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[publishing] More on the Amazon vs Macmillan problem - Lakeshore
An author of no particular popularity

Jay Lake
Date: 2010-01-31 08:47
Subject: [publishing] More on the Amazon vs Macmillan problem
Security: Public
Tags:amazonfail, books, green, personal, publishing
First of all, here is Macmillan's statement on Amazon's withdrawal of all Macmillan print and ebook titles from sale. This is a letter from John Sargent, CEO of Macmillan's US operations. (And to be clear where my own business interests lie, the upstream executive management of Tor Books, my own trade publisher.)

Sargent states that Macmillan offered Amazon a revised business model for ebook pricing. Amazon declined the offer, and removed Macmillan ebooks from sale on the Amazon site. I'm very dubious about the value of this as a business practice or a negotiating tool, but that at least has context.

Shortly afterward, Amazon also removed all Macmillan print titles from sale on the Amazon site. This is what made me very angry and frustrated, for reasons I explained in detail yesterday [ jlake.com | Livejournal ], to much discussion in comments on both sides of the blig, as well as on my Twitter feed. (If you want to go Twittering, look for the #Amazonfail tag.)

One question many people raised in discussion yesterday was why I was so aggressive in blaming Amazon for pulling the titles from sale, when it might have been Macmillan that had done so. As I said at the time, I was prepared to be wrong, but I found it far more likely that Amazon would stop selling Macmillan's products in a trade dispute than that Macmillan would stop selling their own products.

Unsurprisingly, that turns out to be the case.

Now we have not yet heard from Amazon. We may be told Monday that this was a "database error" that is being corrected. That would be what is casually known as a "lie", but corporate PR departments do it all the time to get themselves out of corners where the paint has gotten too sticky. This assumes, of course, that Amazon considers themselves to be in a corner. Frankly, I can't imagine that they care what me and a few hundred other Macmillan authors thinks. Nor even our readers and fans in their many thousands. In business terms, we aren't a force to be reckoned with, not outside our noisy little piece of the Internet.

Whatever Amazon officially pretends on Monday, suricattus nailed it on the head when she said, "This isn't about pricing, it's about control." That's pretty clear from the Macmillan letter, too. Macmillan is looking for dynamic pricing on ebooks, based on the perceive value of a title as related to its print release status. Is that smart? I don't know. It might be. Is it innovative? Seems like a step in the right direction. Is Amazon trying to stop this direction in its tracks to defend the Kindle business? Absolutely.

I don't know that I'd do anything different, at the strategic layer, if I were in charge of things at Amazon. For better or worse, in the American system, any corporation's highest loyalty is to its stockholders. If you don't believe that, do some research on "breach of fiduciary duty." Stockholders. Not customers. Not suppliers. Not employees. Not even themselves. Stockholders. For Amazon to simply let go of their Kindle strategy and revenue stream because Macmillan said so could lead to shareholder lawsuits, investigations, and even charges under some circumstances.

But at the tactical layer, their response blows chunks. As I explained yesterday. I don't think it's wrong in a legal or moral sense — Amazon is free to run their business as they choose. But pulling the print titles is akin to me beating up your kid brother because you owe me money. It's bullying, pure and simple, punishing readers and writers of print books because they can, to try to force Macmillan to back down on ebooks.

Amazon is using their marketplace power to advance their shareholder interests at my expense as both a customer, and as (ultimately) a supplier of their core product. That's why I cancelled my Amazon accounts yesterday, pulled all the Amazon links off my Web site, and deleted my Kindle reader and Amazon purchasing applications from my iPhone. I don't care what they say tomorrow, or in the future, or how they apologize should they bother to do so. This isn't "just business", and it isn't a reasonable commercial dispute. It's the big kid using his fists to intimidate another big kid by pounding on the rest of us.

As for the question of ebook pricing, several people yesterday seemed to believe that I was either in favor of higher ebook pricing, or dissing the issue of ebook pricing because of my own personal reaction to Amazon's behavior. I submit that's a meaningful misreading of my statements. I have been very careful not to comment directly on the business and contractual aspects of this, largely because my own lack of expertise leaves me unconfident that I can provide constructive additions to the discussion.

However, in thinking about this yesterday and overnight, I want to offer two observations on this, despite my lack of expertise.

