Monday, May 26, 2014

It's Business

I have decided to speak out. No, it's not that strange, except that I haven't commented on the negotiations between Bi publisher, Hatchette Group, and Amazon. I have avoided eye contact just like when I live in a motel and refused to look into any transient patron's eyes lest they consider that a prelude to sex. It saved me many times and it's a real good policy in such situations. It's easier to avoid eye contact than to have to grab, twist, and pull when a casual glance ends up in a disagreement about sex with a man who refuses to take a polite no for an answer.

Amazon and Hatchette are in contract negotiations and heating up. Hatchette wants higher prices in eBooks and Amazon wants to maintain the right to lower prices below $10. This should not come as a surprise to Hatchette, who lost in a similar situation 2 years ago when they and 5 other Big Publishers decided to align with Apple to keep eBook prices high. Amazon won and now the contracts are being renegotiated, except Hatchette wants to keep those prices high and Amazon wants to keep them low.

Hatchette delays shipment of books to Amazon by 2-4 weeks and Amazon responds by removing the preorder button. Like I said, heating up. Hatchette then complains to its authors (getting 25% on eBook sales) and authors like Lilith Saintcrow complains to readers on her blog. (Side note: Lilith, it is fewer books not less books. You had problems with that when I edited your books years ago.) Joe Konrath responds by taking Lilith on point by point. Joe makes a good case and I'd have to agree with the Stockholm Syndrome here -- and with every Hatchette author who feels that Hatchette is being strong-armed by Amazon.

Here's the way retail works. I open a gas station and decide to cut my profit margin temporarily by offering lower prices than all the gas stations around me. More people fill up their vehicles at my gas station, thus saving them money and earning me more money by selling more gas (and sundries while they're waiting to fill up their Hummers, Mercedes, Volvos, Coopers, and Achievas). The other gas stations don't like losing revenue to me so they respond by lowering their prices below mine. I lower mine even further and they lower theirs and -- GAS WAR! Gas wars were big when I first learned to drive. The same goes for bookstores and any retail venue.

Lower prices are used to great effect in a movie, Bare Essence, where Tiger Hayes built a company with the philosophy that it is better to sell a good quality fragrance at a lower price, One bottle at $1000 an ounce is less effective than selling 1000 bottles at $1 an ounce.

On the face of it that seems counter productive to earnings, but it isn't, especially when you consider that 1000 people will tell their friends who will tell their friends and a multimillion dollar empire is built. That is how Jeff Bezos of Amazon took his company from his parents' garage to become the biggest retailer and publisher in the world.  Good business.

Amazon built their company on the promise that they would offer the lowest prices. An eBook that sells for nearly the cost of a hard cover book means only the die hard readers with money to burn will buy -- or will spend their entire budget on an author they love and hope they can find other books at secondhand stores and the library. Amazon continues to want the same thing -- eBooks selling for $9.99 or less. Hatchette wants to keep the prices high. Isn't that how they got in trouble with the Department of Justice (DOJ) in the first place when they banded together with their Big Publisher friends and Apple before and had to settle because they were in the wrong? Methinks Hatchette has learned nothing.

Hatchette has instead gone to their authors, authors like Lilith Saintcrow and James Patterson and Scott Turow (letters on Konrath's blog) to complain and those authors complained (whined) to the public. That is the beauty -- and the curse -- of social media on the World Wide Web.

The whine goes something like this: Amazon won't agree to Hatchette's terms and meany Amazon took off the preorder buttons so Hatchette won't be able to sell as many of my/our books and I lose money and can't feed my kids or pay my mortgage. Boo hoo. Hatchette needs those preorder buttons on Amazon to figure out how many books to print, even though eBooks aren't printed and you're not supposed to notice that.

Guess what, kiddies? Amazon could drop every single Hatchette author from their website and not sell any of their books except through third party buyers and where would that leave you? Amazon is not obligated to sell your books. How does that strike you?

The World Wide Web also keeps these blog posts and inanities forever. Keep that in mind.

Authors seem to forget that the old agency model where bookstores ordered books and didn't pay for them, sending them back to be buried in landfills has been the norm since Big Publishing helped book stores stay afloat during the Great Depression. Millions of books are trashed every year when bookstores send unsold books back to publishers. How much money did the authors make on those books?

Amazon is doing business and Hatchette is protecting its bottom line, the same bottom line that guarantees fancy lunches and travel on expense accounts out of the 75% royalties Big Publishers keep out of eBook sales while the authors are paying their mortgages and feeding their children on the measly 25% they get. Minus expenses, of course.

Amazon sells a lot of books and losing Amazon sales will hurt Big Publishing and eventually authors because authors don't have the guts to ask for higher royalties or take their back list and manuscripts into the indie market and sell their own eBooks for 70% of the profit. Something tells me the Stockholm Syndrome helps to block out those facts. (Remember Patty Hearst?) Or maybe the authors were so busy juggling finances and writing their next books to think that far ahead.

It is busines. It is not personal.  At least not to Amazon which is more than willing to sell Hatchette's books at a lower price. Gram always said some pie is better than no pie.

Hatchette will have to suck it up and sell more books to Barnes & Noble (those that remain) and independent bookstores and print books for libraries at a reduced cost more in line with smaller budgets libraries are working with these days. Good thing it doesn't take much effort to stock eBooks and transmit those to libraries and bookstores. Readers will just have to get used to paying high prices or going to the library more often.

No, Amazon is not the bad guy here. The bad guy is the same bad guy who lost that DOJ case 2 years ago and had to pay off. That would be Hatchette.

Say what you will -- and I am sure you will -- about Amazon's practices, but business is still business. Hatchette needs Amazon more than Amazon needs Hatchette and that is what sticks in Hatchette's craw.

Joe Konrath offers up Scott Turow and James Patterson's comments on this issue and lays them to rest. You wouldn't see any of this if you had to rely on newspapers, TV, and radio for your news. All of this would happen behind closed doors until it was signed, sealed, and delivered. The Internet makes playing tricks and dirty pool so much easier, but it also makes everything so much harder when there are people on the other side offering up common sense and facts instead of emotional appeals.

Lilith Saintcrow said it is up to the reader, and in a limited way that is true. If one of Hatchette's authors' books are not available on Amazon, I can find a bookstore that does carry it somewhere else in a matter of moments. The Internet takes the work and fuss out of checking out dozens of bookstores. And that is the point. Amazon is not the only game in town, but they are the quickest and fastest way to get the books I want, but not at hard cover prices. I will wait until the price drops below $10, even for authors I love and books I've anticipated. I'm 59 and have learned patience. If those other bookstores won't sell me an eBook from a Hatchette writer at a reasonable price, I'll buy a hard cover book from a third party seller or get it at a secondhand or remainder bookstore and the author will get nothing from me. Like I said, it's business.

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