Walter Isaacson

The motivation of the publisher-bashing commentariat is what I cannot figure out


Once again this morning we wake up to a piece by David Streitfeld in The New York Times about Authors United and their ongoing effort to discredit Amazon. The message coming loud and clear from the legacy publishing establishment is that Amazon doesn’t appreciate, and perhaps doesn’t understand, the value that agents, publishers, and chain and independent bookstores bring to authors and readers and, by extension, to society as a whole. The challenge they face in this ongoing discussion is that many of those values — multiple (agent, publisher, bookseller) levels of curation, investments in quality editing, giving worthy authors the financing to do the creative work that must take place well before the IP will generate any revenue — are pretty esoteric and hard for most people to relate to. And they apply to a small and possibly diminishing number of writers.

The critical services publishers provide are marketing and distribution and those functions, as we all know, are undergoing change and revision as part of the digital disruption. And because they are rapidly changing, there is even greater-than-usual variability to how well these things are done across publishers and, within publishers, across their imprints and lists. Indeed, many authors at legacy houses are not enamored of their publishing experience, but the ones who are defending the publishers are also defending something of their own.

What is equally loud and clear from Amazon’s own statements and those of their supporters (including many authors who would be less well known and less well off today if Amazon hadn’t built the tools and market share they have over the past several years), is that the legacy industry doesn’t appreciate, and perhaps doesn’t understand, that commercial publishing was built on an ecosystem which is rapidly being dismantled and will ultimately be irrelevant. And they point out that what is replacing what came before delivers much lower-priced ebooks (print is another matter) to consumers and a substantially larger portion of the revenue to the authors than published contract splits would give them. (The fact is that those splits are irrelevant more than 80 percent of the time for the most commercial books because big agents get big authors advances larger than what they “earn”, but that’s another story.) The authors that work in the new paradigm also gain unprecedented control of their professional lives: publishing when they want to, pricing and changing prices as they want to, and playing with marketing opportunities (bundling print-and-digital, entering subscription services) or not, as they and they alone decide.

The fact that both options are commercially viable today means we might actually now be living in a golden moment for authors. Publishers are certainly aware that a brand-name author has a truly workable self-publishing option (although, frankly, the biggest surprise to me so far is that basically no major author has taken it, which is objective evidence that the execs running the big houses are navigating at least some aspects of the digital transition very well). And Amazon started paying authors 70% when publishers switched to agency and extracted 70% for themselves, a connection that seems not to have been made by much of the publisher-bashing commentariat.

While there is a symmetry to the two sides’ dismay about what is appreciated or understood, there is a massive asymmetry here that is hardly, if ever, mentioned. And that asymmetry makes the motivation of the legacy defenders very clear — they’re fighting for their lives — but actually suggests that the “side” fighting them (to the extent that it consists of indie authors) is at least sometimes simultaneously fighting against their own interests.

Those who feel well served on the legacy establishment side have much to fear from Amazon’s continued growth and success. The clear self-interest of all the publishers, agents, and those authors fortunate enough to be continuously “employed” through book contracts — which includes many, and certainly the most recognizable, of the authors in the Authors United effort — who are fighting for Hachette to “win” (which means maintaining the publisher’s share of the sales that flow through Amazon) in the current dispute is obvious, if perhaps insufficiently emphasized or acknowledged.

Cynicism about whether it is really the greater societal “goods” that get so much emphasis in their appeals that are really motivating these authors or whether they’re just protecting their own gravy train is not unreasonable.

Assuming that the publisher-bashing commentariat, who could also be characterized as the “pro-Amazon” advocates, has a healthy number of authors whose revenue is as largely dependent on Amazon as James Patterson’s is on Hachette, one can see the emotional motivations to fight for the home team could be similar. But the practical side of it is precisely opposite. It is obvious that Amazon getting stronger weakens Hachette’s (or HarperCollins’s or Bloomsbury’s or Cambridge University Press’s) ability to pay advances and publish more books, which directly affects various stakeholders and particularly steadily-working authors. But if Hachette “wins” — or if Amazon’s margins on transactions with publishers are not improved — how does this injure the self-publishing authors who are working successfully that way now? Simple logic says that Amazon will treat them best when the possibilities offered by publishers are the best.

Do they really think that Amazon will offer them more if Hachette is weaker? History and logic would suggest the opposite.

