Tag Archives: Hachette Book Group

Hachette vs. Amazon—Do We All Lose?

By Liesa Malik

Personal Note: It has been several years (decades) since I last worked on news copy, and my journalism background is very rusty. Therefore, I have to admit to writing this with bias, and let you know that any opinions expressed here are mine as an individual and do not reflect an official stance by RMFW or its members . . .

Whether you love it or hate it, big business is here to stay, and stay involved with our lives. This is the story of two giants in the publishing industry and how we as authors might be involved.

BREAKING NEWS . . .

In May 2014, the New York Times broke a news story sure to rock the publishing industry. Hachette Book Group, fresh off an anti-trust lawsuit by the government, was the first of five major publishing houses required to re-negotiate pricing issues surrounding the ebook business. And talks weren’t going well.

On the surface, the lines of this dispute were clearly drawn and easy to form opinions over. Hachette, as the publisher, would set prices for ebooks in a similar fashion to pricing for hardcover books. Some ebooks would be offered for sale at $12.99 up to nearly $20. Most of these ebooks were authored by some of the biggest names in the industry – James Patterson, Malcom Gladwell, Stephen Colbert, Douglas Preston, and more—and demand for these books would easily cover the prices asked.

On the other hand, Amazon wanted the books priced at no more than $9.99. Jeff Bezos, CEO of Amazon has a standing phrase, “your margin is my opportunity.” His focus is to bring the lowest price to everything Amazon distributes to the consumer. And that includes books.

Some problems here:

  1. The publishers claim the right to price their own products (often developed with hefty advances, public relations campaigns, and the costly editorial superiority of large publishing houses). If Amazon is allowed to price the books at below cost, the big houses could soon be in financial trouble.
  2. Amazon called foul over that thinking. In a printed statement the company said, “With an e-book, there’s no printing, no over-printing, no need to forecast, no returns, no lost sales due to out-of-stock, no warehousing costs, no transportation costs, and there is no secondary market—e-books cannot be resold as used books. E-books can be and should be less expensive.”
  3. The Wall Street Journal weighed in on the pricing dilemma even before this latest dispute arose. In an April 2012 article, WSJ reporters wrote “publishers feared that $9.99 would cement consumer price expectations and make it difficult to charge more (for books) in the future.” That fear drove competitors into an alliance between the five major publishers (Hachette, Harper Collins, MacMillan Publishing, Penguin Random House and Simon and Schuster) and Apple computer, in which a new sales model would allow higher pricing to exist across the board. That’s when Amazon complained and the government stepped in. The publishers and Apple ended up with millions of dollars of restitution to pay, and the demand that new negotiations take place.

THE PR WAR BEGINS

Soon after the break down this spring, Hachette and some of its authors began reporting on the semi-secret punishing tactics Amazon was using to drive down Hachette sales on Amazon. This is significant because Amazon owns 41% of all book sales and 61% of ebook sales in the U.S. The tactics being used were:

  • Slow delivery of book orders. Amazon claimed Hachette wasn’t sending books over on time, and Hachette claimed Amazon was holding them back from consumers.
  • Removal of “Buy Buttons” from some titles
  • No ability to pre-order expected releases
  • Competitive advertising on a Hachette author’s page that recommended different titles (by other publishers) at a better price.

These punitive actions were met by huge complaints in the press. Stephen Colbert even produced a questionable hand signal to the distribution giant. 

THE GLOVES COME OFF

As more and more authors found out about, and voiced concerns over, Amazon’s “bullying” tactics, Amazon tried offering to pay the authors 100% of its sales of their books while the price war continued.

“That was not a real offer,” said Douglas Preston (co-author with Lincoln Child of the Pendergrast series) “It was an attempt to divide authors from their publishers.”

Mr. Preston dove into the fray with a letter that quickly circulated among the famous and not-so-famous author community. “I wrote that letter hoping twelve brave souls would sign it. I’ve received over one thousand responses. The letter went viral,” said Mr. Preston.

On August 10th that same letter appeared as an advertisement in the NY Times and immediately faced tremendous support, and large skepticism.

Authors like Stephen King, Donna Tartt, and Philip Pullman “signed” and endorsed the letter, while Amazon called Mr. Preston “entitled” and “an opportunist.” The Amazon team was referring to the successful career Mr. Preston has built as an author, and hinted that personal greed was the reason Mr. Preston may have written his letter.

NOW IT’S OUR TURN

The above notes only nick the surface of the publishing world at work. Some other salient points to ponder include:

  • If Amazon succeeds in cowering Hachette, will it be able to use this battle to set up negotiations with the other major publishers to its advantage?
  • Are consumers right in their demands for the lowest possible price on books? Is there such a thing as a “free lunch” in publishing?
  • As authors, are we receiving a fair deal from publishers who have little to no cost in converting our paper and hard bound books to ebooks?
  • In the past, Amazon had a program called “The Gazelle Project” where small publishers were pressured out of existence with similar tactics. In a Hachette published book by Brad Stone, The Everything Store, Mr. Bezos is supposed to have set the tone by saying Amazon “should approach these small publishers the way a cheetah would pursue a sickly gazelle.” Since that became public knowledge, the program name has changed to the “Small Publishers Negotiation Program.”
  • While Amazon sells 50% or more of all books sold in the United States, those sales represent only about 7% of the giant distributor’s sales. Are the big five gazelles now?

I tried to reach representatives from the biggest two players in this situation. I was essentially told “no comment,” and given links to press releases and public letters.

Next month, I will write up interview notes from Mr. Preston–one man, one voice who has shown once again that there is power in words.  The question is, will those words stand up to legitimate, albeit, hardball tactics by Amazon?