance is earned out and they start earning royalties again.

    • Laura Resnick

      And like a lot of traditionally published authors, I’d earn out the remaining portion of my advances quickly if I were being credited with 100% of list price instead of with 25% of digital net (“net” being whatever the publisher chooses to say it is). That would be good for me, too, as would the 100% pay on books that have already earned out. Either way, it would have been a boon for authors.

      • http://idealog.com/blog Mike Shatzkin

        Let’s remember that *aside *from the unearned question, Amazon’s proposed “compromise” called for Hachette to give up more margin than they would.
        Some authors would have benefited. I still say chances are that most of the ebooks sold would only produce questionably ethical or legal benefits (that is, the contracts would still not earn out.) But we don’t know that balance as clearly as we know that Amazon would give up less than Hachette.

      • Elliot1234

        I keep hearing about margin. Is that in percentage or absolute dollars? How do we compute Hachette’s margin? How do we compute Amazon’s margin? How do we know? What are the figures?

        Amazon’s operating margin is les than one percent.

        Anyone know Hachette’s parent’s margin?

      • http://idealog.com/blog Mike Shatzkin

        Terms have been defined. I’m clear in how I use them. I don’t have any interest in responding to manufactured confusion. Net profit is NOT operating margin.

      • Elliot1234

        I agree net profit is not operating margin, and under generally accepted accounting principles, Amazom’s operating margin is less than one percent.

      • http://idealog.com/blog Mike Shatzkin

        Take it elsewhere. You manufacture worthless time sucks.

    • http://idealog.com/blog Mike Shatzkin

      Fraught with legal complications, I’d say. And that’s not the offer Amazon made. It’s not worth tackling it theoretically unless they do. And I doubt that will happen because the effect would be to give Hachette an unexpected financial windfall (although we don’t know if it would compensate them for what they’d be giving up.)

  • Laura Resnick

    Hachette really fumbled the ball on this one.

    They issue a petulant, inarticulate rejection of an impressive (to writers, who’d benefit) offer that would pressure both sides to end the stalemate. They make a non-denial denial in response to Amazon’s complaint that Hachette has been stalling and stonewalling for 6 months. (Hachette’s statement confirmed that the first time they responded was AFTER the existing distribution deal had already expired and 4 months after Amazon opened negotiations.)

    And then, presented (by Amazon’s stance on this salvo) with an obvious opportunity to take charge of the ball by making a counter-proposal… instead, they do NOTHING. They just stew.

    Why one earth wasn’t Hachette’s response to Amazon, “We can’t afford to do that, but if you’re as concerned about the authors as we are, then here’s our counter-proposal for how to cease harming them during this negotiation. Will you agree to it?” And state their terms–terms which would indeed protect or benefit Hachette authors.

    Instead… they look like a weak company with inept, inexperienced negotiators and inarticulate spokespersons.

    • Laura Resnick

      And, no, their response offering to negotiate in good faith if Amazon will do what Hachette wants was NOT a counter-proposal. (Unless their position is that they have not negotiated in good faith and will not negotiate in good faith without first getting everything they’re trying to negotiate FOR?)

    • http://idealog.com/blog Mike Shatzkin

      Not sure how you can look strong when you’re negotiating with an adversary who holds all the cards. They’re *not *strong, as evidenced by the fact that they are made to look bad by turning down an “offer” that called for them to strengthen the other side in the negotiation!

    • Jackie Barbosa

      “They issue a petulant, inarticulate rejection of an impressive (to writers, who’d benefit) offer that would pressure both sides to end the stalemate.”

      This misrepresents the known facts. The letter in which Amazon floated this idea was sent to authors and agents, not to Hachette, and it explicitly states that Amazon is “thinking about” making this proposal to Hachette. Nowhere does the letter claim that the offer was actually made to Hachette.

      Hachette did issue a statement in which it said it had rejected a “brief proposal” from Amazon, but there’s nothing to suggest that this proposal was the same one outlined in the letter to agents and authors. We just don’t know. Maybe the offer was made and maybe it wasn’t, but since accepting the offer likely would have violated the terms of many contracts (a lot stipulate that payments must be made to the agent, for example; how could Hachette unilaterally decide to ignore that provision?), Hachette probably couldn’t accept it anyway.

