>Who Left the Door Open?

>Latest update (Jan 31) — See Below

Updated @ 4:35 CST — See Below

Maybe it’s the phase of the Moon. Maybe it’s an alien virus that’s caused it. But, whatever the case, the lunatics have escaped their rooms and are now running loose. Worse, one started the shouting and hysteria followed and I’m tired of it.

What, dear reader, am I talking about? I’m talking about the Amazon – Macmillan situation. In case you haven’t heard, last night Macmillan books (from, as far as I can tell, all their imprints) disappeared from Amazon.com. This includes e-books as well as hard copy books. Not included are those hard copy books sold by Amazon associates or Amazon.ca and other non-US versions of Amazon. Almost at once, twitter was a-flitter with conspiracy theories and accusations being flung at the evil that is Amazon.

Now, I’m not saying Amazon isn’t at fault. It may be. But, as far as I can tell, there is nothing to support that supposition except for one line in a NYT article, to-wit: Amazon is expressing its strong disagreement by temporarily removing Macmillan books, said this person, who did not want to be quoted by name because of the sensitivity of the matter. This unnamed person is supposedly someone “in the industry with knowledge of the dispute”.

Okay, call me a skeptic, but I have problems putting a whole lot of weight behind an unnamed source. I have further problems accepting as true an assertion from the media where they don’t have a secondary source to back up what their unnamed source claims. There used to be journalistic standards in this country but that’s a different issue and gets too close to politics — something I’ve promised my fellow MGCers I’d try to avoid.

Let’s look at the issue without the histrionics that have filled Twitter and Facebook and other online networks. Did Amazon delete the books? Yes. That’s undeniable because they aren’t there. But that’s not the real question. The real question is why did Amazon delete them? Is this a ploy by Jeff Bezos and Amazon to keep Macmillan in line, perhaps even to punish it for signing with Apple’s iPad? Or is it an attempt by Macmillan to force Amazon to increase e-book prices from $9.99 for best sellers to the $15.oo mark it prefers? Or perhaps it’s a bit of both. That’s more likely the truth.

Don’t be fooled by the blogs saying Amazon refused comment or couldn’t be reached for comment, etc. Guess what, the news broke well after business hours Friday night. There was no one in the office to comment, in my guess. But that doesn’t play nearly as well in print as saying Amazon refused comment or couldn’t be reached for comment, etc. And, gee, no one from Macmillan has commented either but you don’t see anything being made of that.

So who are the ones being hurt by the removal of these books from Amazon? Readers and authors. Readers because they can’t get their e-books in Kindle format and at a reasonable price. Sure they can go to Barnes and Noble or Sony or Fictionwise and buy the book but, guess what, those sites have DRM as well. Which means they won’t work on a kindle unless you break DRM. So, those folks out there yelling about Amazon having DRM and that’s evil and they need to do what other e-book sellers are doing need to look at the facts again. Beyond the DRM issue, price becomes an issue. I checked several titles last night and even if I could have bought the books in a Kindle-friendly format, I wouldn’t have. Why pay more than $20.00 for an e-book when I can go out and buy it for half that price at the local used bookstore? Oh wait, that’s what Macmillan wants me to do. They want me to buy the hard cover of the book and not the e-book. But, if I buy the discounted book at the resale shop, the authors don’t get anything for it.

I’ve just demonstrated one way authors are being hurt by this current situation. Another way is that, with their books gone from Amazon.com, they are losing potential sales. That’s reality. Another reality is that some of these same authors are pissing off potential buyers by blaming Amazon without any real proof that they are the ones at fault and by removing their Amazon author pages as well as removing their Amazon client buttons from their websites. Come on, guys, take a step back. Take a deep breath and think for a moment. And quit acting like a bunch of lemmings following the crowd over the edge of the cliff just because someone said to jump.

