Thursday, August 7, 2014

Much Ado About Publishing

Watch and read this--CNN Opinion: If I Were Jeff Bezos, by James Patterson
James Patterson\n
Why so serious, James?

I have a different take on the Amazon/Hachette Book Group dispute, but this CNN piece (and James Patterson's rambling muses that are attached to the piece) are interesting. I find it funny that Hachette continues to use the media to shape the public's perception of the business dispute and yet most people continue not to care. The ones who should care the most--the authors--are taking the wrong side.

Out of loyalty to their publisher, they continue to vilify Amazon. Amazon gives the publisher 70% of the revenue generated per book sale. The publisher, in turn, gives the author 25% of that. Yet, if the author published directly to Amazon, THEY would receive the 70%.

The other thing that should be made clear is that Amazon is not fighting for more than 30%. Many of the pieces I have seen claim that Amazon is fighting for a larger share of the revenue. That simply is not true. Amazon is fighting to keep ebook prices from being more than or the same as hard copies. 

This obviously appears to effect the revenue of the publisher and therefore the authors. This is not always true, especially for authors who are considered "midlist" authors (outside of the top 50 sellers). Amazon's models have shown that the best pricing practices are under $9 for ebooks. They know that volume will increase if that pricing model is followed. With the increased volume, the total volume of sales will increase.

On the other side of this paradigm, publishers want to retain control over the pricing of their product.This is only slightly different than Wal-Mart telling Coleman that they need to make a sleeping bag that they will price at $25, even though Coleman would prefer to set the manufacturer's price at $35 for the same product.

This model threatens smaller distributors of books, like local independent book stores more than it does the big publishers. Amazon is leveraging their already considerable power to capture even more of the market by setting pricing models that only they can support. They can do this because they can offer you more than just the book. They have socks, computers, soap, raincoats, umbrellas, cell phones, ereaders, and more that they can market to the same customers who are learning just how great it is to purchase from Amazon. Their pricing strategy is a brand recognition incentive.

Where do I personally fall on this issue? Well, I have watched and read, listened and waited. The debate has raged on, with petitions signed, and famous authors like Patterson and even Stephen Colbert weighing in on the publisher's behalf. I do not think that either corporate giant needs a helping hand. This is a business dispute. I see benefits and concessions under both outcomes.


If Hachette finally gives in and allows Amazon to set the pricing models, then some good stuff and some bad stuff will happen. First of all, let's all understand that when we speak of this pricing model, we are mostly speaking of new release books by best-selling authors. We are not talking about a book that is more than a year old, or that is written by an author in the midlist.

The Good Stuff
Readers win. Instead of paying $14.99 or $19.99 for the newest James Patterson novel, readers will only have to pay $9.99. Arguments will be that most people would pay $20 for that. I would not agree. But, if you saved $5 to $10 on his book, read it in a weekend and then received an email showing ten more books in that genre by authors similar to him where they had a deal on an older Harlen Coben book for $4.99, you'd be tempted to get it, right? You spent the same $14.99, but two authors benefited. The reader finds that they got a great deal, two books for the same price as what they would have spent on one before the Amazon/Hachette war. So the authors win as well.

With the increased traffic, increased publicity (although most of it was negative), and a chance to prove their algorithms are correct, Bezos and Co. will likely note an increase in revenue. More people will sign up for Prime (getting access to streaming movies, unlimited book borrows from 600,000 titles, and the availability for discounts and free shipping in some cases will be a no-brainer for Amazon regulars). More customers will buy ancillary products like movies, games, clothing, or electronics. More people will discover the greater Amazon community from reviews, to resellers, to blogs and sites dedicated to Kindle apps, Kindle accessories, and book discussions. So, Amazon (DUH) wins.

The Bad Stuff
The other publishers (Penguin, MacMillan, HarperCollins, and Simon & Schuster) are going to have to come to the negotiation table soon as well and will be faced with a precedent that has been set. They can fight it, but for how long? At what cost? How long will their authors be willing to continue to be loyal, knowing that results of Hachette's failure actually benefited their authors in the long run? Will they see that Amazon is actually reaching out to help them, or will the perception continue to be "Big Bad Amazon" vs. "Little Publishing House?" The other publishers lose.

This is potentially bad, because a repeat of this current dispute is not healthy, especially from a public perception standpoint. When it gets to the point of public apathy, then everyone else is getting hurt: publishers, Amazon, authors, and readers.

If Amazon "wins" independent book stores lose again. Already hurt by the burgeoning ebook market, independent book stores will have to continue to scrabble for ways to stay relevant. Pricing for them will remain the same for their stock. The pricing model that the publishers employ actually keep brick and mortar booksellers relevant and competitive. The price difference between a hard cover and an ebook is not significant. The good news is that the majority of people continue to PREFER printed hard copies over digital and pricing is not an issue to them as long as it maintains. However, if Amazon "wins" the dispute, this is still another dagger in the dark, another straw on the camel's back.