      There’s no doubt in my mind that Hachette is stalling in this negotiation, likely because it doesn’t want to be the first and only publisher to sign a post-agency agreement with Amazon. I don’t blame them for wanting to sit tight and wait for other publishers to be in the game. If more publishers are pushing for better terms than Amazon is offering and are unwilling to sign, it strengthens Hachette’s negotiating position.

      • http://idealog.com/blog Mike Shatzkin

        Good analysis, Jackie. Makes a lot of sense and adds clarity about “the offer”.

  • Industry Observer

    Mike missed the larger message Amazon is sending Hachette here.
    Look at what they actually said:

    1) They are willing to give up all revenue from Hachette’s books.
    2) They are calling Hachette’s bluff about Amazon “hurting authors” in a way that publicly gives Amazon the moral high ground.
    3) They are able and ready to make a site-wide change affecting all Hachette titles within 72 hours.

    It’s smart bet that the 72-hour clock is ticking right now.

    Expect to see all Hachette titles disappear from Amazon shortly. And the most ironic part? Because of all the media exaggeration to date about Amazon “boycotting” Hachette titles, the boy can’t cry wolf again.

    Amazon has already paid the price in bad PR for what they are now really about to do.

    • http://idealog.com/blog Mike Shatzkin

      Perhaps you’re right. I wouldn’t have thought before this dispute Amazon would take the customer-unfriendly positions they already have. This would be taking it a lot further.

  • Jackie Barbosa

    The key thing to understand about Amazon’s letter is that it wasn’t an offer to Hachette, and it wasn’t even really an offer to authors/agents. It was a PR maneuver, plain and simple.

    Amazon wanted to get its view of the negotiation in the public eye. The timeline Amazon lays out makes Hachette look incompetent and negligent (Amazon had to impose sanctions to get Hachette to respond, etc.).

    Sweetening the pot with an offer that Amazon KNOWS Hachette cannot and will not accept is a ploy to make Amazon look like it cares more about authors than Hachette does. Some people are buying that, but viewed in a more realistic light, if Amazon really cared about Hachette’s authors, it would stop distorting their books’ shipping dates and ranking algorithms. Hachette isn’t not paying its authors because of this dispute; its authors are losing sales because of it. That’s a whole different problem and one Amazon’s so-called offer doesn’t begin to address or correct.

    • http://idealog.com/blog Mike Shatzkin

      Thanks for this. Adds useful detail.

    • Steven Zacharius

      A very fair comment.

    • Stacy Chambers

      It seems rather specious to me that Amazon would make this “offer” and yet see to it that Hachette books don’t sell well on its site. That makes no sense, given Amazon’s insistence that it cares about authors.

      • http://idealog.com/blog Mike Shatzkin

        There are two battles going on for Amazon and Hachette. One with each other and one for public perception. That’s just the way it is.

      • Stacy Chambers

        I understand. Just seems like more people would pick up on the irony.

  • DXW

    This is just Amazon’s latest jab at making big publishing look like greedy corporate fools. Hachette just can’t win, and I think they’re starting to see it. They flood the media with their anti-amazon propaganda, but they can’t seem to make a dent in public perception on a large scale. People love Amazon, and a bunch of greedy publishers whining about the situation isn’t going to change anything. The big publishers only have themselves and their arrogant lack of foresight to blame for what’s happening.

    BTW, did you see Amazon just bitch-slapped the authors guild for being run by a bunch of big publishing shills? It’s about time someone did. http://goo.gl/xNeR3H

    Amazon: “Our offer is sincere and it stands—Hachette need only say yes to help their authors. We also wonder what this letter would look like if Hachette had posed this idea and Amazon had rejected it. The letter conflates the long-term structure of the industry with a short-term proposal designed to take authors, the constituency this organization supposedly represents, out of the line of fire of a negotiation between large corporations. Given that the Authors Guild are an author’s advocacy group, it is hard to believe they don’t support this. They are the Authors Guild, not the Publishers Guild.”