What does all this mean? It means that, as I’ve said before, publishing is changing and the major houses hate it. They hate the fact they no longer have the control of the buying public like they used to. They hate the fact they don’t control sellers as they once did. In short, they hate change. The sad thing is, because most publishers — and all too many authors — have no grasp of the economics at play right now, there are going to be many more losers in this battle then there has to be. We’ve already lost most of the mom and pop bookstores because the publishers liked the way the big box stores could order more books and potentially sell them. So what happened, the big box stores cornered the market and could dictate terms to the publishers, hitting the publishers in the pocketbook, hard. Then, with the advent of the internet and e-commerce, they failed to adapt and develop their own on-line sales presence, leading to Amazon.

Now, the furor is over e-books and their pricing. Publishers refuse to realize they can sell more e-books at $10.00 than they can hard cover books at almost $30.oo. What will their next battle be? Will they pull their books from the shelves of stores like Walmart and Target because they sell the “best sellers” for $10.oo and discount paperbacks? How does any of that help the reading public and the authors?

Okay, I can hear some of the authors out there grinding their teeth and sharpening their pencils to stab me through the heart because I’m advocating lower prices for e-books and taking money out of their pockets. No, I’m not. Okay, most have their royalties based on sales price instead of cover price. However, they have continued to sign contracts that give them the same, and in some cases lower, royalty payments for e-books as they get for dead tree versions of the books. They are listening to the pabulum their publishers feed them instead of looking at the economics of the situation. And it is to their detriment as well as the detriment of their fans.

The times, they are a-changing and instead of yelling about what’s wrong and pointing the finger of blame, everyone — publishers, authors and readers — need to understand that publishing will never be what it once was. It can become better, but only if it doesn’t shoot itself in the head. Right now, I’m afraid too many publishers are caressing the gun, looking down the shiny barrel and wondering what would happen if they pulled the trigger. Whether Macmillan pulled the books from Amazon in an attempt to retake pricing control or Amazon pulled the books to maintain that control, it really doesn’t matter. All that does is that no one is the winner here, at least not in the short term. What happens in the long run remains to be seen.

In the meantime, let’s check our facts, verify our sources and let sanity return.

UPDATE:

The NYT article cited above has been updated. The interesting points, imo, are as follows:

Motoko Rich, my colleague, spoke with a person who had a direct conversation with a person at Macmillan familiar with the conversations with Amazon. Macmillan offered Amazon the opportunity to buy Kindle editions on the same “agency” model as it will sell e-books to Apple for the iPad. Under this model, the publisher sets the consumer book price and takes 70 percent of each sale, leaving 30 percent to the retailer. Macmillan said Amazon could continue to buy e-books under its current wholesale model, paying the publisher 50 percent of the hardcover list price while pricing the e-book at any level Amazon chooses, but that Macmillan would delay those e-book editions by seven months after hardcover release. Amazon’s removal of Macmillan titles on Friday appears to be a direct reaction to that.

If this is true, I don’t blame Amazon one bit for taking the stance it has. To start, for Amazon to maintain the pricing as it currently is — something the majority of those posting on the kindle boards seem to want — they would have to agree to wait 7 months for the e-book. Now, paperback editions of most hardcovers come out before then. E-book readers will either not buy the book at all, wait and buy the paperback book or buy an e-book from another seller and break the DRM. None of which will help the author, the publisher or Amazon. If Macmillan believes this tact will increase the sales of hardcover books, they are mistaken. Worse, the ill-will they are creating may have long reaching consequences for them and for their authors. Will they — and the other publishing houses who believe as Macmillan does — please hire someone who understands the technology, the market trends AND the economics of the situation?

UPDATE 2:

At 2:22 PST, the following post was put up on the Kindle boards by the Kindle Team:

Dear Customers:

Macmillan, one of the “big six” publishers, has clearly communicated to us that, regardless of our viewpoint, they are committed to switching to an agency model and charging $12.99 to $14.99 for e-book versions of bestsellers and most hardcover releases.

