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I'm a full-time working non-fiction author. I've worked with major publishers on past projects with excellent results, have received multiple major offers from

I'm a full-time working non-fiction author. I've worked with major publishers on past projects with excellent results, have received multiple major offers from major publishers for my upcoming projects, and have firm plans to self-publish new projects in the near future. Early in my career, I also spent time negotiating with retailers like Walmart at a large consumer goods manufacturer. I've been following this situation closely. I'm not personally affected (yet), but it's an opportunity to collect information in the interest of making better decisions about how to publish future projects. In most ways, this is a pretty standard supplier/retailer negotiation. Most of these disputes don't go public, and don't last this long, but they happen all the time. Both sides are trying to use whatever leverage they have to negotiate the best possible deal. That's normal. What's atypical about this particular negotiation is that authors are the counterparty that have the most at stake, but have no seat at the negotiating table. They're directly affected by the dispute, but have zero leverage, zero input, and zero recourse for losses incurred in the dispute. The affected authors are, quite simply, the only real leverage Hachette has in this dispute, and Hachette is using them for all they're worth. Here's the part of the NYT story that stuck out to me. It's buried close to the bottom: "About half [of Preston's] book sales used to come from Amazon. But since the retailer started discouraging orders, his paperback sales are down 61 percent and his e-book sales are down 62 percent." Hachette failed to come to mutually agreeable terms with their largest retail partner by dollar and unit volume. That's their most important job as a publisher, and they blew it, to the tune of permanently costing their authors 50-60%+ of sales they'll never recover. Shipping books into retail distribution in a timely manner to minimize out-of-stocks is a publisher's second most important job. Production and distribution of physical finished goods inventory into retail is a hard problem, and most publishers are reasonably well equipped to handle it at scale. When Hachette's contract with Amazon expired, Amazon (rightfully) stopped ordering advance inventory for stocking, but continued taking orders for available titles and transmitted those orders to Hachette as they arrived. From there, it's Hachette's responsibility to deliver the orders to an Amazon distribution center. Once the books arrive, Amazon packs & ships them to purchasing customers as normal. That's why, when Hachette's contract expired, all of their books were listed as "Out of stock: ships in 1 to 6 weeks" - that's how long it takes Hachette to deliver stock. That's slow as hell. Amazon didn't "boycott" or "drop" or "betray" authors or "discourage" readers from buying their books - it ceased offering retail inventory management services to a supplier whose contract had expired, and made a rational and defensible business decision when it became clear that the supplier was not negotiating in good faith to establish a new agreement. Preston has a right to be pissed off, but not at Amazon.

frandroid 12y ago
You kiiiiiiind of forgot the central issue of the story: Amazon trying to tell publishers how much they can sell their books for. Amazon could continue offering "retail management services" to these sellers, at a fixed percentage cut, like it does to sellers of countless other goods where it does not try to fix prices. Amazon and the publishers had a perfectly good agreement before, and Amazon decided to play hardball upon renewal, punishing readers and authors. That's unprecedented in the book business, and it is incumbent on Amazon to justify this. The only reason Amazon can pull this off is that they control half the retail book market, so it becomes an anti-trust issue.
- icelancer 12y ago
  > That's unprecedented in the book business The printed book business is about 50 years behind every other modern industry. This is always going to be true for the forseeable future. BTW I am an author who sells books and has no problem with Amazon trying to improve value for the customer.
- joshkaufman 12y ago
  It's the other way around, actually: by law in the US and most countries worldwide, suppliers are free to set whatever prices and terms they like, but retailers have the final authority to set the price that's presented to the retail customer. Suppliers can not unilaterally dictate to retailers the final sales price the retail customer pays. That's why "Manufacturer's Suggested Retail Price" (usually abbreviated MRSP) is a thing. The manufacturer / supplier suggests a price, but the retailer makes the final call. The only recourse suppliers have to this is pulling distribution from that retailer entirely, as long as they apply the same policy to all retailers - companies like Apple and Bose make credible threats to do this to suppliers that violate their guidelines, which is why their prices are so consistent across retailers. Otherwise, retailers have the final call on retail pricing unless they waive that right via negotiation: if they want to sell at a loss, or reduce their own margin to use lower prices as a marketing tool, they can. That's why Walmart and Target often sell bottles of Tide below cost - it's called a "loss leader" strategy, and it's very common as a way to attract new business. Amazon used loss leader pricing on bestselling titles to establish the Kindle platform, which is a major reason why it's the dominant ebook platform now. A big part of this dispute is that Hachette is demanding final authority on setting prices, and demanding that Amazon gives up the right to discount and use its ebooks as loss leaders - instead, they'd get a flat percentage (likely ~30%) of whatever Hachette decides to charge. This is a major part of what's now called "agency pricing," and the big 5 publishers and Apple colluded to force Amazon to adopt it several years ago. That's why the DOJ filed suit for antitrust / collusion / price fixing, and the publishers each lost or chose to settle. As a condition of the judgement / settlement, publishers now have to renegotiate their contracts with Amazon. Amazon, justifiably, isn't willing to agree to agency pricing without major concessions. Hachette won't agree to standard retail non-agency pricing. Hence the impasse. EDIT: also to clarify, wholesale non-agency pricing isn't "unprecedented in the book business." Barnes & Noble and independent retailers have operated on wholesale pricing for print books for decades. Otherwise, B&N wouldn't be able to place a "20% off" sticker on bestselling titles, or offer large discounts to move remaindered stock. Hachette is asking Amazon to agree to something no other book retailer has or would agree to. Retailers like Apple and B&N/Nook have agreed to agency pricing on ebooks in the hopes of shutting down Amazon's ability to discount, with the understanding that publishers were attempting to force Amazon to do the same. (Via collusion.) The larger game is that Hachette (and other large publishers) are attempting to protect their hardcover print sales by inflating the price of ebooks, which makes them less attractive to readers. Ebooks are more profitable, but it's a more difficult market to control, so publishers are fighting Amazon and doing what they can to slow ebook adoption as much as possible. It's not a smart strategy, IMO, but that's what they're doing.

