Jay Lake (jaylake) wrote,
Jay Lake

[publishing] More on the Amazon vs Macmillan problem

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.

Tags: amazonfail, books, green, personal, publishing

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