We have expressed our strong disagreement and the seriousness of our disagreement by temporarily ceasing the sale of all Macmillan titles. We want you to know that ultimately, however, we will have to capitulate and accept Macmillan’s terms because Macmillan has a monopoly over their own titles, and we will want to offer them to you even at prices we believe are needlessly high for e-books. Amazon customers will at that point decide for themselves whether they believe it’s reasonable to pay $14.99 for a bestselling e-book. We don’t believe that all of the major publishers will take the same route as Macmillan. And we know for sure that many independent presses and self-published authors will see this as an opportunity to provide attractively priced e-books as an alternative.

Kindle is a business for Amazon, and it is also a mission. We never expected it to be easy!

Thank you for being a customer.

I’m not, personally, happy with this resolution and if I were Barnes & Noble and other e-book retailers, I’d be wondering how long before Macmillan and the other major publishers try this same tactic on me. I’m hoping that, as one commenter suggested, this is not so much a capitulation on Amazon’s part but a warning to Macmillan that they are looking at possible SEC violations. You have to wonder since they did use the “M” word. — Amanda

19 Comments

Filed under Amazon, E-books, Macmillan

19 responses to “>Who Left the Door Open?

  1. >My name is Geoffrey Kidd. I'm posting this as anonymous because I don't have my Google PW memorized.As far as I can tell, what we're all looking at is rival flocks of greedy seagulls squabbling and shrieking "mine!" over an audience their collective behavior is driving away.First the RIAA. Then the MPAA. Now book publishers? Does *every* industry have to shoot itself in the kneecaps this way?

  2. >Geoffrey, welcome! Great imagery. I had pictured two kids in the sandbox fighting over the pail with others on the outside, screaming for their favorites. You just asked the question I want answered. You would think the supposedly intelligent publishers and booksellers would realize what happened with RIAA and MPAA and learn from it. But no, they seem determined to repeat the mistakes of the past, hurting not only themselves but their authors and readers in the process.

  3. >There's a reason for this, Amanda. No matter how striking the similarities, no matter how how hauntingly close the warning signs of this disaster resemble the warning signs of the previous disasters, there's always that moment of glorious institutional denial where the Legions of the Clueless link arms and herald their clarion cry from the rooftops: "But this is DIFFERENT!"Though, in a way they are right: the first train wreck happened because the train was being run a new set of tracks at full speed by folks too bloody-minded and arrogant to slow down and exercise any degree of caution. So, when they hit that nasty bend in the track, they went flying off in a ball of fire.The train right behind them fared no better because, in their arrogance and bloody-mindedness, they held their speed so they were mere inches from the rear car of the first train.In both cases, colossal ignorance coupled with arrogance and bloody-mindedness caused a wreck that still has yet to be cleaned up.So, now that graphic details of both crashes and the failures that led up to them are well known and acknowledged (save by the surviving engineers of the wrecked trains — they're sticking to their stories no matter how flimsy and full of holes those stories are), what does that tell you about the people running the third train, who are rapidly approaching that treacherous, debris-strewn bend, yet have the throttle wide open and are furiously shoveling coal firebox?

  4. >That should read "furiously shoveling coal into the firebox".

  5. >Dear AmandaI was going to post on this tomorrow.It is yet another stunning example of the classical Greek saying 'Those whom the Gods wish to destroy they first make mad'.A declining industry threatens to blow its own head off.John

  6. >John,Uh… Today was your day? I think you people on furrin calendars get confused. (Runs.) At any rate, I'm sure Amanda will let you have tomorrow, if you wish, and you can expand on it.S.

  7. >Robert, ain't that the truth? And isn't it sad and frustrating that they don't see the similarities. I really wish the publishers would start paying attention to marketing trends and to what their customers are saying. Of course, I wish Amazon, Sony, Barnes & Noble and the other e-book resellers would also listen and do away with DRM. There won't be true competitive pricing between the resellers until this happens. In the meantime, the idiots are still steering the bus and texting on their cell phones as they speed down the mountain with blinders on. By the time the conflict is settled, there's going to be even more ill-will from the buying public toward the publishers, the "stores" and the authors. And it is the ill will toward the authors that most concerns me, to be honest. I've seen too many tweets and facebook entries (not to mention blogs, etc) over the last 12 plus hours from authors whining about how Amazon is evil and mean for taking down their books and pricing them so low and how they — the authors — have no say in anything business-related to the sale of their books. Maybe they don't, but the whining doesn't help any more than the berating of fans who want e-books in non-drm formats.Okay, stepping off the soapbox again.

