Amazon and S&S Agree Terms. Who’s The Bad Guy Again?

s&sSimon & Schuster has agreed a multi-year deal with Amazon covering both e-books and print books. Business Insider reported that negotiations only took three weeks and were concluded two months before the original contract expired.

I’m confused, does this mean the end of literary culture or not? Someone needs to run up to Douglas Preston’s quaint writer shack to find out. (If you get lost, it’s at the back of his 400-acre estate).

It also begs a question: what exactly is Hachette holding out for? As everyone knows at this point, Hachette’s contract with Amazon expired in March and the two parties have been unable to agree a deal since.

The narrative being pushed by the media was that Amazon’s desired terms would harm Hachette and its authors, yet Simon & Schuster was able to agree a contract very quickly which CEO Carolyn Reidy called a “positive development.” She characterized the deal as “economically advantageous for both Simon & Schuster and its authors and maintains the author’s share of income generated from e-book sales.”

In a brief statement, Amazon noted “the agreement specifically creates a financial incentive for Simon & Schuster to deliver lower prices for readers.”

Exact terms haven’t been disclosed but it appears to be a modified version of agency – i.e. where Simon & Schuster sets retail prices, Amazon has certain discounting powers, and the publisher has various incentives not to price too high. In other words, both sides got some of what they wanted.

And the sky remains stubbornly in place.

Hachette, its proxies in the media, and pro-publisher groups like “Authors United” should be feeling pretty foolish right now. It’s harder now to depict Amazon as a rapacious bully which is using its market power to force terms on publishers that will squeeze them out of existence, turn writers into paupers, and end the literary world as we know it.

Maybe Douglas “I’m not taking sides” Preston will finally consider asking his publisher what the sticking point is and why Simon & Schuster is able to make a deal with the world’s biggest bookseller when Hachette has singularly failed to do so over the last seven months ten months. Maybe he’ll consider the possibility that the problem doesn’t lie with Amazon, but with Hachette.

Of course, we don’t know the exact terms that have been agreed between Simon & Schuster and Amazon, nor do we know the particular points of disagreement between Hachette and Amazon. But this news clearly shows that a deal is possible, and that both parties can live with the terms.

It’s not just Simon & Schuster. German media is reporting that Bonnier has agreed a long-term deal with Amazon covering print and digital. Bonnier is a huge Swedish-based media conglomerate with a large publishing division operating across Europe. It had been involved in a Hachette-like dispute with Amazon Germany for the last few months, but announced yesterday that it was also able to agree terms.

I sincerely hope that these two announcements will bring Amazon and Hachette back to the negotiating table so they can hammer out a deal. Not least because we’ll (hopefully!) see the end of this orchestrated anti-Amazon PR campaign that Hachette’s proxies have been subjecting us to for months.

And perhaps next time everyone will employ a little more skepticism when the next moral panic is whipped up. Although I’m mindful of Santayana’s aphorism, “Those who cannot remember the past are condemned to repeat it.”

Because we’ve been here before.

The Day The Publishing World Stood Still

The removal of Macmillan’s buy buttons is always held up as the ne plus ultra of Amazon bullying. But the episode looks very different when examined in the light of the disclosures from the price-fixing trial.

For those who don’t remember: in February 2010, the publishing world held its breath as one of the Big 6 publishers, Macmillan, faced down the biggest player in the business, Amazon. At stake was the system under which e-books would be sold to readers.

Up to that point, e-books had been sold by Amazon under a wholesale model, which essentially meant that Amazon was a designated re-seller of Big 6 e-books, the publisher set the list price, and Amazon purchased them from the publisher at a discount of around 50%. Amazon was then free to sell the e-books at any price it chose to its customers. This was a pretty standard retail arrangement, and one that had been used for print books for decades.

But the largest publishers wanted a change.

Amazon had been aggressively discounting certain titles, many of them New York Times bestsellers, to $9.99 or less. This didn’t effect what publishers (or authors) were paid but the Big Six were aghast, complaining it devalued books in the minds of readers, cut into juicy hardback sales, and hastened the switch to digital – all of which they felt compelled to fight.

At the end of January 2010, Macmillan CEO John Sargent told Amazon that it would only let its digital catalog be sold by the world’s biggest bookseller if they switched to an agency model where publishers set the retail prices and Amazon would not be permitted to discount.

The way the official narrative goes, Amazon was enraged by the demand for agency and it removed all buy buttons from Macmillan books in a fit of pique designed to pressure the publisher into dropping its demand for agency.

The story then “leaked” to the New York Times on January 30 and received wide coverage in the rest of the media. Amazon was painted as a bully, Macmillan CEO John Sargent was called a hero, the Authors Guild issued a statement in support of Macmillan, traditionally published authors attacked Amazon, and we were treated to a tsunami of hysterical articles like this one which claimed that Amazon “hates you, and it hates publishers.”