One, Macmillan wasn't simply proposing to raise ebook prices. Macmillan was proposing a staged pricing model to run in parallel with the staged pricing model of print fiction which has existed for decades. Specifically: Hardcover releases first, at a higher price point when demand is strong enough to be willing to pay that price, followed later on by mass market paperbacks at a lower price point to meet wider, softer demand. The ultimate pricing of the ebook, per Sargent's letter, could be rather lower than Amazon's magical $9.99.

Two, people keep getting distracted by the cost of ebooks, as opposed to the price. I myself have spent a fair amount of time down this rabbithole. Ignoring the question of whether price should be based on cost, which is a never-ending issue in business economics, the simple fact of the matter is ebooks aren't free for the publisher to provide. Cory Doctorow argues that incremental pricing on ebooks is zero. In a narrow sense, he's right. Much as the incremental pricing on a telephone call is zero. Yet you don't expect to get your cell service for free, do you?

Smarter people than I, with better information than I, have observed that the production cost of a print book is a tiny percentage of the cover price. I've seen various numbers thrown around, so I won't try to quote one, but well less than 10% on the high side seems to be consensus. Everything else embedded in the cover price is cost of acquisition (ie, paying the author), editing costs, preproduction costs (copy editing, layout, art direction, etc.). None of that changes with an ebook. Just like the phone company has to recover all the sunk costs for switches, engineers, lines (or cell towers), billing systems, customer service etc., and so they charge you for the "free" phone call that bears no incremental costs, so the publisher has to recover their sunk costs in the ebook.

And here's the insight I had this morning. I can't possibly be the first person to think of this, but I suspect it's important enough to bear repetition and discussion.

Books are a product. Ebooks are a service.

People resist ebook pricing because they have been told ebooks are a product, they perceive ebooks as a product, and the value of buying what amounts to electrons is difficult to perceive.

If you pay $26.95 for a hardback of Green, you acquire an object with heft and permanence. You can read it. You can re-read it. You can loan it out, take it to a used bookstore, give it your grandchildren, throw it in the trash, donate it to the school library, use it for kindling. It's yours.

If you pay $9.99, or any price, for an ebook of Green, you acquire a license to download and view a specific software offering. The license can be revoked under some circumstances, cannot be freely transferred by you to others, and has no other value. You don't own it, you're renting it on terms dictated by someone else. It's not yours.

The metaproduct here is of course the story I have to tell. You can listen to it on an Audible.com recording. You can read it in print and ebook editions. Soon you'll be able to read it in Hebrew. But the editions aren't just priced differently, they have profound functional and legal distinctions.

I'm not sure yet what this insight means. But if we can bring ourselves as writers, publishers and industry professionals, and more to the point, our readers and fans, to consider ebooks as a product rather than a service, much of this debate might shift in a more constructive direction.

Meanwhile, I also ponder, as I did yesterday, that to many readers with no need to be familiar with publishing industry issues, the outrage and frustration of us writers looks like so much greed. No writer published in the trade press controls our pricing or distribution terms. Most of us don't even make a full time living at it, at least not in speculative fiction. And downward price pressure on ebooks means we ultimately get paid less, which means it's harder for us to make the living we do, which means both our ability and our financial incentives to write the stories readers want to see are compromised.

Because to most readers we are the most visible public face of publishing, Amazon and Macmillan are making writers look like the bad guys here. And that is perhaps the most frustrating thing of all.


ETA: I retitled this post because the original title was misleading with respect to the content.

Post A Comment | 18 Comments | | Link






Autopope
User: autopope
Date: 2010-01-31 16:57 (UTC)
Subject: (no subject)
Jay, Amazon pulled this stunt on Hachette in the UK last year. AIUI, Hachette caved. This is not a "database error", it's the deployment of a strong-arm tactic that worked for them on an earlier occasion.

If Amazon gets away with it, they'll do it again and again. They're bullies.
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Jay Lake
User: jaylake
Date: 2010-01-31 17:00 (UTC)
Subject: (no subject)
That's what they said about the suppression of GLBT titles last Easter -- oops, a database error. And, erm, no. Bullying, pure and simple.
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Autopope
User: autopope
Date: 2010-01-31 17:06 (UTC)
Subject: (no subject)
See also.
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erudite_ogre: Books
User: erudite_ogre
Date: 2010-01-31 17:05 (UTC)
Subject: (no subject)
Keyword:Books
Wow, I didn't realize that there was a precedent for this behavior. Thanks for the link! I'll have to go track down the rest of this story.
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User: joycemocha
Date: 2010-01-31 19:24 (UTC)
Subject: (no subject)
Just a datapoint for everyone that I dredged out of deep backbrain memory--Amazon tried doing some similar sort of control thing years ago, 1999-2000ish, with regard to auctions. Tried to go head to head with eBay. I can't remember if it was 9/11 or a further move by eBay that put eBay on top.

