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Amazon/Macmillan: other perspectives

Here's a round-up of what other insiders are saying about the Amazon/Macmillan dust-up. (Almost all ellipses are mine):

John Scalzi opines:

They're both playing hardball. That said, I think this particular negotiating tactic of Amazon's makes it look worse than Macmillan in the short term, and certainly will make other Amazon partner wary in the long term.
Also, Scalzi explains why Amazon threw the switch on a Friday:
As the White House across several administrations knows, Friday is the day to do or say anything you don't want heavily reported in the traditional media or heavily read by traditional media consumers, including on traditional media Web sites ...

Tobias Buckell explains about how books are produced and how ebooks are sold:
Let's take a look at how this particular sausage is made. ... A book is a group undertaking.
... Just like a pill requires research to bring to market, or a jacket requires artists, designers and invention, professionally published books that look slick and readable use the services of a number of different people. ...

C. E. Petit explains how the law affects this (for lo, he is an attorney):
Macmillan's position depends fundamentally on assuming full ownership and control of not just the rights actually transferred in publishing agreements with the authors, but of a full, unrestricted ownership interest in Macmillan's packaging of the author's intellectual property for market. Crucially, Macmillan could not maintain this position without having oligopoly power to exert — and we'll be returning to that shortly. Nonetheless, most of the blame here goes to Amazon. It's actually fallout from a bad Supreme Court decision a couple of years ago regarding ladies' leather accessories ...

Andrew Wheeler (an Editor And A Gentleman) notices a disturbing parallel:
I haven't seen anyone yet note that this is the second time that Amazon has applied the big hammer of delisting an entire publisher; they tried the same thing to Hachette in the UK almost two years ago. In that case, Amazon was the aggressor — they were attempting to demand higher discounts from Hachette (and their other suppliers) and pursued the delisting to get the publishers to agree to its new, and much more favorable to Amazon, terms.

Your eyes are probably glazing over by now, so I will stop flogging the deceased equine for now, until there's some concrete news to report. Normal LOLcat video service will be resumed shortly.

59 Comments

1:

You might also include Brad Hicks take ( http://bradhicks.livejournal.com/437764.html ), but he probably doesn't count as an insider. That said, what do you think of his post?

2:

What everybody seems to be missing, is that none of the books that are published by the Macmillan group are available for sale.

This is not about e-books. The paper books are gone from the site.

Macmillan’s imprints include Farrar, Straus & Giroux, St. Martins Press and Henry Holt, and Tor and Forge, etc... Which means a major chunk of the SF market, and a major chunk of mainstream fiction, just vanished from sight.

More than half of the books I was going to buy over the next month have become unavailable. That is fifteen books, vanished.

This is more dangerous than Amazon pulling 1984 from somebody's Kindle. A huge chunk of the market just vanished and you guys are babbling over how many angels can be downloaded onto the head of a pin, and how much they should be paid. Or to twist another metaphor, you guys stand there discussing Nero's fiddle style while Rome burns around you.

Amazon, and online vendors are the future, bookstores are dead. If Amazon can get away with this shit, then all of the online vendors can.

I am the consumer impacted by this BS. And I am pissed.

You can go back to counting angels now.

3:

Mike Crichton: you're right that Brad Hicks isn't an insider: he gets the story almost exactly upside-down!

allynh: exactly right. You nailed it. Yes, it's a disaster in the making -- if it's allowed to stand.

4:

Charlie,

Why have publishers not become their own bookstores? It seems to me that this is the ultimate end of disintermediation in the book selling business. I know that they have to worry about cannibalizing and alienating their supply chain, but that is a familiar story of which the computer industry is littered with.

5:

"of which the computer industry is littered with" = "in the computer industry"

sorry

6:

Hey Charlie,

I just happened upon your FAQ on why there's no tip jar on your site and thought I would mention that given the recent events with Amazon, you should probably update it to remove the line about links to their online store.

These recent discussions in the last couple of posts have definitely shed a lot more light for me on the whole publishing process. Thanks for hosting them. The charge of technology has plenty of pros and cons but access to authors, like you provide via your blog, is a major pro in my book. (heh heh, couldn't resist)

I, for one, will sorely miss the paper bound book if I really live to see it's demise. Though, of the many things to love about them is their very long lives, so I suppose I don't have to worry too much about them all going so much as the end of new books actually being printed.

-Ben

7:

Some random thoughts (and isn't this - and the previous thread - a compelling discussion)

- yes, it's very, very scary that Amazon can do this, regardless of the rights and wrongs.

- I'm in the "won't have ebooks, anytime, at any cost" camp. I see no value in them, I want paper and will carry on reading paper as long as it's published. So to be deprived of the ability to buy my paper books because of a skirmish over sales models for ebooks is something I find doubly annoying

- isn't the most useful function of a publisher to select the publishable 1% from the unreadable 99%? If everyone went over to self publishing then the 99% can self publish too. (Sorry if anyone's made that point already).

8:

Charlie, I wonder if you have access to anyone who could describe the development cost of publishing for other types of books, or in other countries? I'm thinking of manga, here. In that situation the supply chains are similar but not completely alike, and the pre-production process (and therefore the cost) must be different depending on if the author is partnered with an artist, or if there's a team of assistants, how many editors there are, if there are agents, who does the promotion and how, etc. I know from my thesis how this works in principle, but finding testimonials on the actual nitty-gritty economics of it is difficult. And I feel like we could use some comparison from other models, right about now. Maybe someone from comics could speak up, just for perspective?

