Friday, May 30, 2014

What Is Going On Between Amazon and Hachette

There has been a lot of rumblings in book world of late about the contentious negotiations between Hachette Book Group and  The publisher and the online giant are in the midst of renegotiating their terms, which happens from time to time between large sellers and the publishers they do business with.  Well things have become contentious, with Hachette attempting to protect their bottom line, and Amazon attempting to increase theirs.  This is not exactly an uncommon occurrence when terms are negotiated.  Both parties are trying to get the best deal for their side.  That would be expected.  But here is where this negotiation is different.

Amazon has started to throw their weight around.  They have decided to show Hachette what they can do to them, if they don't play nice and give them what they want.  By neglecting to list Hachette titles for pre-order, suggesting alternate titles at the top of the pages of Hachette author's books, or offering no discounts or smaller discounts on Hachette author's titles.  It seems as if Hachette is negotiating for terms with a mobster who is showing them exactly what kind of accident they could have if they neglect to pay up.  They are a company who can decide what they will or will not sell, but they are big enough and powerful enough to put publishers out of business if they decide that's the direction they want to go in.  And if they decide they just want to show them how it behooves Hachette to give Amazon what it wants during negotiations, they can do that too.  But that doesn't make it right.  It's estimated that Amazon controls 33% of the book market.  They have grown very large thanks to generous discounts and inexpensive shipping.  That's where the problem lies; generous discounts.

When a bookstore buys from a distributor of publisher, they they typically receive discounts between 40-55%.  A long time ago Amazon decided they were going to give most of these discounts away to their customers by steeply discounting their titles.  They were going to make their money by selling in a large volume on this new thing called the internet.  Now anyone who has ever been in business can tell you, that is an extraordinarily difficult way to make money.  Margin is everything in business.  Consequently it took Amazon many, many years before they were able to make a profit conducting business this way.  Their investors where not deterred and kept giving them money even though they had yet to succeed.  Now obviously most businesses would not be able to operate at a loss for years and still be allowed to continue on, so in this way they were blessed.  Their competitors were not however, and they went out of business in droves.   And now Amazon has decided they want to recapture some of that margin, by taking it from their suppliers.  You can see why the book world is up in arms about this.  That's not how the game should be played.  You were given a large piece for yourself, and decided to give it away, and now you want my piece?  That's not really how business should work.

Now one of Hachette's best-selling authors is James Patterson.  Patterson has been a champion of independent bookstores, and even though I haven't read much of his work, I respect him a great deal.  He has much to say about this situation, and I think when people this intelligent and in the know speak, the world should listen.  Here is something he said at Book Expo America, which is currently going on in New York:

Hi, I'm Jeff Bezos. I can't do his hysterical laugh.... Amazon seems out to control shopping in this country. This ultimately will have an effect on every grocery and department store chain and every big box store and ultimately put thousands of mom and pop stores out of business. It sounds like a monopoly to me. Amazon also wants to control bookselling, the book business and book publishing. That's a national tragedy. If this is the new American way, it has to be changed by law if necessary.
Perhaps it is time that Amazon thinks about Google's Mission Statement, one which would be best followed by all companies both large and small.  "Don't Be Evil."  It has a nice ring to it, don't you think?  I really would love to know what you think.  Please let me know your thoughts in the comments.


  1. Well put. It has occured to me that Amazon, through it's deep, and entirely unreasonable, discounting, has devalued the book to most customers. While I think most people were aware that Amazon was not making a profit on the books they sold, people have now come to believe that the $24 hardcover should really only cost $15. "Because, really now, Amazon must be making money." And if hardcovers are now only worth $15, then how can you possibly charge, horrors, $10!! for an ebook, or $8.50 for a mass market.

    1. The ebook thing really bothers me, but mostly because people are typically unaware of the costs associated with producing a book outside of paper, printing, and paying the author. I think that is Amazon's biggest crime. Devaluing the book in the eyes of the consumer. The same people who spend $12 on a movie which entertains them for 2-3 hours and then it's gone are unwilling to spend $27 on a hardcover book that will entertain them for 2 or 3 times as long, and remain with them when it is over.