In other words, publisher-published authors definitely lose if Amazon gains strength in relation to them. But Amazon-published or KDP authors (and the publisher-bashing seems to come from both flavors) lose nothing if legacy publishing remains strong. They are, allegedly, fighting for the “good” of those authors who are signing “exploitive” publishing contracts, but their own interests are not served.

This asymmetry plays out in another way in the Lee Child exchange on the Konrath blog. Child says, again and again, that he thinks it makes complete sense for authors to exploit the opportunities in KDP if it looks like the best commercial choice for them. Maybe I’ve missed it (and I admit that I am disinclined to read most of the publisher-bashing posts and I certainly don’t make a habit of reading the bloggers who specialize in them), but the message I keep getting from Konrath, Eisler, and Howey is not “choose the course that is best for you based on the choices you have in front of you” but is more like “never sign one of those exploitive publishing contracts!” (Howey tells me he blogs about that “all the time” and cites this post of his. You can decide for yourself what you think, but it seems to me that he is saying “only sign with a publisher after you’ve built yourself up by self-publishing first”.)

The motivation of the authors who spend a great deal of time and energy bashing big publishers has puzzled me before. Because “price-shoppers” are a core audience for indie ebooks, indies actually got a shot in the arm when the publishers and Apple put in agency pricing, which in its original form prohibited even the retailer from taking a loss to bring branded ebook prices down.

There’s no way for an outsider to compile the data to prove this, but the chances are very good that indie author breakthroughs were easier to achieve during the years when the price gap between the majors and the indies was greatest. But most of the voices now demonizing Hachette (and the rest of what is being called the Big Five “cartel”) also bashed agency pricing. I see the benefit to Amazon in that position, but I don’t see how crippling agency pricing helped indie authors.

It is not only Judge Cote’s decision which has changed things since, but also the growing awareness of publishers about the value of temporary price drops, or “daily deals” and services — most prominently BookBub — to amplify the effect of promotional pricing in the marketplace. But how did ending agency pricing benefit independent authors?

Hugh Howey maintains that he is better off if his books and those from the big branded authors are priced the same. Hugh’s a smart guy so maybe I’m just not bright enough to get it, but that makes no sense to me. Except in the luxury goods market, there is virtually no situation where you gain advantage with a higher price than the alternative pitted against you. The bigger the saving you can offer, the more you’ll sell. In fact, Hugh makes that argument himself when he claims that lower ebook prices will raise industry revenue because it makes the ebooks more affordable. It’s fine to argue that the big publishers are dumb not to lower prices and sell more, but, even if it is true and especially if it is true and they pay attention and obey, how does that do him any good? (The answer from Hugh, by the way, is that we’re all better off if all prices are lower.)

I have been persuaded in Howey’s case that he personally rises above self-interest in his industry commentary. Hugh’s a nice guy, a smart guy, and a socially-conscious guy. He and I have had many candid and mutually respectful exchanges. And I read “Wool” and recruited him to speak at Digital Book World long before he was such a celebrity on the anti-publisher side. I believe him when he says “I’ve made more money than I ever imagined I would; I’m grateful; and one benefit of that is I don’t need to be motivated by money in my decisions.”

Howey is a true believer and a crusader who is sincerely convinced that the standard publisher terms for authors are unfair and need to change. He has occasionally expressed skepticism and concern about some of Amazon’s decisions and behavior, particularly around the complex compensation schemes for Kindle authors with their KOLL (lending library) and Kindle Unlimited (subscription) initiatives which buys him a certain amount of credibility. But I still can’t understand why he’s in KU but not Oyster and Scribd and 24Symbols, a set of decisions that strike me as being in Amazon’s commercial interest but not his own. (One possible explanation is that going into additional distributions creates more “work”, but I don’t take that too seriously. Hugh can afford to hire people to do the work, and he does all kinds of other things, like his AuthorEarnings blog, purely to add to industry knowledge. It would add a lot of useful insight if he were in the subscription services and reported on it.)

Perhaps the problem has to do with Amazon’s KDP rules, which apparently require “exclusivity” to be in KU. That is almost certainly not a requirement visited on publishers. If that’s what is stopping Howey, it would be nice if he would say so. Could Amazon be preventing its authors from pursuing revenue opportunities? If that’s true, wouldn’t that belong in any discussion of an author’s choices?

Another persistent Amazon advocate is author Barry Eisler, whom I first encountered during a brief moment when he was going to eschew taking advances and being published by somebody in favor of doing it on his own. (In the end, he became an Amazon-signed author.) When I posed the quandary that is the subject of this piece to Eisler, he referred me to this post of his which I don’t believe addresses the question. You can check out the link and decide for yourself.

