Update to the Amazon/Macmillan story (one side's POV)

[lagilman]

So I was both right (it was a hissy fit at being told they'd have to work on the same terms as Apple) and wrong (it was part of terms-of-sale discussions that had just started, probably triggered by Apple's price offering)

ETA: and I want to say that I love all of you guys who weighed in on this thread and the other, and all over the 'net; you're awesome and involved and thinking beings and... *flail* You're all utterly cool. Just sayin.

EtA2: Toby Buckell, bless him, breaks out the costings and slaps down the Clueless Entitlement so I don't have to. I owe you a drink, my friend.


direct link: http://www.publishersmarketplace.com/lunch/free/

PL Editors' note: This message ran as a paid advertisement in a special Saturday edition of Publishers Lunch


To: All Macmillan authors/illustrators and the literary agent community
From: John Sargent (Macmillan CEO)

This past Thursday I met with Amazon in Seattle. I gave them our proposal for new terms of sale for e books under the agency model which will become effective in early March. In addition, I told them they could stay with their old terms of sale, but that this would involve extensive and deep windowing of titles. By the time I arrived back in New York late yesterday afternoon they informed me that they were taking all our books off the Kindle site, and off Amazon. The books will continue to be available on Amazon.com through third parties.

I regret that we have reached this impasse. Amazon has been a valuable customer for a long time, and it is my great hope that they will continue to be in the very near future. They have been a great innovator in our industry, and I suspect they will continue to be for decades to come.

It is those decades that concern me now, as I am sure they concern you. In the ink-on-paper world we sell books to retailers far and wide on a business model that provides a level playing field, and allows all retailers the possibility of selling books profitably. Looking to the future and to a growing digital business, we need to establish the same sort of business model, one that encourages new devices and new stores. One that encourages healthy competition. One that is stable and rational. It also needs to insure that intellectual property can be widely available digitally at a price that is both fair to the consumer and allows those who create it and publish it to be fairly compensated. (ital mine)

Under the agency model, we will sell the digital editions of our books to consumers through our retailers. Our retailers will act as our agents and will take a 30% commission (the standard split today for many digital media businesses). The price will be set the price for each book individually. Our plan is to price the digital edition of most adult trade books in a price range from $14.99 to $5.99. At first release, concurrent with a hardcover, most titles will be priced between $14.99 and $12.99. E books will almost always appear day on date with the physical edition. Pricing will be dynamic over time. (ital mine)

The agency model would allow Amazon to make more money selling our books, not less. We would make less money in our dealings with Amazon under the new model. Our disagreement is not about short-term profitability but rather about the long-term viability and stability of the digital book market.

Amazon and Macmillan both want a healthy and vibrant future for books. We clearly do not agree on how to get there. Meanwhile, the action they chose to take last night clearly defines the importance they attribute to their view. We hold our view equally strongly. I hope you agree with us.

You are a vast and wonderful crew. It is impossible to reach you all in the very limited timeframe we are working under, so I have sent this message in unorthodox form. I hope it reaches you all, and quickly. Monday morning I will fully brief all of our editors, and they will be able to answer your questions. I hope to speak to many of you over the coming days.

Thanks for all the support you have shown in the last few hours; it is much appreciated.

All best,
John
Posted on January 30, 2010 at 5:28 PM

Comments

[jimhines.livejournal.com]

Thanks, Laura Anne.

[lagilman]

I think Amazon badly overplayed its hand, here. Macmillan's offering seems reasonable as hell to me, even taking out the corporate spin, and I suspect most publishers have been moving toward that formula already. By throwing a hissy fit within 24 hours of negotiations being opened... Amazon is clearly trying to say "my way or the highway."

The problem is, the highway's lined with other retailers.

[mtlawson.livejournal.com]

B&N is probably doing handstands right now.

[jimhines.livejournal.com]

It's Macmillan's response, so I'd expect them to sound better, but even taking that into consideration, WTF, Amazon???

I can't think of another way to say it. This is a total dick move on Amazon's part, and I hope it continues to blow up in their face.

