UPDATED: Spelled Hachette wrong. Fixed.
For the past few months, Amazon has been at war with one of the largest book publishers, Hachette. Amazon is trying to force Hachette to adjust its book prices to under $10, but Hachette has thus far refused. Actually, to be fair, Amazon has been at war with publishers over pricing for years, but this is the latest battle in that prolonged war.
So, Amazon took action by delaying shipment and refusing to sell some of Hachette's books. This is big because some of our favorite authors are effectively blocked from selling their books.
The battle took a new turn this weekend to an old form of political communication. Back in the communism days of the Soviet Union, the Otdel Agitatsii i Propagandy (the USSR's department of agitation and propaganda) produced all forms of pamphlets, movies, posters, and other propaganda in an attempt to win hearts and minds. This was called agitprop. This weekend, both Amazon and Hachette went agitprop.
Hachette's authors (presumably with the coordination of Hachette) took out an ad in the New York Times, calling for Amazon to yield. You can read the piece by the Hachette authors at authorsunited.com.
Amazon sent a letter out as well. A version of it is at the creatively named readersunited.com and is addressed as "Dear Readers." I was emailed a copy that was addressed as "Dear KDP author" because I have a Kindle book available on Amazon. Both letters are identical.
Below, I've reprinted the Amazon letter and then interpreted it for our audience by helpfully providing CliffsNotes (or, I guess, DavesNotes), so you can really get inside Jeff Bezos' head and know what the Amazon folks really mean.
Let's get started, Comrades.
What they said: Just ahead of World War II, there was a radical invention that shook the foundations of book publishing. It was the paperback book. This was a time when movie tickets cost 10 or 20 cents, and books cost $2.50. The new paperback cost 25 cents – it was ten times cheaper. Readers loved the paperback and millions of copies were sold in just the first year.
What they mean: Ebooks are here to stay. Readers love Kindle books. This kind of disruption isn't new, so you darned well better get used to it. Plus, by mentioning World War II, maybe you'll think it's patriotic to buy ebooks.
What they said: With it being so inexpensive and with so many more people able to afford to buy and read books, you would think the literary establishment of the day would have celebrated the invention of the paperback, yes? Nope. Instead, they dug in and circled the wagons.
What they meant: Those darned greedy, elitist publishers.
What they said: They believed low cost paperbacks would destroy literary culture and harm the industry (not to mention their own bank accounts). Many bookstores refused to stock them, and the early paperback publishers had to use unconventional methods of distribution — places like newsstands and drugstores.
What they meant: Yes, ebooks are killing bookstores today, but since bookstores have been in cahoots with elitist greedy publishers forever, they deserve whatever happens to them. Pay no attention to the fact that Amazon has been putting bookstores out of business since the 1990s.
What they said: The famous author George Orwell came out publicly and said about the new paperback format, if “publishers had any sense, they would combine against them and suppress them.” Yes, George Orwell was suggesting collusion.
What they meant: Ignore the fact that the LA Times says Orwell was joking. Think Orwell. Think Orwellian. Think thought police. Those publishers are telling you what you can think. Big publishers. Big Brother.
What they said: Well… history doesn’t repeat itself, but it does rhyme.
What they meant: We don't understand this line either, but Bezos made us put it in. You know he owns the Washington Post, right? Well, that's probably why those Authors United folks bought an ad in the New York Times and not the Washington Post.
What they said: Fast forward to today, and it’s the e-book’s turn to be opposed by the literary establishment.
What they meant: Elitist publishers and elitist authors hate ebooks. Yep, they hate them. Ignore the fact that they just want to set their own market prices, in reality, these publishers are Luddites. They're fighting against the future, itself.
What they said: Amazon and Hachette — a big US publisher and part of a $10 billion media conglomerate – are in the middle of a business dispute about e-books.
What they meant: Hachette is the big company who hates ebooks and the future. Ignore the fact that Amazon made something like $74 billion last year. We're waaaay bigger than Hachette, but we want you to think of them as the evil big business.
Vhat? You think this is all they said? Turn to next page, Comrade. Turn to next page.