The more things change, eh?

The difference with the Amazon-Macmillan dispute is that we now know what was going on behind the scenes, thanks to the disclosures which surfaced in the price-fixing trial. All the documents are online here, and you can go through them yourself, but the timeline is very clear. Here’s a quick summary of what actually happened:

20 January 2010: John Sargent tells Amazon’s Russ Grandinetti that Macmillan will offer Amazon the choice of an agency model and a wholesale model. Later that night Sargent meets Apple VP Eddie Cue for dinner and Cue tells Sargent that the Apple’s terms don’t allow Macmillan to offer Amazon a wholesale model.

21 January 2010: Sargent calls Grandinetti to tell him that the Apple contracts require Macmillan to only offer Amazon agency terms. Amazon had already received this same message from two other Big 6 publishers, Hachette and HarperCollins, and would receive similar notices from Penguin and Simon & Schuster over the next few days.

27 January 2010: The iPad launches, along with the iBookstore – which contains titles from Macmillan, HarperCollins, Hachette, Simon & Schuster, and Penguin, who have all signed agency deals with Apple.

28 January 2010: John Sargent flies to Seattle to give Amazon an ultimatum: sign agency with Macmillan or you won’t get any new releases for the first seven months. Negotiations break down. That night, Amazon removes buy buttons from Macmillan books.

31 January 2010: After intense media pressure, and realizing that five of the Big 6 publishers are all demanding identical agency terms, Amazon announces that it will capitulate, restore Macmillan’s buy buttons, and sign agency contracts – but not without complaining that this is bad for readers, and also filing a report with the FTC about possible collusion and price-fixing.

January 2011: Macmillan and Amazon agree to estimate lost sales during the dispute and compensate authors accordingly (and split the cost).

December 2011: The DOJ launches a price-fixing investigation into the events of January 2010 (as do regulatory authorities in Europe, Canada, and Australia).

February 2013: Macmillan settles with the DOJ, despite John Sargent claiming in December that the company was innocent and would fight the charges all the way.

July 2013: A federal court finds that Apple, Macmillan, Simon & Schuster, HarperCollins, Hachette, and Penguin colluded to raise the price of e-books.

Let’s try and remember what really went on in January 2010 the next time that the publishing establishment – and its proxies in the media – wants us to completely freak out over Amazon.

* * *

mysteryBefore I go, I have a big announcement… coming next week. This is the top secret project I’ve been hinting at for the last few weeks.

I refuse to confirm or deny if it’s book-shaped, but will note that subscribers to my New Release Mailing list will be hearing about it on Monday, and I’ll blog about it here Tuesday. So if you want to get the scoop before everyone else, sign up here.

About David Gaughran

David Gaughran is Irish, living in Prague, and the author of Mercenary, A Storm Hits Valparaiso, Let's Get Digital, Let's Get Visible, and this here blog.
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36 Responses to Amazon and S&S Agree Terms. Who’s The Bad Guy Again?

  1. Thomas Scott says:

    Isn’t it strange how things like this have a way of working out when people come to their senses and listen to each other instead of the often lopsided media? The real question now is, what in the world will the Author’s Guild have to say about this arrangement with S&S after the bashing they gave Amazon a few weeks ago on the PBS Newshour? I’m guessing they might keep quite, but, stranger things…

    Thomas Scott
    Author
    Virgil Jones Mystery Series

  2. Good news for readers and S&S authors. Thanks for the info David.

  3. Maria says:

    Bottom line – the Author’s Guild needs to stay out of these type of disputes – they look stupid every time they issue a statement. Next bottom line – I believe Hachette is French and this may take a while to sort out because of national pride (lol). Third – whatever happened to Sargent? Is he still working for Macmillan? Or did the shareholders finally get a clue and get rid of him?

    • Thomas Scott says:

      Maria, I couldn’t agree more. Every time the Author’s Guild jumps into the middle it only further muddies the already very murky waters. Did you see the interview with Roxana Robinson? She couldn’t have been more wrong.

    • Werner says:

      AU and AG make themselves irrelevant (I’m getting to use that word a lot today!) when they take the side of the publisher over the writer’s they pretend to represent.

    • Amazingly, all of the CEOs who organized this disaster are still in a job – despite leading their companies into an illegal conspiracy which will end up costing them hundreds of millions of dollars in legal fees and fines. It also cost them huge market share. Oh, and it reduced the incomes of their authors too (authors which still defend their publisher and deny any price-fixing took place!). The only exception is the Penguin CEO, but IIRC that was more to do with the post-RH-merger reshuffle.