Trying really hard to understand this and think imaginatively about it, I can only really come up with two “selfish motivations” that make sense. One — and I think this is the one that is claimed — is that the publisher-bashing is designed to improve life for the victimized authors who choose those deals. Indeed, the content of the anti-publisher rants often includes specific suggestions, or demands: raise the digital royalty, make shorter contracts, pay royalties more often, etc. that are, no doubt, author-friendly. But it does seem a bit weird for people committed to demonizing, weakening, and ridiculing the big publishers to be the ones to tell them what they could do to stay competitive. If publishers accepted the suggestions, of course, perhaps Amazon would be pushed to improve author terms too, but that seems a pretty indirect and distant reward to explain all the time and energy some people expend on this. (Or are they promising to sign with the big publishers if they follow these suggestions? I don’t think so!)

Another conceivable legitimate motivation, of course, is ego. These publisher-bashers have managed to “do it” without them, and continuing a high-profile running criticism of the establishment they outdid and outmaneuvered, particularly when you can get a lot of applause, might be alluring. But even that feels weak to me. If self-aggrandizement were what motivated these people, it would be even more impressive if their frame were “this is hard, but I managed to do it” whereas the message feels much more like “anybody can do this and you’re a bit of a dolt if you don’t.”

None of this constitutes enough of an explanation to satisfy me. I am either missing something in plain sight or I’m not in possession of all the facts. Perhaps the “explanation” that the published authors defending Hachette pursue their selfish interests but that the indie authors who bash Hachette and the others do it out of public-spiritedness, even if their own revenue suffers, does it for you even though it doesn’t for me.

Amazon has a strong case to make for itself. They really made online book retailing work through strategic brilliance and excellence of execution, without being first and against industry entities that should have had competitive advantage. They made ebooks into a thriving business for everybody pretty much singlehandedly, also without being first. They’re entitled to feel that the powerful position they’re in is because of the virtue of their model and execution, and they’re entitled to feel that a different publishing industry than the one they came into is the future they have to work towards, whether or not they want to spell out that vision in full and whether or not the incumbents “get it”.

If every argument being made by the publisher bashing commentariat were coming from Amazon, I’d understand the motivation and factor it in, as I do with Authors United or Hachette when they speak.

But I need to understand a rational motivation to put anybody’s advocacy in context. And it seems to me the very best thing for indie authors is for all the existing publishers to retain their capability to hire authors on that model as much as they can for as long as they can. That’s not the best thing for Amazon, but I really think it is the best thing for authors, and as true for those who do-it-themselves as for those who are published.

A senior Amazon executive, in a meeting we had two or three years ago, complimented me on the fact that I “understand entities acting in their own self-interest.” My response then was, and my feeling now is, “I’m mistrustful when they don’t.”

After I wrote this, I found that blogger Chuck Wendig had asked a similar question, with far less editorial speculation than appears here, in what appears to be an undated, but recent, post. He framed it differently than I do and I’m not sure what I read at his attempt at irony (“why are self-publishers trying to save the Big Five?”) was seen that way by his many respondents. My focus is narrower: this fight is being carried by a handful of very persistent and energetic critics, spending time and energy that one would think takes more motivation than is required simply to  “have an opinion” on this subject one way or the other. “What fuels all this energy and vitriol?” is a different question than “which side are you on in the dispute?” 

Early Bird pricing for Digital Book World 2015 is only open until next Monday. There will be lots of programming that will provide context and insight around all things Amazon. Michael Cader and I will have a half-hour wide-ranging discussion with Amazon’s Russ Grandinetti. Judith Curr, the CEO of Simon & Schuster’s Atria imprint, will present her view of  the “publisher-or-self-publishing” choice authors face. An expert on the school and college market, Matthew Greenfield of Rethink Education, will include an assessment of Amazon’s role in his review of what publishers need to know to compete for those sales as things change. Jonathan Nowell, the CEO of Nielsen Book, will use his company’s historical data to look at how the mix of what sells in print has changed since ebooks took off. Media veterans and authors Walter Isaacson and Ken Auletta will let us see the book business alongside other media undergoing technological change, which is necessary for any valid understanding of Amazon. We have a panel of publishers talking about selling direct. Oh, and of course, Founder/President Josh Schanker of BookBub will be on a panel on price promotion! There’s a lot more that is relevant, which you’ll find if you scan the entire program.