What they said: We want lower e-book prices. Hachette does not. Many e-books are being released at $14.99 and even $19.99. That is unjustifiably high for an e-book. 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 and should be less expensive.
What they meant: This is the core point of our argument. We want lower prices. There's no need for higher prices because ebooks don't cost anything to make. Ignore the fact that books (at least those that aren't self-published) require not only authors, but editors, marketers, publicists, layout people and all the rest.
What they said: Perhaps channeling Orwell’s decades old suggestion, Hachette has already been caught illegally colluding with its competitors to raise e-book prices. So far those parties have paid $166 million in penalties and restitution. Colluding with its competitors to raise prices wasn’t only illegal, it was also highly disrespectful to Hachette’s readers.
What they meant: Watch this. This is where we get to call Hachette Orwellian. Not just Orwellian, but colluding and illegal and probably fattening. Plus, they're disrespectful. Oooh, put that in your paperback and smoke it!
What they said: The fact is many established incumbents in the industry have taken the position that lower e-book prices will "devalue books" and hurt "Arts and Letters." They’re wrong.
What they meant: Elitist, elitist, elitist. Plus throw the bastards out. We hate incumbents, don't you?
What they said: Just as paperbacks did not destroy book culture despite being ten times cheaper, neither will e-books. On the contrary, paperbacks ended up rejuvenating the book industry and making it stronger. The same will happen with e-books.
What they meant: Check it out. Paperbacks were ten times cheaper. Ebooks are only a bit cheaper. So just go along with lower pricing and we'll all be better off.
What they said: Many inside the echo-chamber of the industry often draw the box too small.
What they meant: We're real proud of the "echo-chamber of the industry" phrase. Even Bezos loved it. Those "industry" folks have no vision, plus they're in their ivory towers and don't pay attention to the real world.
What they said: They think books only compete against books. But in reality, books compete against mobile games, television, movies, Facebook, blogs, free news sites and more. If we want a healthy reading culture, we have to work hard to be sure books actually are competitive against these other media types, and a big part of that is working hard to make books less expensive.
What they meant: We sell all that stuff. We'll be fine. But you guys... you need to play along or you're going to sink.
What they said: Moreover, e-books are highly price elastic. This means that when the price goes down, customers buy much more.
What they meant: Really, you might as well charge what we tell you because you can price it at pretty much anything. Besides, although this doesn't work for everything, generally, consumers like lower prices.
What they said: We've quantified the price elasticity of e-books from repeated measurements across many titles. For every copy an e-book would sell at $14.99, it would sell 1.74 copies if priced at $9.99. So, for example, if customers would buy 100,000 copies of a particular e-book at $14.99, then customers would buy 174,000 copies of that same e-book at $9.99. Total revenue at $14.99 would be $1,499,000. Total revenue at $9.99 is $1,738,000.
What they meant: Okay, stop complaining that we never release our numbers. See, here are some numbers. Granted, they're a wild over-generalization and unless you're a big name, you'd be lucky to ever see 100,000 copies of your book sell. But if you were able to make $1.4 million, you'd make $1.7 million. Now, isn't that a nicer number?
What they said: The important thing to note here is that the lower price is good for all parties involved: the customer is paying 33% less and the author is getting a royalty check 16% larger and being read by an audience that’s 74% larger. The pie is simply bigger.
What they meant: Okay, you authors. We hope you're paying attention. You know that you don't get the whole increase in profit if you go through a publisher. But if you dump your publisher (especially if you're one of them big Hachette name authors) and just publish directly, that $1.7 mil is all yours, buddy. All yours. Wouldn't you like to roll around in that stuff? Sure you would. So who needs publishers like Hachette when you've got Amazon? But we didn't say that. We merely vaguely implied it.
What they said: But when a thing has been done a certain way for a long time, resisting change can be a reflexive instinct, and the powerful interests of the status quo are hard to move. It was never in George Orwell’s interest to suppress paperback books – he was wrong about that.
What they meant: Don't forget that your publishers are Orwellian. Even Orwell wasn't good for Orwell. Those publishers are so old fashioned and stuck in their ways that they will never see the light. Come to us. Come to the light.
There's still more on the next page, as well as my take on what it all means. If you've read this far, you might as well finish...