[eldestmuse.livejournal.com]

I could almost, almost understand the decision to remove all the Macmillan e-books. But all of Macmillan's books? Especially after the past furors and dustups over #Amazonfail and how dumb it is to restrict what I as a customer can buy, encouraging me to go elsewhere with my business? (It's not like I'm going to give up my Tor books, Amazon. I'm sorry but I need books more than I need Kindle ebooks.)

Fail.

Then again, I've never been particularly happy with Macmillion's ebook (or hardcover, actually) pricing anyway; L. E. Modesitt is one of my favorite authors, I own almost every one of his books (and his daughter is my Torts / Employment law professor--how cool is that?!) and for the first time in a long time I trekked over to the library instead of just getting a book instantly with the Kindle.

Because let me be frank. $15 for an ebook is pushing it just as hard as $30 for a hardcover (I love Baen, love David Weber, fully understand how much more content is in some of his newer books, and I still don't shell out $30 for him either--and I'm lucky enough to have a fair amount of disposable income).

I don't agree with Amazon's tactics, but I've never been much on board with Macmillan's strategies.

Thanks for sharing this, though.

[lagilman]

well, I had conniptions when I found out that the hc of Flesh and Fire was going to listed at $25, so I totally understand. As those who worked with me on the editorial side can attest, I was a strong advocate of keeping books in mass market and priced reasonably, under the theory that readers will buy two books under $10 rather than one book at $20, and more books sold is a Good Thing.

Me, I'd spend $15 on an e-book vs a $25 hardcover for most authors I buy in hc, just for the ease of carrying. But first they have to give me an e-book reader that is budget-friendly. The "make the hardware cheap, make your profit on the repeated acquisitions of new software" model is far more likely to lure me.

[eldestmuse.livejournal.com]

I understand the ease of carrying argument, but I'm one of those strange, fortunate people who can sit down and read an average length novel in an hour or two. I remember the first time I went to Balticon--I met Joshua Palmatier, he was nice to me, mentioned he was an author, so I picked THE SKEWED THRONE, read it in an hour or two sitting on one of the steps on the first floor of the hotel, and he had a new fan.

I also remember sitting impatiently at my computer refreshing the day of a release for 3AM to roll around so that the Amazon site would have the ebook available at their midnight PST.

The appeal of the Kindle for me as a reader is that I don't have to drive to the bookstore, or wait for Amazon to ship it. I'm willing to pay a premium over production costs for the speed, as a voracious reader who never has enough books she enjoys. I have a calendar with alerts for book releases of authors I follow--and I invariably read those books the day they come out.

The only time ease of carrying comes into play for me is vacations, when it's nice to have 30 books for the week without setting aside two suitcases for it :(

I don't have a problem with $20 or $25 hardcovers, though, which I know is silly. But $26 with shipping and handling? Ouch! (My local mall doesn't have a bookstore--other than the Urban Knowledge store, which emphatically does not count--if you can believe that... and I hate driving to get a new book. I know it's silly, but I don't like driving unless I have to be somewhere, like school or work.)

I will admit that I got Flesh & Fire from the library, but that was less because of the price and more because I wasn't totally sure how I'd like the series; when book 2 comes out I'll be buying both to put next to the Retrivers books. I probably would have gotten the Kindle version since it's not too expensive, but you're a Balticon author so no ebooks for you!

I could justify the cost of the Kindle itself because of the cheaper price of ebooks. Even only saving a dollar on a paperback, I read a lot of books and the Kindle paid for itself pretty quick.

Sorry to eat up your blog with wall of texts, but the issue does concern me because Tor is one of the publishers that I read a lot of books from. Skimming my bookshelf it's mainly Luna, Tor, Baen, and Roc.

I admit to a certain level of surprise that Tor hasn't sent anything about this in its newsletter to readers; I can only hope that I'll see something from them to me as a customer sometime next week when Tor's editors hear from the big bosses.

[anisosynchronic.livejournal.com]

Barnes & Noble sells hardcover to people who pay for member card, at no more than 80% of list price, bestsellers at a larger discount, and sometimes has discounts ontop of the regular ones... so someone buying $25 cover price book at B&N could it it for $20 or less...