If Amazon "wins" Barnes & Noble loses. Again. Barnes & Noble continues to lose due to their dinosaur-like ability to move in the market and adjust. Their search engine still lags behind, their purchasing strategies are stuck in the 1990s, and their inability to market their superior ereader product perplexes even the staunchest retailers. If this dispute is solved in Amazon's favor, B&N may become the injured elk in the herd, crippled, wounded, and floundering, a target for some predator to take it out. That, in turn, would be a loss for readers. We NEED a good brick-and-mortar store to get books that curates more than just the best-sellers (like Target & Wal-Mart).


The Good
Independent book stores win. Barnes & Noble gets a bit of breathing room and perhaps some collateral they can use when negotiating with the other Big 5 publishers. Big authors win. They lent their voice in defense of their publisher and get rewarded. Their face and name is associated with the winner. They helped slay the giant. Not the truth, you understand, but the perception, and in today's world, that is all that matters in the end.

The other Big 5 publishers win. They now have a precedent in their favor. They can leverage that in their negotiations without being accused of collusion. In their minds, Amazon used a "nuclear" method of negotiating, and if Hachette lost then they would have to threaten with their own nuclear option: pull their books from Amazon's store. Not the wisest decision and certainly one that will hurt them dearly, but also not an empty threat. But, with Hachette winning, this sacrifice will not be necessary.

Hachette gets their way. Although it is arguably to their detriment in the long run, in the short run, they win respect of their publishing peers, become heroes to their authors, build credibility with literary agents, and elevate themselves as a true defender of the publishing industry.

The Bad
Readers lose. They lose because publishers will continue to set the prices to ebooks at the same or sometimes higher than their printed counterparts. Which, makes absolutely NO SENSE. No printing costs. No distribution costs. Minimal "middle-man" costs (wholesalers and retailers are cut to only Whispersinc and Amazon). NO RETURNS (Where a store sends back their purchases to the publisher).

Why does Hachette (and RH, S&S, HC, and Penguin) want to keep ebook prices high? THEY MAKE MORE PROFIT. Simple. Plus, they also do not want to scavenge from their baby: hard cover sales. Even though the margins on hard covers are slightly lower due to their higher production and distribution costs, hard covers still represent a larger volume of revenue than publishers think they can recuperate from ebook sales. In addition, in their minds it would mean more RETURNS. This would dig deep into their pockets.

Authors lose. If you haven't read a publishing contract, you should. I am sure they are not too dissimilar to contracts offered to any type of artist. They are rarely favorable to the artist. Extended rights, clauses, terms--everything favors the distributor (Publisher, record label, art gallery, etc.). If Hachette wins, then their clout and perceived heroics will create an atmosphere that may enable them to continue to demand status quo in terms of author contracts. Why fix something that is obviously not broken, they will argue. In the meantime, they will continue to receive $10.50 in revenue for every $15 book and pay their authors $2.36 (after their agent's 10%). What is the publisher doing for their $7? A whole lot less than they would for that same title in paperback. So, why pay more? Publishers will argue: so the author gets a fair share. Bull. If the publishers were truly interested in the authors, then they would negotiate a better deal with them. If they were truly interested in ALL THEIR AUTHORS, then they would see the marketing logic that Amazon is presenting to them that would increase the sales of ALL of their titles and therefore benefit everyone.

I ramble. I could go on. Obviously, Amazon loses. Maybe only loses face, maybe some reputation, but ultimately, it will continue to be a mega-giant. Who knows how this will effect them in future negotiations? Will they continue to strong-arm their way into these deals if the strategy does not work with Hachette? Will they increase the pressure? Give in? Change direction? Aggressively pursue more authors themselves in order to put pressure on publishing in that way? Who can predict that?

Ultimately, this exchange has deepened my resolve to stay an independent publisher. I have even played with the idea of eventually becoming a small publishing house myself, offering editing, marketing, and publishing services to aspiring writers. I have to first become successful, I suppose. However, even though I am more committed to this path of self-publishing, I am saddened by the rhetoric and the clamor. I am appalled at the continued practices of gatekeepers who, under the guise of culling literary worth, manage to merely act as prophets of profit. They want to find the next 50 Shades, the next Harry Potter, the next Hunger Games. Not the next masterpiece of literature.

I am not knocking those books. I am merely pointing out that publishers continue to leverage their expertise and clout in the name of literature when they are actually only interested in money.

What do you think? Where do you fall in this dispute? Who would you like to see win? Do you even care? The Hachette authors would like for you to boycott Amazon on their behalf. Is that likely something you would do?