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Trying to explain publishing, or understand it, often remains a great challenge


I went to the In Re Books conference at New York Law School last Friday and Saturday in hopes of curing some of my ignorance about the law and publishing. I learned some things, including the facts about a very interesting case involving a book publisher, the associations of publishers and booksellers, and a large general retailer that took place over a century ago and anticipated a lot of what we’re seeing today as the other players in the industry battle the power of Amazon.

But I’m afraid my major takeaway was, once again, that the legal experts applying their antitrust theories to the industry don’t understand what they’re monkeying with or what the consequences will be of what they see as their progressive thinking. Steamrollering those luddite denizens of legacy publishing, who just provoke eye-rolling disdain by suggesting there is anything “special” about the ecosystem they’re part of and are trying to preserve, is just part of a clear-eyed understanding of the transitions caused by technology.

So perhaps we have symmetrical ignorance and will never understand each other.

The conference was lively and well organized. The speakers were articulate and well prepared. There were two panels I wish had taken place in a different order.

On the first day, the In Re Bookstores panel had an antitrust lawyer who fully supported the Justice Department’s case against the publishers, although he seemed to be attacking the Agency model itself, rather than the collusion which, as I understand it, was the core of the government’s case.

But it was only on the very last panel of the conference, on the second day, that two speakers created some meaningful context for the whole discussion. Author James Gleick made a clear and cogent case for the agency model. (Essentially: because there is no investment in inventory or shelf space by the retailers, it is more sensible to consider them “agents” of the publishers than retailing intermediaries equivalent to what we have for print, where substantial investments are required and are at risk.) And Professor John B. Thompson of Cambridge, author of “Merchants of Culture” who is, as far as I know, the single person who has spent the most time and effort learning about trade publishing and synthesizing a coherent view of it, made it clear that Anglo-American trade publishing has challenges which make it unlike other endeavors, even other book publishing endeavors.

So that gives me three things to elaborate on: the blatant misunderstandings about the industry and its concerns about the DoJ case which came from the bookstore panel; the old publishing case that is so resonant with current circumstances; and a reprise of Thompson’s cogent analysis.

The lawyers speaking on the bookselling panel (and lawyers were dominant on just about all the panels; this was, after all, an event staged by New York Law School) were dismissive of the argument that any special treatment for publishing was called for because of the nature of our business. Then they proceeded to get two things startlingly wrong:

1. They dismissed the idea that any “predatory pricing”, i.e. sales of books below cost, ever took place. There was a wee bit of wiggle room there, where they might have meant “in the aggregate” as opposed to “title-by-title”. But they never made that distinction clear and, if that’s what they meant, there was further explanation called for. One is left with the impression that they simply didn’t understand that Amazon was paying publishers $12 or $15 for ebooks they were selling for $9.99. (And, in fact, there were far more dramatic examples of loss-leading than that!)

2. They seemed to think that the concern on the part of those opposing the DoJ was that Amazon would only lower prices to gain market share and would then exercise predatory behavior by raising prices to a captured market. That, actually is not the concern. Or at least it isn’t mine.

As I tried to spell out in a talk in Washington last July, what is concerning is that Amazon will restructure the pricing of books so that the profit for publishers is squeezed out, robbing us of a publishing ecosystem that invests in unwritten books tens of thousands of times a year. My argument and fear is that a restructured ecosystem will deny us books like Walter Isaacson’s Steve Jobs biography or Ron Chernow’s George Washington. Books that take years to write and require hundreds of thousands of dollars of financing to be written will never see the light of day if publishers can’t earn a profit by investing in their creation.

This is an argument and a concern which the attorneys on the platform at this conference made explicitly clear they never entertained. I don’t think the ones in the DoJ did either. Perhaps this has no bearing on the law, but I wish they’d stop trying to tell us the concerns of the industry are just the same old crap coming from a different source when they haven’t taken on board what we’re actually saying.

I tried to inject some of these facts and thoughts from the floor, as did a woman from a Big Six house who was similarly frustrated by the twisting of the reality to fit the antitrust narrative. The moderator cut me off from pressing the argument (which was appropriate; I hate it when people use the rubric of q&a to make their case from the floor at my conferences too!) But for the rest of the conference, at every break people from publishing houses kept thanking me for making the attempt to inject reality about our business into the discussion.