I could try to go back to my business files from the time and see if I can recall what happened--but I have been reluctant to work with Amazon ever since. Now if I could just remember what it was--something very obscure and not of interest except to artisans selling items via auction.
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erudite_ogre: Rohan Facepalm
User: erudite_ogre
Date: 2010-01-31 17:02 (UTC)
Subject: Product v. service
Keyword:Rohan Facepalm
I had not thought of it like that until you brought it up, but as you framed it above, it makes a lot of sense. It weirdly upsets the bookseller and booklover in me, but it probably shouldn't. It's very constructive to consider e-books in that manner, because with DRM, you are essentially renting a book. You get access with very specific rights and terms, which we're not used to with our books. It skeeves me out a bit to think that I could have books on a reader and they could just disappear, but that is the model that Amazon has set up with the Kindle. They obviously want to protect their privilege to maintain a pricing structure that they feel benefits their product.

And this is totally about control. Amazon has become the 800-pound mutated commerce gorilla, happy to throw its weight around and crush opposition with its many arms. And I don't think they care who they screw with this maneuver. Which is sad.
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Scott Raun
User: sraun
Date: 2010-01-31 18:37 (UTC)
Subject: Re: Product v. service
The 'e-book is a service' is a another way of looking at DRM. Please pardon me if my rant is yet another reiteration.

Without DRM, I'm buying a product - I own it, I can do pretty much what I like with it. There are significant legal limits on making multiple copies, but that's different.

With DRM, I'm locked in to the platform and time that the vendor allows. If I've got a Nook, I can't read my KindleForPC books on it. I don't want to have to carry around Ghu-only-knows how many different e-book readers to read all the content I've purchased. womzilla points out that this is the current state of affairs in computer gaming - it's a different kind of DRM there, but it's still a 'you can do it here and nowhere else'.
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Jay Lake
User: jaylake
Date: 2010-01-31 18:50 (UTC)
Subject: Re: Product v. service
I am NOT arguing the merits of DRM here (personally, I think it sucks), but even without DRM, you're still buying software, with the attendant licensing restrictions in the EULA, which simply do not apply to print books.
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(no subject) - (Anonymous)
Jay Lake
User: jaylake
Date: 2010-01-31 17:35 (UTC)
Subject: (no subject)
You are absolutely right. But the only power I have here in truth is my public voice. As a consumer, I am 0.0000000001% of Amazon's revenue. As a writer, I am perhaps one or two decimal places to the left of this. But as a blogger and a public figure, I can cry foul, loudly. And this was a huge, deep foul.
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Michael: man
User: akaspeedo
Date: 2010-01-31 17:34 (UTC)
Subject: (no subject)
Keyword:man
I have no idea how this works in fact, but it seems to me that authors should be paid a larger percentage for ebooks than paper books, since paper costs more to make. If that were so, then the author would at least make as much from ebooks as they do from paper should the price of ebooks go down significantly.

Who is pocketing the difference in cost to produce ebooks?
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Jay Lake
User: jaylake
Date: 2010-01-31 17:37 (UTC)
Subject: (no subject)
That's part of my point, the difference in cost to produce ebooks is very small. <$1. It's not really going in anyone's pocket, so to speak.

And our contracts typically state a percentage of cover price as our share. Each edition (hardback, paperback, ebook, audio) has a separately negotiated royalty rate. So, erm, we're covered.
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Michael: man
User: akaspeedo
Date: 2010-01-31 17:59 (UTC)
Subject: (no subject)
Keyword:man
I obviously need more coffee! Yes, you did say this. Maybe people (like me) get stuck on this point because the evolution of the internet has been for things to generally be free, or free-ish, or very cheap.

It's very useful to point out, as you do, that downloading an ebook is equivalent to renting it. I suppose there's something to be said for that, like renting a DVD, if the consumer is aware that's what they're doing.