    • http://idealog.com/blog Mike Shatzkin

      You did a great job of expressing your unvarnished opinion without bothering with any facts or even the shred of an effort to look objective. Let’s just root, root, root for the home team, if they don’t win it’s a shame! Lots of heat but not a bit of light.

      • DXW

        Thanks, but nothing I said was an opinion.

        1. NY publishers ARE greedy corporate fools.
        2. Hachette CAN’T win this fight.
        3. The NY publishers DO use their media ties to flood the media with anti-Amazon propaganda.
        4. Despite their best efforts, the public still LOVES Amazon.
        5. The NY publishers enabled Amazon, and it was their own arrogance that kept them from seeing that little bookseller from Seattle as a threat.

        All facts.

        I think you’re just confused. This isn’t a two-sided issue. Amazon is the good guy. NY publishers are a middle man who have cheated authors for years while overcharging readers. They truly believe that they create the books people read. It’s ridiculous.

        I can see why publishers and agents are upset, but those people are secondary players in the game. They’ve just run the show for so long that they’ve forgotten their place. The author and the reader are king. Amazon knows this, and they’re fighting the good fight to bring the industry back to where it should be.

        Nothing wrong with being on the right side of history, Mike.

        Go home team.

      • http://idealog.com/blog Mike Shatzkin

        Your opening statement and your list actually demonstrate more clearly than any argument I could make that you can’t tell a fact from your opinion. Apparently, your definition of a fact is your opinion! Anybody with a scintilla of objectivity can and will see that. Who do you argue with most of the time? Students of yours or employees? Certainly SOMEBODY who is constrained from pointing out the obvious!

      • DXW

        Whatever, Mike. I knew after reading your post that you weren’t exactly a “thinker”, but I decided to grace your irrelevant blog with my comments just the same. Call it boredom, charity, pity, they all fit.

        I get that you’re trying to find a middle ground in this situation, but even you have to see that it’s becoming harder to do every time Amazon steps forward with a new press release that highlights how greedy NY publishers have become.

        I look forward to reading your next half baked post.

        You’re welcome.

      • http://idealog.com/blog Mike Shatzkin

        Thanks for “gracing” my blog with your comments. You will understand if I doubt the value and invite you to spend your time elsewhere in the future. Look up the word “hubris”. I’m not a “thinker”, but I know somebody who is full of himself (and not much information) when I encounter him.

      • Steven Zacharius

        I’ve never heard a more idiotic one sided comment in my life.

      • DXW

        Then you obviously haven’t been reading the NYT coverage of this dispute.

        The difference between the propaganda they keep spewing and what I said above is that my comments are based on personal experience with NY publishers, and from observing the treatment of hundreds of other NY published authors. Meanwhile, the media coverage has been based on talking points handed to them by publishers and lawyers, and it’s designed to cloud the issue and gloss over the decades of bad treatment and theft from an oligopoly of publishers who have had zero competition. Until now, of course.

        If you can refute any of the things I’ve said, feel free.

      • Steven Zacharius

        You may talk with 100 authors but as a publisher I’ve worked with thousands. This negotiation at this time has nothing to do with author earnings. It has to do with each side trying to keep as much as the margin as they possibly can. It might be about terms changing from agency to wholesale but we don’t know that. The release from amazon was pure pr as were the petitions from indie authors and Preston. If anything is true it would be that the Hachette authors will earn more per book by keeping the prices higher and you indie authors should be supporting your fellow writers.

      • DXW

        I think we’re talking about different parts of the same issue. You’re right that we don’t know what this dispute is over, but the rumors I’ve heard from people who work closely with Amazon is that Hachette wants to go back to agency pricing and windowing their titles to support hardcover sales. This means $15 ebooks released six months after the hardcover, and at the same time the paperback comes out, which is a terrible idea, and will hurt NY publishers and their authors.