What they said: And despite what some would have you believe, authors are not united on this issue. When the Authors Guild recently wrote on this, they titled their post: "Amazon-Hachette Debate Yields Diverse Opinions Among Authors" (the comments to this post are worth a read). A petition started by another group of authors and aimed at Hachette, titled "Stop Fighting Low Prices and Fair Wages," garnered over 7,600 signatures. And there are myriad articles and posts, by authors and readers alike, supporting us in our effort to keep prices low and build a healthy reading culture. Author David Gaughran’s recent interview is another piece worth reading.
What they meant: Basically, all authors aren't against us.
What they said: We recognize that writers reasonably want to be left out of a dispute between large companies. Some have suggested that we "just talk." We tried that. Hachette spent three months stonewalling and only grudgingly began to even acknowledge our concerns when we took action to reduce sales of their titles in our store. Since then Amazon has made three separate offers to Hachette to take authors out of the middle.
What they meant: Even though we refused to sell your books, we don't want to put you in the middle of this. Seriously. Yes, we could have just kept on selling books while we negotiated, but we really wanted to get attention on this and show we had some firepower. So, you're really just unfortunate collateral damage. Just because we dropped the bomb doesn't mean we don't love you.
What they said: We first suggested that we (Amazon and Hachette) jointly make author royalties whole during the term of the dispute. Then we suggested that authors receive 100% of all sales of their titles until this dispute is resolved. Then we suggested that we would return to normal business operations if Amazon and Hachette’s normal share of revenue went to a literacy charity.
What they meant: Those Hatchette people refuse to do right by you. We tried. They're unwilling to help. It's their fault you've become a human shield, not ours. No, really. We blame them.
What they said: But Hachette, and their parent company Lagardere, have quickly and repeatedly dismissed these offers even though e-books represent 1% of their revenues and they could easily agree to do so. They believe they get leverage from keeping their authors in the middle.
What they meant: They're keeping authors in the middle, not us. They refused to meet our demands, so we just had to stop letting them sell their books. We're not kidding. They made us do it.
What they said: We will never give up our fight for reasonable e-book prices. We know making books more affordable is good for book culture. We’d like your help. Please email Hachette and copy us.
What they meant: We're including their CEO's email address in this message. Go ahead and send him all the mail you want. He won't mind. Oh, and send us a copy so if you send him something pithy, we can use it. We like pithy.
My take on all this
I'm not including the email addresses because I don't think that's necessary here. Amazon then goes on to include a few talking points they recommend putting into the letters sent to Hatchette. Finally, they thank everyone for their support and sign it "The Amazon Books Team".
The book distribution business has always been pretty nasty. Back in the day, distributors used to return unsold books to publishers, but tore off the covers so they couldn't be resold elsewhere. This destroyed publisher inventory. It was destructive, mean spirited, and made it difficult for publishers to repurpose their goods.
So, publishers are used to distributors and retailers behaving in a relatively reprehensible manner. But publishers aren't children of the light either. Their contracts with authors have always been brutal, and so the authors usually get a very small percentage of the deal. Most publishers have treated authors as poorly as the distributors have treated the publishers.
Basically, the book business sucks and has always sucked.
Amazon is fundamentally a distribution channel for books, and as such, has the right to choose what it wants to sell. If it wants to stop doing business with one publisher because of pricing considerations, it has the right to do so.
That said, I don't think this approach is good for Amazon, publishers, or authors. Frankly, I think it's a very short-sighted approach. Amazon could have done fine listing the Hatchette books at Hatchette's asking price, and then let market forces dictate what sells. If people bought fewer Hatchette books, then it would make sense for Hatchette to adjust prices.
But the fact is, Amazon is the lion's share of the ebook distribution market these days, and by blocking books by Hatchette, authors who worked months and years on books are being beaten up unnecessarily.
This fight is ridiculous and there's really no need for it. Normally, I have the highest respect for Amazon, but this thing is wrong-headed. It seems kinda dumb. Not only that, it's creepy. What's next? Is Amazon going to blackmail every company they do business with to get pricing concessions? Where will it stop?
This is bad for Amazon's reputation. It's bad for authors. There are no winners here.