As to your main point, re Amazon, I have long disliked them and won't buy from them. This is yet another black mark.
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theturbonerd
User: theturbonerd
Date: 2010-01-31 17:35 (UTC)
Subject: (no subject)
Oh many of us know the Service vs Product distinction, which is why we actively resist it with any kind of digital media: music, movies, or books. People who hate DRM the most are the ones that hate the concept of item-as-service. DRM turns any digital file into a service. With no DRM, when you buy a file, then it is a product. With DRM, you don't own it because you don't control it. Simple as that.

I want to buy and own books and movies and music, not rent them in perpetuity. I want to be able to feel secure that some faceless entity can't yank back something I bought just because they made a mistake (as illustrated by Amazon's clueless yanking of "1984" from Kindles last year). I want to know that when reader/viewer technology changes that I can take my existing library and move it to the new gadget... without paying for it again and again and again.

Owning a digital file, no matter what's on it, means I get to back it up so that I don't have to buy it again should my computer fail.

Owning means I get to share with others too. I loan books and movies to my friends all the time. Heck, I loaned my iPod to a friend at work recently so that he could listen to a song he had never heard.

Do I need to be responsible in this and not abuse the privilege of owning my entertainment? Heck yeah! I want to make sure that I maximize the care and feeding of my favorite authors, musicians, and movie-makers. That is why watching what I consider two behmothic middlemen like Amazon and Macmillan tussle over how they get your content to me ticks me off. I want to be able to buy what I want when I want at a fair price. I want to know that the creator of that "content" makes their fair share from the transaction so that they will continue to create things that enrich my life.




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jtdiii
User: jtdiii
Date: 2010-01-31 18:37 (UTC)
Subject: Minimal impact, but it could add up
I just canceled a pre-order on Amazon and let them know I will not be using them until they fix the current debacle.
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The Green Knight: Money
User: green_knight
Date: 2010-01-31 19:05 (UTC)
Subject: (no subject)
Keyword:Money
The thing about the service is that if I'm buying an e-book I buy it in the knowledge that it's still fragile and might have a life of around ten years. (I've mislaid paperbacks, too, but they're likely to last longer). Keeping track of and backing up computer files is much more work.

Personally I don't feel they're more convenient, but I'm willing to concede that for many people, they are. So I'd be willing to pay approximate paperback prices for them.

If, on the other hand, I'm only renting a brief experience, then it becomes 'cup of coffee' territory - a sum that I don't mind spending on brief entertainment - and the price point for that is around $2,50, which is bad news for writers.
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Lisa Deutsch Harrigan
User: lisa_marli
Date: 2010-01-31 23:58 (UTC)
Subject: (no subject)
Actually, there is a BIG difference from what MacMillan is claiming they are doing and what they are actually doing.
Currently - Amazon.com buys the e-book rights for a book at a fixed price, then they are free to set whatever price They Want for the book. Frequently, for Hard Cover Books they pay $9.99 a book. Yes, exactly what they charge the reader. This is the opposite of the razor analogy (where the blade holder is cheap and the blades are expensive). Amazon wants to create a interest in people OWNING the Kindle, by making the Books "Cheap". As a Retailer, they frequently sell Real Books cheaper than you can get them any where else. They just don't make as much profit per book as the independent seller. It's their right as a retailer. MacMillan Does Not Tell them what price they can sell a Real Book once they have it in their warehouses.
MacMillan though Wants to Set the Price of what they can sell an ebook for. They won't be allowed to sell it for any price but Only What MacMillan Tells them too.
And That is what Amazon is fighting against. The Right as a Retailer to Set Their Own Prices.
This is because Apple wants to charge more for ebooks on the iPad than Amazon does for the Kindle, and Apple is using MacMillan to Force Amazon to Raise Their Prices.
So actually, the real boogie man in all this is Apple.
And MacM did issue the first ultimatum, by telling Amazon this is the deal we have with Apple, take it or leave it.
If MacM succeeds in this, then All ebooks will have the Same Price, regardless of Retailer. Imagine, Always Paying $25 for that hardback, no matter where you bought it. Would you like that?
Yes, I have ebooks, I read them on my Palm TX. If I can't get them for my Palm (and it actually handles most of the sources out there), I don't bother. It isn't my main source of books, just the portable ones.
And yes, I have gone to my various ebook sources and shopped around for prices and side benefits, just like I do for hard copies of books. And Yes, Prices do vary!
Just thought you should know the other side of this.


Edited at 2010-01-31 11:59 pm (UTC)
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