  8. >Dear Sarah & AmandaOh Duh, I am living up to my Mad Professor moment. I have just delivered some work and lost all track of days.Sorry and thank you Amanda. I will do as Sarah says and pick up the thread tomorrow.John (crawling back under his stone)

  9. >John (sorry, can't do Dear, John. It's not THAT kind of post, no problem. And thanks for taking tomorrow.

  10. >Ya know, it's close to time to pull the plug on most publishers. I can see authors who aren't tied into long term contracts just going with Amazon and something like Lulu for POD.I just hope the crash doesn't bring down all the publishers. Some have already been showing common sense, and there will always be a need for the economies of large print runs for the established authors.

  11. >Matapam, from your mouth to their ears. Unfortunately, I think John is closer to what they are more likely to do. As long as the publishers refuse to embrace the new technologies and new market demands, there is little hope of them surviving. What really worries me is that their dig-my-heels-in-hold-my-breath-until-I'm-blue tactics will see the loss of a number of very good mid-list authors. Already they are feeling the pinch. Hopefully they will see the potential of electronic publishing through Amazon and other venues and not just give up.

  12. >It's worse than Amanda says. The number of authors who are claiming Amazon is using $10 ebooks as a loss-leader is… well. The idea that once the thing has been type-set (electronically) and converted to ebook format, there is next to no cost for "printing" or "shipping" seems never to have even tip-toed through the back of some minds. I tried several versions of "do they think that" before deciding that the real problem is they don't. Think, that is. It's all margin vs volume. If you're moving a lot of volume, you can make a mint on a profit margin of one penny per item – or less. The problem is, greedy fools want to have the high margin and high volume in places where the demand isn't there, and you get… you guessed it, the publishing industry.

  13. >Yes, thanks for this. I'm absolutely *amazed* that the Internet is up in arms to defend retail price maintenance. I'm far from calling Amazon a hero, but Macmillan demanding that they change their retail model is a whole lot more than a price war.

  14. >Somehow reading all this brought this up…It was the wrong piece of spam in the right place that did it.Steve Royal was upset at the ongoing fighting between publishers and distributors. That's when he saw the email saying, "Make Money With Chinese Ebooks." And he answered it, with a business proposal. Oddly enough, the original email was legitimate, even if the English was about as confused as anything ever translated by Google Translator. And the group of students and geeks were ready to turn raw text into well-formatted ebooks. With Royal's backing, they hired a band of militant librarians to help them with editing and proofreading.Within a month, the new Chinese based epublishing system was cranking out new books from a wide group of disgruntled American authors. They sold their products without DRM direct to anyone in the world who paid with credit cards, paypal, or whatever, And they paid the authors week-by-week.It took a while, but the Chinese system soon brought the traditional publishers in New York to their knees. Amazon and the electronic publishers watched their bits vanish.So that's how we got our new electronic publishing system. Ebooks from China cover the world.The only problem with it is that a half-hour after you read one, you're hungry again.

