The Kris Kringle Formula

One of my favorite holiday movies is Miracle on 34th Street and one of my favorite scenes is where Kris Kringle in his lovely Santa Claus suit tells a mother that she can buy what her son wants to find under the tree Christmas morning by going to another store. The mother, played by Thelma Ritter (one of my favorite character actresses), is dumbfounded and says that from now on Macy's will get her business though she has avoided them in the past. Kris's actions are in the true spirit of Christmas and if Macy's will send people to other stores, like Gimbels, then Macy's just won a new customer.

That is a long way of getting into the point of this post, which is about Amazon. Amazon has built their business on giving customers what they want, even when it means offering third party sellers and telling them to go to Barnes & Noble or wherever customers can find what they want and need. The Big-5 publishers don't have the smarts of the Macy's owner who adopts Kris's policy and puts out a big book to show where products Macy's doesn't carry can be found elsewhere. The Big-5 publishers want to keep the lock on sales and distribution and pricing and keep authors from breaking out and going it on their own.

With the rise of boutique and small publishers, the Big-5 publishers began to lose their grip, but when Amazon came out with the Kindle and sales of eBooks went through the roof, the Big-5 claimed that would be the end of paper book sales in hardback and paperback. Except none of that happened. Yes, sales are down from previous years when all the books available were in paper form, but books are still getting out and books are still being read. Business has never been better for small publishers and readers alike. What's not to like about people buying and reading more books even if it is in digital form?

What's not to like is that paper and ink and paperback books with about a 5-year shelf life is not to like when Big-5 publishers have had the monopoly for so many decades -- and centuries. Authors going independent is nothing new nor are vanity publishers, but the likelihood of such authors getting any real fame and fortune out of the process, outside of Mark Twain or Jane Austen and the like, is like playing Roulette. The house always wins, and the Big-5 in their various earlier guises as smaller publishers before being gobbled up by conglomerates and media factories, held house odds. They were the House.

David Gaughran of Let's Get Visible had a lot to say about the Big-5 publishers' PR machine and what isn't being told by the media (owned by Big-5 publishing media services) about Amazon. Hatchette certainly is not going to pat Amazon on the back, offer a cigar to Jeff Bezos, and sign the current contract on the table. That would be their death knell. People would be able to buy Hatchette's books from Amazon at discounts that would cut into unlimited expense accounts and 3-martini lunches. You would think that the point is to get people buying books and reading more, which is what is happening, and not about the profitability of a $10 billion media conglomerate like Hatchette sending out PR bulletins that demonize Amazon.

David Gaughran writes, "The funny thing is readers don’t seem to have any problem finding books they love. Any readers I talk to have a time problem – reading lists a mile long and never enough hours in the day to read all the great books they are discovering.

The real discoverability problem in publishing is that readers are discovering (and enjoying) books that don’t come from the large publishers. What these publishers have is a competition problem not a discoverability problem." (The bolding is mine.) 

More writers are making the leap into self-publishing, but not at the diamond-studded rates of vanity publishers. Like the song says, "Sisters [and writers] are doing it for themselves," and they are doing it in increasing numbers.

Yes, there are some bad independently published books, but there are also some real dogs put out by the Big-5 too. I thought Meg: A Novel of Deep Terror was just such a bomb -- and so did the critics in spite of a media blitz worthy of Stephen King or David Baldacci and a PR budget that beggars the imagination of even the most well-heeled independent author. The Big-5 can afford it; they've been living off the backs of their solid and hard-working midlist writers for decades and exploiting those same authors' back-list shamelessly while giving very little to the authors, pleading poverty and low numbers. Well, if the Big-5 would put as much effort in midlist writers with a wide fan base even on the lukewarm advertising and promotion offered, they would make even more money, but those CEOs and fat cat Big-5 publishers with their golden parachutes and 7-figure incomes with bottomless expense accounts don't have the sense of R. H. Macy faced with Kris Kringle's manner of doing business so that kids get what they want under the tree Christmas morning. Those CEOs and fat cats are all about the bottom line and the black ink on their side of the balance sheet and to hell with authors, without whom they would cease to exist.

The thing is that the big publishers have sold the idea that it is their know-how, lakes of ink, forests of pulp paper, distribution, and marketing know-how that sells books and authors would be lost without them -- except authors are proving they don't need the Big-5 to make it big in publishing. Not everyone makes the kinds of money that J. A. Konrath or Amanda Hocking have made, but the field is opening up more and more as Amazon helps 99-cent book authors to rise above the pack and make their books worth reading and buying. It's the same idea that has always been true, it is more profitable to sell your product to 1000 buyers at $1 a pop than to sell 1 product for $1000 a pop, especially in this economy as we stand on the brink of a worldwide economic reset where countries are going bankrupt.

There are still reporters like Jeremy Greenfield who buy into the demonization of Amazon and dire predictions for the future of books, but the truth will out. The proof, as my Gram used to say, is in the pudding. And I know she wasn't the first or the last to repeat that phrase. Jeff Bezos and Amazon continue to prove that if you give the customers what they want, they will buy, and they will come back to buy more. Amazon offers everything under the sun from their own warehouses and from third party sellers right on their website and they don't play favorites with marketing algorithms so that their products get a bigger share of the space, no matter what you've been told or what the PR machine of Hatchette and the other Big-5 publishers and their media conglomerate owners pays millions to say. Judge for yourself and buy where you will. Amazon isn't the only game in town, but at least they play fairly with their customers. They also do not hold authors hostage. Can you say that of Hatchette or the other members of the Big-5?

Maybe it's time to follow Kris Kringle's formula and make sure the customers (the readers)-- and the authors -- get a fair shake.