The old publishing case was Bobbs-Merrill versus Straus from the first decade of the 20th century. It seems that Macy’s, the department store that sold just about everything, also sold books at at discount. Bobbs-Merrill posted a notice in its books that the retail price was set at one dollar and that selling below that price constituted a violation of copyright. The Straus brothers, who owned Macy’s, insisted on selling these books for eighty-nine cents.

Both the trade association of publishers and the trade association of booksellers supported Bobbs-Merrill’s position, but the courts did not. There was a “horizontal” as opposed to “vertical” price-fixing angle explained from the stage that I didn’t fully grasp, but we can all appreciate both the irony and distinctions between this case and our present conversations.

Clearly, Macy’s was the Amazon of the time. They saw books as commodities — nothing special — and they simply extended their business model of offering lower prices to cover books. From the perspective of publishers, they were cheapening the perceived value of the intellectual property. From the booksellers’ point of view, they were subsidizing book sales with their ability to sell other things and clearly constituting a threat to what was then a very tiny bookselling network. So the entire publishing community of the time opposed the price reductions being offered by an interloper. In that way, they were creating the same price-fixing “problem” DoJ was “solving” with their lawsuit against Apple and the publishers.

But the difference, as explained by James Gleick a day later, was that the bookstores and Macy’s were, indeed, buying these books from the publishers (and, at that time, they might not have had a returns convention to cushion them from bad buying decisions) risking — or at least tying up — capital to provide stock to the public. In the case of ebooks, that isn’t true. No capital or shelf space (which also costs money) is tied up; all the retailer does is accept and display metadata and pay for the “goods” at some point after the customer pays for them. So the justification for the price-setting in the two cases is quite different.

Still, it was interesting seeing that history was — in a way — repeating itself 100 years later.

And now to Professor Thompson. He interviewed me a few years ago for his book “Merchants of Culture”, which has been out for a few years but which I’m just starting now to read. (Shame on me.) Thompson provided two absolutely fundamental pieces of information which could have been infinitely more helpful to the audience if they had come as the first thing on the program rather than the last.

1. The trade book business is quite different from other segments of the book business and has little in common, as a business, with school or college text or academic or professional publishing. Thompson made it clear that knowing one segment doesn’t mean you know another. After two days of hearing librarians complain that publishers were dissing their “biggest customers” because of the big houses’ concerns and restrictions on ebook sales to libraries, it was good to have somebody explain that publishers were different. In fact, libraries — relatively speaking — are not very large customers for general trade book publishers.

2. Thompson also emphasized — and this was critical insight coming, as it did, from the single speaker most knowledgeable about the transition trade publishing is making from print to digital reading — that nobody knows the future course of ebook adoption. Will it remain, as it is, in the 20% range for general trade reading? Will it go to 30%? 50%? The fact that nobody knows the answer to that question means that publishers’ policies have to accommodate uncertainty about a critical component of the publishers’ future commercial reality.

A couple of other points Thompson made bear repeating. One is that he sees big Anglo-American publishers fighting off threats to their margins. But he thinks the main source of margin erosion for American publishers is the agents, who exercise their power to drive up the cost of acquisition for the most desireable books; whereas for British publishers the source of the biggest problems are the big book retailers, particularly the supermarkets. It is ironic that America’s Robinson-Patman Act, which by requiring manufacturers to offer the same terms to like customers aims to protect small merchants, is actually the shield which protects American publishers from facing ever-escalating demands for margin from their largest accounts.

And Thompson showed a chart tracking the percentage of sales that were ebooks for trade publishers, year by year. The numbers were:

2006 0.1%
2007 0.5%
2008 1%
2009 3%
2010 8%
2011 20%

So the multiple from prior year sales is:

2006-07 5x
2007-08 2x
2008-09 3x
2009-10 2.7x
2010-11 2.5x

The indications are that when we get the report on 2012, it will be about 30%, or 0.5x.

No wonder Thompson makes it plain that we don’t know what’s ahead of us. Did you think that the rate of switchover would drop by 80% this year over last? I didn’t.

The big news of the past few days, of course, is the proposed new Penguin Random House entity. I think the only surprise here is that it has taken so long for a Big Six merger to occur since the last one (which was when Bertelsmann, owners of Bantam Doubleday Dell, bought Random House in 1999). My back-of-the-envelope arithmetic says that PRH is bigger than the other four of the formerly Big Six combined. So I’d expect to see further mergers, but the title of “biggest trade publisher in the world” is secure for the foreseeable future.

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