Physical books are more expensive for resources for handling--they take up space which costs money, if they don't sell they have to be dealt with... ebooks don't have return issues and have nearly 100% sell through rates. The words of the publisher executive ring very hollow to me.... also, a hardcover book I can donate for a tax writeoff, I can pass it on to someone else, I could even do something creative with the cover art on the dust jacket etc. Ebooks don't have reuse ability (or disposal issues, for the matter). I don't need an electronic device as a disintermediation device to be able to read a print book, an electronic device is necessary to read an ebook--and there are those pesky issues of format persistent an level of epehemerality--acid free books can last for centuries, ones on acid paper for a few decades. Ebooks depend whether the format stays supported or not, and whether it can be migrate to another device/readable storage format or not....

[mikefoxtrothow.livejournal.com]

Sounds perfectly reasonable to me, including the claim that Amazon would potentially make more money per book from the scheme.

I suspect that Amazon's objection is the possibility of reduction in their overall profits especially in the area of proprietary files for their stand alone hardware.

The Kindle now has the potential for real competition, and Macmillan's proposal puts all retailers on an equal footing, reducing the dependence on one piece of hardware/software platform for the sale of ebooks.

The Kindle took off well enough to begin with that Amazon ended up with both an effective Monopoly in dealing with consumers, and an effective monopsony in dealing with publishers.

Companies with that kind of power tend to be reluctant to give it up, which Macmillan' plan would have them do.

In the short term, consumers seemed to have the advantage with Amazon's position, Authors not so much...if it went on in the long term i suspect that both authors and readers would have been screwed.

[lagilman]

Yep. Pretty much the skew of my original post, before we got sidetracked into the ever-popular "but how much SHOULD it cost?"

Competition is good for consumers, within reasonable safety limits. A healthy industry is good for authors/publishers/retailers. A monopoly is only good for the one doing the monopolizing.

[katatomic.livejournal.com]

I haven't been a fan of Amazon's policies (and attitude) toward the publishing industry in a while and this is damned close to the nail in their coffin for me. I already removed links to them from my site back in early 2009. I'll wait for further developments during the coming week to determine whether I'll ask them to delete my account completely or not, but Amazon has not endeared themselves. First the deep discount cuts me, then the Audible thing, then the POD fiasco, then the business with back-door deletion of files on Kindle, even letting the stupid "sex" oops slide since it does appear to be a database management problem that was fixed after being blown out of proportion on Twitter, they just haven't made me feel like they are a reasonable partner to work with.

[lagilman]

Icon love!

[katatomic.livejournal.com]

feel free to grab it, if you want. I made it from a friend's photo. I can send you the file if you want it.

[jennielf.livejournal.com]

audible thing??

I <3 audible it is how i consume at least 50% of the books I read. I know they were bought by Amazon, is there something else I missed?

[katatomic.livejournal.com]

Yes they were bought by Amazon, so Amazon no longer lists the CDs by Recorded Books or Books on Tape/CD or the other original audio recordings. Audible also refuses to bid or negotiate. If another audio company is involved, they will back out, putting the author in the position of "take it or leave it" from the other company. Audible then steps in to negotiate an exclusive listing position for the Audible download version. If the original audio company wants to distribute via Amazon, they must make their files available to Audible at fixed rates.

[severedscythe.livejournal.com]

Those prices sound like a dream to me. Regularly, hardcovers in Australia range from $30 to $60, and paperbacks are usually $21. I don't even know.

Even if its in american dollars, I'd be happy. We're 98 cents to the dollar right now or something rediculous like that.

[eldestmuse.livejournal.com]

I heard about that when a friend was going to send me some of the Jennifer Fallon books that aren't out here in the US, and almost fainted. Apparently the justification has to do with the smaller market and shipping costs, but just, what?

It might mean that Aussies are more educated and readerly than us Yanks, willing to spend more, but I dunno--maybe there aren't enough readers to drive down prices. Would be interesting to hear an informed theory. Regardless $20 for a paperback fills me with horror and I love books.

[blitheringpooks.livejournal.com]

What does this mean?