A Lot of Amazon-Hatchette News, A Little Crow

More news comes out about the Amazon-Hatchette title bout and this time Amazon breaks with tradition by speaking out. Amazon has made an offer to Hatchette, but also says that they are not hopeful about Hatchette accepting. The negotiations have been going on since November, so I am not surprised Amazon has that take on things. They would know since they are facing Hatchette across the bargaining table.

Joe Konrath has it all on his blog -- along with a helping of crow.

Take the time to actually click on the links and read other viewpoints. I did and I found them very interesting and enlightening, especially when it came to reading the graph on churn among the Big 5.

Author Earnings had this to say about the drop in sales:

"Our focus on Amazon Kindle sales prevents us from seeing any possible corresponding increase of Hachette sales at other digital retailers to offset these declines, but we can say that the increase in the average price of Hachette’s e-books is having an effect on sales. It could also be that various Amazon algorithms and recommendation tweaks are contributing to the decreased sales. The big lesson is this: Across the Big-5 publishers, lowering average e-book prices correlated with higher per-title revenue. Increasing e-book prices correlated with lower per-title revenue.

This bears repeating, and it’s a lesson publishers could take from self-published authors: Lower prices means earning more money. We understand that this is counter-intuitive, but our data bears this out. And it’s a truth that many authors have seen for themselves as they experiment with prices. Which raises the question of whether or not publishers would even benefit from control over e-book prices. It could be that the worst thing for Hachette’s bottom line would be to get what they’re asking for in these negotiations."

I found Martin Shepard, co-owner of the Permanent Press, a small literary publisher based in Sag Harbor, NY, to offer an enlightened view about who the New York Times interviewed for their article on May 24. It shines a bright light on what went into the NYT's research.

"Who are the other publishers that are crying out? Hachette, the fourth largest of the five conglomerate publishers (who together , through all their more than a hundred imprints sell  85% percent of the books sold to the general public in America). Eddy and Streitfeld then makes passing reference to a third publisher, Bonnier, based in Germany, known primarily for publishing magazines throughout the Western world and far fewer books. As for the outpouring of social media they cite two of Hachette’s best-selling writers:  James Patterson, a writing factory, who, in 2013, “wrote” 13 Alex Cross thrillers alone, using numerous co-writers, which is why one out of five hardcover books sold bears his name. Though he reportedly earned $80 million dollars last year, he described the confrontation between Amazon and Hachette as “a war.“ The other social media complaint about Amazon came from Nina Laden, who writes and illustrates children’s books."

I knew that James Patterson, a Hatchette author, worked much like James Michener did with his massive tomes, but seeing it verified makes me feel so mcuh better than I did about how many books and stories I write every year. Then again, I do have a full time job -- 2 full times jobs if you count reviewing books -- and cannot write as much as I would like since I'm busy making the money to pay for a roof over my head and food to fuel my continued existence.

Hybrid author, Michael J. Sullivan, throws his 2 cents into the mix and comes up with some good advice for publishers.

"Of course many people wisely point out that Amazon may apply similar pressure to self-published titles, and I have no illusions about the long term prospect of a 70% royalty. But even if Amazon cuts the self-publishing royalty rate in half, they would still be paying twice as much as I get under the current Hachette contract where ebook royalties are split 30% to Amazon, 52.5% to the publisher, and 17.5% to the author.

What do I think should happen? Well first off, publishers have to realize that getting $3 for every $1 that an author makes on ebooks just isn’t fair. Ironically, they are feeling the same pressure from Amazon that they apply to authors—requesting a higher share because they hold a strategic advantage. I’m sure both Amazon and authors look at the publisher’s 52.5% and can’t help but think more should come their way, but unlike Amazon authors are powerless. The big-five publishers are remarkably uniform in paying 25% of net on ebooks, so the author has to either accept that rate or go the route of self-publishing. If I could set the terms, I would suggest 30% to Amazon, 35% to the publishers, and 35% to the author.

What can authors do in such an environment? I suggest we each develop a direct sales channel with our readers. In my Hachette contract, I was able to negotiate the ability to sell signed copies of my print books from my website. Since I buy the books from my publisher at a discount similar to what they receive from bookstores, they get their share. I would love to sell my Hachette ebooks as well, and I would willingly pay my publisher their cut from any money I brought in. I’ve not been successful getting this provision from Hachette, but for my latest novel, Hollow World, I retained the ebook rights, so for that title I sell both ebook and print versions. The problem is readers don’t know I sell directly, but if this became more common, it would solve any disruptions when the publisher and retailer are battling."

A hybrid author keeps some of his rights, like digital publishing, while selling some rights to publishers. Digital Book World offers a good explanation.  Amanda Hocking is also a hybrid author. When it comes down to it, I think more authors will go hybrid in the future - or at least they should since they retain more control over pricing and and discounts.

Whatever happens between Amazon and Hatchette in their contract negotiations, please keep in mind that Amazon is not the only game in town. It's the fastest and easiest game, but even Amazon suggests buying from third party sellers and going to other bookstores for your favorite author fix. If price is a concern, learn patience and explore other books that are available. It's one way to expand your horizons and find new authors to love and read.

And don't forget to catch Joe's meal of crow. He eats it with consummate grace and humor. 

"If you missed me saying it earlier, I was wrong. I'd still like to get more data confirming that, but if Amazon and Macmillan did compensate authors, I leaped to a lazy conclusion in my haste to chastise a publisher, and I apologize for that and am grateful someone corrected me. Good going, Macmillan, for taking care of your authors.

And to my many detractors, crow sort of tastes like chicken. Humble chicken. I don't have a problem admitting when I'm wrong."

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.