frandroid 12y ago

You kiiiiiiind of forgot the central issue of the story: Amazon trying to tell publishers how much they can sell their books for. Amazon could continue offering "retail management services" to these sellers, at a fixed percentage cut, like it does to sellers of countless other goods where it does not try to fix prices. Amazon and the publishers had a perfectly good agreement before, and Amazon decided to play hardball upon renewal, punishing readers and authors. That's unprecedented in the book business, and it is incumbent on Amazon to justify this. The only reason Amazon can pull this off is that they control half the retail book market, so it becomes an anti-trust issue.

icelancer 12y ago
> That's unprecedented in the book business The printed book business is about 50 years behind every other modern industry. This is always going to be true for the forseeable future. BTW I am an author who sells books and has no problem with Amazon trying to improve value for the customer.
joshkaufman 12y ago
It's the other way around, actually: by law in the US and most countries worldwide, suppliers are free to set whatever prices and terms they like, but retailers have the final authority to set the price that's presented to the retail customer. Suppliers can not unilaterally dictate to retailers the final sales price the retail customer pays. That's why "Manufacturer's Suggested Retail Price" (usually abbreviated MRSP) is a thing. The manufacturer / supplier suggests a price, but the retailer makes the final call. The only recourse suppliers have to this is pulling distribution from that retailer entirely, as long as they apply the same policy to all retailers - companies like Apple and Bose make credible threats to do this to suppliers that violate their guidelines, which is why their prices are so consistent across retailers. Otherwise, retailers have the final call on retail pricing unless they waive that right via negotiation: if they want to sell at a loss, or reduce their own margin to use lower prices as a marketing tool, they can. That's why Walmart and Target often sell bottles of Tide below cost - it's called a "loss leader" strategy, and it's very common as a way to attract new business. Amazon used loss leader pricing on bestselling titles to establish the Kindle platform, which is a major reason why it's the dominant ebook platform now. A big part of this dispute is that Hachette is demanding final authority on setting prices, and demanding that Amazon gives up the right to discount and use its ebooks as loss leaders - instead, they'd get a flat percentage (likely ~30%) of whatever Hachette decides to charge. This is a major part of what's now called "agency pricing," and the big 5 publishers and Apple colluded to force Amazon to adopt it several years ago. That's why the DOJ filed suit for antitrust / collusion / price fixing, and the publishers each lost or chose to settle. As a condition of the judgement / settlement, publishers now have to renegotiate their contracts with Amazon. Amazon, justifiably, isn't willing to agree to agency pricing without major concessions. Hachette won't agree to standard retail non-agency pricing. Hence the impasse. EDIT: also to clarify, wholesale non-agency pricing isn't "unprecedented in the book business." Barnes & Noble and independent retailers have operated on wholesale pricing for print books for decades. Otherwise, B&N wouldn't be able to place a "20% off" sticker on bestselling titles, or offer large discounts to move remaindered stock. Hachette is asking Amazon to agree to something no other book retailer has or would agree to. Retailers like Apple and B&N/Nook have agreed to agency pricing on ebooks in the hopes of shutting down Amazon's ability to discount, with the understanding that publishers were attempting to force Amazon to do the same. (Via collusion.) The larger game is that Hachette (and other large publishers) are attempting to protect their hardcover print sales by inflating the price of ebooks, which makes them less attractive to readers. Ebooks are more profitable, but it's a more difficult market to control, so publishers are fighting Amazon and doing what they can to slow ebook adoption as much as possible. It's not a smart strategy, IMO, but that's what they're doing.