  15. >Kate, thanks for the comment. You're right of course. But add to the greedy the stoopid. In the paid ad Macmillan took out in Publishers Lunch to explain their "side" of the dispute, John Sargent seems to think the public will actually buy his stance that Macmillan wants to help Amazon make more money. Excuse me? What's that? You want to sell me a bridge too? Sorry, I just ain't buying it. This is the same Macmillan who, via president Brian Napack, said: Piracy happens when motivation meets opportunity. Motivation: love of authors, genres; perceived high prices; lack of availability; restrictive formats; distain for media companies. Opportunity: more digital content; more file sharing sites, broad availability of titles, more pirate ready devices. So, Macmillan wants to increase prices and says nothing about doing away with DRM. How dumb do I look — don't answer that. You'll hurt my feelings.For a very well thought out and researched post on this, check out http://www.teleread.org/2010/01/30/macmillan-ceo-tells-his-side-of-amazon-spat/

  16. >Beloved Snail, you're absolutely right that this is more than a price war. What no one seems to be asking is what will happen to Sony and Barnes & Noble and other retailers when their contracts with Macmillan come up for renewal. Anyone care to place bets that Macmillan will want them to adopt this same market plan if Amazon blinks and gives in? What I would like to see addressed, and haven't so far, is if Macmillan also tried to force Amazon to raise the prices of their hardcover books. I know the $9.99 price for best sellers has been a sore point for most publishers. I have to wonder if that wasn't included, or at least alluded to, in the failed talks.

  17. >Mike, the potential fall-out from this latest round of "Mine's bigger than yours" can remake the publishing industry, imo. Amazon has already signed some best sellers to exclusive e-book deals. You know Steve Jobs is trying to do the same with the new iPad (which is not, and never will be, an e-book reader. It is a tablet that you can read e-books on.). Smashwords lets authors and small publishers put e-books up on their site, which can then be sold through the Barnes & Noble site as well as the Sony e-bookstore. There are ways to get your books on Fictionwise if you meet certain criteria. What this means is that those authors who have the foresight not to sign away their e-rights to houses like Macmillan (who happens to pay less in royalties than most other houses for e-books) can then self-publish on these other sites. They can also set up their own stores or publishing houses and retain most of the sales price of each e-book.It also means there will be, in the short term at least, more piracy and more e-books coming into the country from foreign sources, both legitimate and illegal. All of which takes money out of the pockets of traditional publishing houses which are already in trouble.The solution is actually quite simple in the formulation even if the implementation will be a bit harder. First, publishers have to recognize and accept the fact that e-books are here to stay and the number of e-books readers — and, therefore, e-book purchases — is going to continue to increase. Second, those same e-book readers recognize the fact that it doesn't cost as much to produce, manufacture, store and distribute and e-book as it does a hard copy version of the same book. Third, most e-book readers would love to be able to purchase an e-book on the day the dead tree version comes out but will wait a reasonable length afterward for purchase for a reasonable price. Fourth, that does not mean they will run out and buy the hard cover book. Fifth, nor does it mean they will pay a higher price for the electronic version of the book than the soft cover version is selling at that time. Fifth, and imo most important, e-book customers do not like DRM and would prefer to see it disappear forever. It doesn't prevent piracy. Just the opposite, in fact. It promotes it. Just ask the music industry.In short, e-books are here to stay and the soon the industry, on all levels, accepts that and embraces it, the better it will be for everyone.Okay, getting off my soapbox now.

  18. >Worth noting in Amazon's comment: they don't mention that $14.99 is the high end of Macmillan's planned variable pricing, and it could lead to older books being sold for $6 each—well below Amazon's $9.99.As to whether it being investigable by the SEC, actually you would want the Department of Justice as they're the ones who do monopoly investigations—but even then, it doesn't seem likely to come to anything. Attorney C.E. Petit explains how a recent Supreme Court decision means that it will be very very hard to find any resale price management in violation of anti-trust law.

  19. >Chris, you're right about the Justice Department and not the SEC. This is what happens when I write blog when I'm not feeling up to par. And you may be right about the difficulty. However, having Steve Jobs and others on tape talking about how all prices will be the same does bring about the spectre of price-fixing if nothing else. Either way, there is a lot of bad blood that's come out of this weekend. How long it lasts is anybody's guess. Unfortunately, I still don't see how this will help the buyer, at least not in the short run. Prices increase and, if e-sales decrease, I don't have any confidence that Macmillan will lower prices. They aren't, imo, worried about anything except propping up hardcover sales.