        This: “If anything is true it would be that the Hachette authors will earn more per book by keeping the prices higher.”

        –True factually, but misguided.

        Yes, authors will earn more “per book” if publishers keep prices high, but they will sell far fewer copies. And with the low ebook royalty of 25% most NY publishers offer, the authors lose on every front. Do you really think authors should be happy selling 100 copes of their book at $12.99 a copy, when they can sell 1000 copies of the same book at $4.99? Even if publishers don’t raise the digital royalty from 25%, the lower price is still a better choice for authors.

        “…and you indie authors should be supporting your fellow writers.”

        I’m not an indie author. I’ve published five books with major NY publishers, and I very much care about how I, and my fellow authors, are treated. Your perspective on this is obviously from a publisher point of view, and nine times out of ten that POV sees authors as interchangeable parts in an industry that knows if you get rid of one author there are a thousand waiting in the wings, desperate for a chance to publish. Except now, thanks to Amazon, that relationship is shifting, and every day it moves just a little bit further away from NY.

        Unless NY wakes up and adopts a new pricing structure and agrees to a higher royalty rate for its authors, their days as industry leaders are numbered.

      • DXW

        I think we’re talking about different parts of the same issue. You’re right that we don’t know what this dispute is over, but the rumors I’ve heard from people who work closely with Amazon is that Hachette wants to go back to agency pricing and windowing their titles to support hardcover sales. This means $15 ebooks released six months after the hardcover, and at the same time the paperback comes out, which is a terrible idea, and will hurt NY publishers and their authors.

        This: “If anything is true it would be that the Hachette authors will earn more per book by keeping the prices higher.”

        –True factually, but misguided.

        Yes, authors will earn more “per book” if publishers keep prices high, but they will sell far fewer copies. And with the low ebook royalty of 25% most NY publishers offer, the authors lose on every front. Do you really think authors should be happy selling 100 copes of their book at $12.99 a copy, when they can sell 1000 copies of the same book at $4.99? Even if publishers don’t raise the digital royalty from 25%, the lower price is still a better choice for authors.

        “…and you indie authors should be supporting your fellow writers.”

        I’m not an indie author. I’ve published five books with major NY publishers, and I very much care about how I, and my fellow authors, are treated. Your perspective on this is obviously from a publisher point of view, and nine times out of ten that POV sees authors as interchangeable parts in an industry that knows if you get rid of one author there are a thousand waiting in the wings, desperate for a chance to publish. Except now, thanks to Amazon, that relationship is shifting, and every day it moves just a little bit further away from NY.

        Unless NY wakes up and adopts a new pricing structure and agrees to a higher royalty rate for its authors, their days as industry leaders are numbered.

      • Steven Zacharius

        As you said we all only know rumors. I think publishers are smart enough to look at their royalty structure to figure out what is best for their company. Most publishers pay more on their digital only imprints where there isn’t an advance. Rates can vary up to 50% of net receipts. Although this is lower than KDP the companies are still providing marketing, editorial, art, etc..

      • DXW

        “I think publishers are smart enough to look at their royalty structure to figure out what is best for their company. ”

        I wish I could agree, but before digital took off a few years ago, it seemed like almost all the NY publishers were struggling. Now, thanks to Amazon and ebooks, they’re making money again, but they still seem to think that the same old practice of overpricing (e)books and driving away readers is a valid way to do business. It’s baffling to watch.

        As far as digital imprints go, I’ve had friends who’ve published ebooks with Dutton and Simon and Schuster in the UK, and in both cases all the publisher did was slap a cover on it and upload it to Amazon. There was no marketing, no editorial, no push whatsoever. The publishers put these books out hoping they’d take off, but it didn’t seem like they cared one way or the other, and why should they? There was no risk. It cost them almost nothing to produce, but they took the majority of the royalties and paid no advance in either case.

        Believe it or not, it is my sincere hope that these publishers wake up soon. They can still be a strong counterbalance to Amazon if they rethink they way they publish books in the digital age, but it’s becoming obvious that that’s not going to happen, and that’s truly a shame.