. In addition, I told them they could stay with their old terms of sale, but that this would involve extensive and deep windowing of titles.

Windowing?

Did he mean winnowing? What exactly is he saying would happen under the old terms of sale?

[lagilman]

I wondered that too. Typos happen, I suppose, especially in an Emergency Get This Out Now! manner. Or maybe it's an Internet sales term I just never encountered?

[blitheringpooks.livejournal.com]

Also, is it true that Amazon is taking a loss on Macmillan books by selling them at 9.99? I'm reading that in places and ...?

[ex-fashioni.livejournal.com]

Yes, they are. I spoke with a major best-selling author at RWA Nationals this past year and this was one of the things she touched on. My friend had expressed disappointment as to the fact that this author's books weren't available for the Kindle at the same time that the hardbacks dropped. She forthrightly answered that it was because she had instituted a clause in her contract that required that e-book versions not be released until six months after the hardcover release. The reason for this was because of Amazon's $9.99 price policy for new hardbacks and how it interfered with Wal-Mart's match any competitor's lowest price guarantee. Rather than be forced to match $9.99 for a brand new hardback release, Wal-Mart was opting not to buy new hardback titles; given that Wal-Mart is the largest brick and mortar book retailer, this put a huge hurt on the publishers and on an author's numbers.

The author said, very clearly, "Jeff Bezos knows he's operating at an approximate five dollar loss per book. He's willing to take that loss for five years, to to steamroll any competition for the Kindle, then I guarantee you, prices on e-books will rise dramatically."

Given the current contretemps, it would seem that there's more than a kernel of truth to what that author said.

[jennielf.livejournal.com]

Laura Anne,
Thank you so much for posting all of this and doing the research (and cutting and pasting necessary). As I said in a comment above, I am still confused as to what they are fussing over and I am still confused as to why it is bad, but I trust you. I miss the Amazon of the old days that was this bizzare website where you could get all these fantastic used books.

Sigh. Progress.

[lagilman]

It's pretty much basic economics, which isn't basic at all, so don't feel too bad about being confused.

Short version: if one person holds the majority market share, they get to make all the rules. And very few people and even fewer corporations, given that chance, don't make the rules to benefit themselves, usually at the hurt to everyone else (me, thee, macmillan...).

If this forces Amazon to back down, the consumers win by having more options. The publishers/authors win, by not being forced into deeply unfavorable terms. Amazon... can recover nicely, if it gets its head out of its ass and remembers that it's a retailer, not a dictator.

IMO, anyway.

[mskiara.livejournal.com]

I don't purchase eBooks. They can have my print books when they pry them out of my cold, dead hands. Which is why I, personally, am so ticked off at Amazon right now. I don't care about the price of eBooks because I don't buy them. If people are willing to purchase them at $15 a pop (and I don't think they will - but my opinion is to let the market reflect that), then more power to them.

But to remove all buy options to printed books as well? I feel like I'm the innocent bystander who's house just got blown up in a war I didn't even know was happening.

I spend hundreds, probably more like thousands, of dollars at Amazon a year. Mostly on books - because those are my vice and my biggest hobby and my gifts for people on special occasions. But not anymore. I was ready, as a reader, to ignore their monopoly on eBooks as long as it didn't effect me. Guess what? Now it effects me. And it was Amazon who did it to themselves.

I'm in the process of moving my entire (many pages long) mass market wishlist to Borders.com - and I'll be getting my hard covers from my local independent. I'm also considering expressing my displeasure by using their universal wishlist function to change all of the books on my wishlist to Borders.com listings.

So. I just had to get that rant out of me. Thanks for listening to one reader's opinion. And thanks, Laura Anne, for being the outspoken advocate that you are. I know that anytime something big like this happens, I'll always get a well-researched opinion from you.

[lagilman]

Making your opinion known with your wallet is the most effective clue-by-four there is, for something like Amazon. If you happen to send them an e-mail informing them of why you're doing it, that might help, too. *small evil smile*

For the record, I don't think Amazon is "evil" the way I think, oh, certain political/politi-religious figures are evil. They're 'just' doing what corporations will do, if unchecked. Like algae in a pool, sort of...