      Reading the court docs is illuminating. All the CEOs are on record as saying that moving to agency will reduce the amount they make per copy sold. Anyone can read the emails. It’s very clear. That, of course, has the knock-on effect of reducing the author’s take per copy sold. In other words, they knowingly gave their authors a pay cut in an attempt to reduce Amazon’s market power. (And that’s before you even factor in how those books would have sold less while the prices of same were artificially inflated.)

      Some of the stuff in the court docs is unintentionally hilarious. For example, Penguin frothing at the mouth in its crazy 80-page submission to the court claiming that Amazon was predatory and exploitative etc. This is the same Penguin which had just purchased Author Solutions.

  4. Rain, Rain says:

    It is a relief to see someone put this into its proper context: one in which what is at stake, in a fight between well-heeled capitalists, is an economic model, with writers used largely as stalking horses to allow the real players to import bogus “moral” arguments. Oh, and by the way, Hachette’s preferred economic models have a regrettable tendency to be illegal because they offend public policy; in this respect (at least) Hachette is a far worse actor than Amazon. If I had to choose between Hachette and Amazon (but look! I don’t), I’d pick Amazon any day.

    Unless, of course, Hachette offered me a better deal.

    • This is the thing. There’s nothing illegal about the agency model. There’s nothing illegal with having “check Amazon’s power” as a business goal, or “slow the growth of e-books because we are stronger in a paper world.” The problem is how the publishers went about it. Either the actions were anti-reader (pricing digital more than paper, windowing, slow pace of digitization), or outright illegal (price-fixing).

  5. Thanks David. Somebody’s gotta keep their head through all the smoke, fireworks and mirrors. Reposted on FB.

  6. I heard news of this this morning and immediately thought about Kobo’s president 32-tweet manifesto a few days ago explaining that all publishers, including indie authors, “were on Amazon’s hit list” and were going to be bullied at some point: http://www.thebookseller.com/news/tamblyn-takes-twitter-give-his-views-amazon

    Well, his timing couldn’t have been any worse… Obviously, he can still argue that Amazon has only agreed on a deal with S&S to continue luring us, though I wonder how long that argument will last.

    What I think is important to understand here is that there are economic interests at stake in an industry where, quite worryingly, the retail is dominated by so big a player that it can almost be seen as a monopoly, and the supply is dominated by a cartel. So it’s quite easy for both sides to criticise the other with relatively valid arguments (or at least ones that make sense at first if you read them).

    In 2010 the cartel was stronger in terms of decision power than the retail giant. So they bullied Amazon. Today, self-publishing and independent publishing have made it possible for Amazon to hold its ground (and even release KU with essentially self-pub and independent publishers’ titles). Is that a good thing? Well, it definitely is a good thing for authors, because it gives them more possibilities (and that’s always a good thing). And as the whole industry revolves around authors, basically, I’d say that, yes, it is a good thing.

    • Mirtika says:

      Instead of tweeting a manifesto as if he was some sort of prophet with future-seeing powers, he should work harder and smarter to make Kobo better and more competitive with Amazon. All indies welcome the BETTER step forward in self-pubbing and e-reading. Make it better and they will come. Evolve. It’s not about AMAZON, it’s about what Amazon offers. Offer something that beats the crap outta Amazon….

    • I like Kobo (erotica-gate aside), and I particularly like the Kobo Writing Life team who always seem to be fighting the corner of indie writers.

      I’m not crazy about this manifesto though. I wish someone would talk to us on these issues who doesn’t assume that we are too naive to see Amazon’s Big Bad Plan. I wish they would consider the possibility that we have considered this theory and either rejected it, or think it’s more prudent to focus on entities that are acting badly now, rather than what Amazon may do in the future.

      I’m also not sure what the overall point of the tweets were. Don’t go exclusive with Amazon? I’m not. But I’ll make that decision based on what can grow my sales best, not on ideology or what’s good for the market as a whole. Or was the point that we should support Hachette? Because that doesn’t make any sense.

      And, yes, as Mirtika says, if Kobo wants less indies to go exclusive with Amazon then Kobo needs to make its platform more attractive to indie authors.

      Kobo is improving in some areas – particularly in the amount of co-op they are now opening up to indies. And that’s wonderful.

      But there are some very basic issues that Kobo hasn’t addressed at all in the last few years. Search is still terrible. Their system doesn’t use keywords at all, which is nuts. The whole recommendation ecostructure is still very basic (although I’ll note some minor improvements recently, which is welcome).

      Here’s a hilarious/depressing example of how bad discovery is on Kobo. If you search for my name on the Kobo site, this is what you see:

      • I was particularly disturbed by Tamblyn’s last few tweets, in which he paraphrased Pastor Martin Niemoller’s statement of regret about the Holocaust that begins “First they came for the socialists…”, Tamblyn re-wrote it to make his point, more or less comparing Amazon to Nazi genocide. A few of us called him out on Twitter and received cookie-cutter non-apologies justifying his use of the quotation in this context. I think it was a giant misstep.