      • Steven Zacharius

        Publishers weren’t struggling before digital….what happened was digital started and then print retailers started declining. We had the huge loss of Borders and then big decreases in shelf space in mass merchandisers as well. Also decreased B&N stores. Don’t count the mass merchandisers out yet. They’re going to get into the ebook game too shortly. NYC publishers do not think we’re overpricing ebooks. If anything, we think indie authors are underpricing them. We still sell enormous quantities of digital books at traditional prices. I haven’t seen a decline in readers because of these prices. Now that the print market has leveled off and there’s a slight increase in digital again, we’ll see what happens.
        Even with digital first books we have a risk. It takes as much time to put out a small book as it does a big book. It’s a manpower cost. We do marketing and publicity for all of our digital books, primarily social media but still a fair amount of it and much of it is paid advertising on social media.

      • http://idealog.com/blog Mike Shatzkin

        You know, the “publishers are idiots” meme doesn’t work very well over here.

      • http://idealog.com/blog Mike Shatzkin

        The rumors you’ve heard are ridiculous and untrue. The conjecture based on them is worthless. Read Michael Cader about the agency agreements and what is and isn’t eligible for discussion before you repeat things like that and spin elaborate theories around what is certainly not true.

  • John Andrews

    I’m surprised that this issue, though interesting, has generated such a large volume of comment.
    Amazon wants to make money out of authors and publishers want to make money out of authors. Authors, obviously, will prefer the group which gives them the most money, however it is calculated.

    • http://idealog.com/blog Mike Shatzkin

      Nice succinct summary of reality, John.

  • kate jaimet

    Sorry, I haven’t followed the ins and outs of this, but if Amazon is willing to offer Hachette authors 100%, then what about all the other authors that Amazon publishes? What would be the rationale for not offering them 100% as well? And then where does that leave Amazon? Let alone the other publishing companies?
    Also, what about the authors’ prior contract with Hachette? Would authors have to keep 25% of what Amazon pays them and then remit the remaining 75% to their publishers? And, I agree, this does not even take into account the advance paid.
    People seem to focus on the top-earning authors who get large advances, but even mid-list authors get (small) advances and are expected to earn out before they start collecting royalties, so I’m not sure how this would play out, although if this is the new ‘model,’ then in the future publishing contracts could be structured so that the advance excludes ebooks and applies only to paperbacks/hardcovers, I suppose.
    I agree with others who think this has to be a negotiating ploy.
    Kate

    • http://idealog.com/blog Mike Shatzkin

      Wrote a whole post on this; the one just before this one on this blog. Touched on just about all of what you’ve asked about.

  • InklingBooks

    Great analysis! I’d add one more factor. Amazon invests virtually nothing in putting ebooks into their system or selling them–mere pennies per copy. That’s all it would be forgoing with this deal.

    But Hachette has already made a substantial investment in those books, tens of thousands of dollars to proof, edit, layout and promote them in addition to the advances you mentioned. It needs income not as profit but simply to recover expenses.

    Viewed from one angle Amazon’s move is clever, and one they hoped many in the (ever ignorant) mainstream press would echo as reasonable.

    But viewed from better angle it is a deep insight into the cultural mindset at Amazon. That culture simply has no interest in or ability to understand others. Like the harm Amazon does to authors, the investment that publishers make in books simply isn’t a concept it can grasp nor does it care. The only ‘feelings’ understood in Amazon’s corporate offices are those that impact the great beast itself–Amazon.

    I’ve often though it would be helpful to see Jeff Bezos’ grades from elementary school. I can easily imagine every one of them covered, month after month with “Does not play well with others.”

    That’s Amazon.

  • Steven Zacharius

    DRM-I stand corrected. When we tried to do our digital imprint as DRM free the obstacle we had was with the library market making the books either all with DRM or all without. Also with many of the retailers it’s a manual process of turning it off on a title by title basis and with over 5000 ebook titles it’s an enormous task and prone to errors as well. We’re still looking into testing our digital first imprints as DRM free and we’re busy investigating solutions. More to come…..but I stand corrected.