  7. patricefitz says:

    Thanks for your clarity of thinking here, David. Will anyone eat humble pie? I nominate Douglas Preston, but I suspect he’s already had plenty of champagne and caviar…

  8. Werner says:

    This is thunderous. This S&S deal makes Hachette’s arguments, all the media Amazon hate-heaping, and the elitist author petition irrelevant.

  9. Well, S&S is the bad guy, natch. They caved to Big Bad Amazon, and set a precedent. Hachette will bravely soldier on, like the UK during the Blitz… for a little while, at least!

    • Werner says:

      I’m not sure how that will play out. S&S -AND- Amazon both the bad guys? If I were a Hachette author reading this news today, I’d be contacting my publisher about now…

  10. bluecandies says:

    This just make me think about this crazy movie i saw where there where no more books and to have one was illeagal. The government had the last books known in existance in some vault locked away. And people were trying to write books and plays underground and were being sent to jail for it. I think this deal will be the death of Books ( no more paper or hard back books) And that sadens me. Books are one of our last truly tangible original and old world Art Forms

    • Books are not going away anytime soon. RL bookstores, maybe, but not books.

    • Mirtika says:

      What? Are you joking? Was this sarcasm? Because this makes NO sense.

      The book is not the paper. The book is what is held by the paper or the ereader or the parchment or the scroll or the wooden plates. The book is what is written–the thing that emerged from the mind of the writer.

      No matter what form the story or information takes –hardcover, trade pb, mass pb, Kindle ebook, Nookbook, iBook, post-it notes performance art story–the BOOK is the content, not the delivery system.

      And books won’t disappear. People love to hold and give as gifts. But for convenience, you cannot be ebooks. I have a library of 1000 books in my purse every time I leave home. The giant minds around Alexandria would have pooped their pants in delight to think this would be possible.

  11. The only thing that made me happier today than this deal–which is epic in its implications–was your excellent analysis (and peek back through time to the Macmillan flap). Hugh Howey’s post on the subject is likewise very good.

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  15. alex says:

    Thank you David for the info! You are just so darn readable! Thanks a bunch of times!

  16. sjarnott says:

    I fear this is the end. Angry mobs of Hachette authors will take to the streets to hunt down the turncoats and quislings of Simon & Schuster. The choral wailing and gnashing of teeth from Authors United will deafen passers-by…

  17. Jim Self says:

    “Amazon had been aggressively discounting certain titles, many of them New York Times bestsellers, to $9.99 or less. This didn’t effect what publishers (or authors) were paid but the Big Six were aghast, complaining it devalued books in the minds of readers, cut into juicy hardback sales, and hastened the switch to digital – all of which they felt compelled to fight.”

    This is absolutely the most important thing to remember. The big publishers were waging a war against change, customer-driven change, by colluding to raise prices. This is the exact, explicit reason that antitrust laws exist. Those crying “Amazon monopoly” aren’t worth the time it takes to listen.

  18. Nirmala says:

    In describing the agency pricing, you say that Amazon “would not be permitted to discount beyond 30%”. I thought that with agency pricing, Amazon lost the right to discount at all, and were required to sell the ebook for the retail price set by the publishers. As you then continued, “Agency meant that publishers would regain effective control of retail pricing and squash discounting.” That sounds like no discounting at all, not just a maximum discount of 30%. Is that what you meant to say?

    • Hi, yes. Good catch. In fact, there were two errors in that sentence! I’ve changed it above to read:

      “At the end of January 2010, Macmillan CEO John Sargent told Amazon that it would only let its digital catalog be sold by the world’s biggest bookseller if they switched to an agency model where publishers set the retail prices and Amazon would not be permitted to discount.”

      And removed the next sentence which is now extraneous. Three errors! If I keep this up, I’m canceling my one-man Christmas party.

  19. Reblogged this on David VanDyke's Author Blog and commented:
    Great post. Everyone involved with publishing should read this.

  20. Mirtika says:

    Well, let’s see if Hachette is willing to ruin the holiday season for its authors. Since we know now, it’s not Amazon, it’s HACHETTE targeting its authors by not being flexible in any way. Kinda hope Amazon waits until January to make a contract. A little non-negotiating footdragging tit for tat.

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  23. Tim F. says:

    I’m very confused my the revisionist view here: The big publishers wanted control of final pricing, little or no discounting. Amazon wanted $9.99 price point or less.

    Now all of a sudden because there are tiers (which doesn’t change agency whatsoever — if I sell in one tier, I know what the price and my cut is, if I sell in another tier, I still now the price and my cut)… now all of a sudden this becomes “modified” agency, “incentivized” agency, “hybrid” agency? Now all of a sudden agency isn’t evil? Now all of a sudden $9.99 is not the best price and most important factor?

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