I also feel that you're correct in the thinking that we have to solve this now, and not later. I suspect that the cost of producing paper books is low only because we've been devaluing the materials, and in the event of progressive legislation that could all change. In other words, if you think books are expensive now, wait until we start charging appropriately for carbon. Assuming that paper books eat more carbon than electronic ones (and I may be wrong about that), ebooks could become far more popular, and this shit would need sorting post-haste.

However, that's a lot of assumptions to make. Like I said, I could be wrong. Maybe I've just been embracing my systems theory course a little too tightly.

9:

My taste is in books some what specialised. Causality for fifty five dollars. Exposition for forty-two pounds 50. If Amazon manages to push through a low price cap on book prices, it can hardly mean that I will get the books I crave at a reduced price. No, the result will be that authors can no longer make a living pandering to such unusal tastes and I will have to do without.

However, I don't think that Amazon has the market power it thinks it has. Before I buy a book from Amazon I check the price elsewhere, usually at abebooks. I assume that Amazon will one day start abusing their dominant position to raise prices and I'm watching for it.

Its appears that I've got the problem backwards. Amazon wants to make money off the Kindle. As Joel says "Smart companies try to commoditize their products' complements." No matter. Amazon is just a website and its competitors are just a mouse click away.

10:

The thing is Charlie, none of the babbling masses that you listed in the blog-o-sphere get what just happened.

In 1985, we had an old PCB transformer cook off inside the building. It appeared to just cause minor smoke damage. It took over a year, and 11 million dollars to clean up, before we were allowed back in.

That was the Highway Department, we could not shut down for a year. People died from heart attacks trying to do business as usual in rented/borrowed quarters.

Let me put it another way:

Even if come Tuesday I can buy _The Lost Books of the Odyssey: A Novel_, and the other 14 currently delisted books that I want over the next month, the damage has been done.

We just had an earthquake. The building looks sound from the outside, but in reality the foundations are blown, we have to pull the building, and not rebuild, because this design has been proven unsafe.

Everything you just talked about over the past month, about making a living as an author, just vanished unless we come up with something new.

And this impacts not just you, but every midlist author, and every small publisher like Tor.

11:

Alan: Abebooks is a wholly-owned subsidiary of Amazon.

Daniel: I'm going to be asking some publishers that question in the near future. I'll let you know if I get any answers, sane or otherwise.

Madeleine: actually, the taxable carbon footprint of dead-tree books is minimal ... especially if you consider that the books themselves are mostly carbon, and are a net carbon sink because we don't burn them or compost them!

allynh: Yes. That hasn't escaped my attention, although I think you overstate it slightly.

12:

I just happen to be reading Cheap by Ellen Ruppel Shell, and it is leading me to believe that there is a much larger context here.


The power of the large retailers has grown tremendously over the past few decades, and they have been pushing consistently and hard for lower wholesale prices and getting them. I suspect it isn't a good time to be book publisher. They may be selling lots of discounted books from grocery stores and WalMarts, but they aren't making a lot of money off of them. It isn't right to say that Macmillan should be satisfied because the ebook deal isn't bad compared to the dead-tree book deal, because the publishers are not happy with those deals either.


What is changing is that some power may be up for grabs right now, and Macmillan wants to try to get some of the control back that they used to have. They have a chance, because barriers for entry in ebook distributing are much lower (my random guess is you could get a store going from nothing for under $10k). Market dominance is much more tenuous (without hardware or software lockin, which Amazon is trying desperately to maintain). It is an open question whether publishers will have more or less power and profits when a significant market share moves to ebooks. Macmillan thinks that they are on track to have even less power than they currently have, and they are trying to seize the opportunity to turn this around

13:

Amazon is delisting dead-tree books from their store... Strange behavior, to be sure.

For grins I took the kids to a local Borders brick-and-mortar store this afternoon to buy them some books. Imagine that, buying books at a bookstore. No waiting for them to be shipped. I wonder if that'll catch on?

14:

Charlie @11

Ha! No one ever listens to the Engineer.

Now if I was the building inspector, who just red tagged the place, then people would listen.

But nooooo.....

15:

allynh: There _are_ other bookstores, both online and off. While this is kind of an inconvenience, I don't see it quite as Rome burning.

Admittedly, Amazon is playing serious hardball here. I'm still rolling the consequences around in my head. One thing to watch is how long the de-listing lasts, and whether or not it's an isolated incident. That sounds flippant, but it's really not...these sort of things DO happen in content negotiations periodically. FOX removed from Comcast cable, etc. It's odd for it to happen in book sales, because until pre-Internet, it'd be too difficult to "unstock" a publisher from your shelves. But welcome to the 21st century!

And I think this discussion thread (along with many others, but I happen to like Charlie's place!) is bringing up many good points and arguments.

16:

kenzoid: this is the third time Amazon have delisted work that competes with their business plans. It's just that the previous two either didn't happen in the US, or happened to small fry.

17:

Daniel @ 4:

I think the reason publishers can't become their own retailers is because it fragments the marketplace and makes it more difficult to attract customers. Amazon doesn't care who published a book, they want to sell them all. So if you go to a book published by Tor, they might recommend one by Roc and one by Baen on the same page. You can put all three in your cart, pay for them, and have them shipped together.

Go to the Tor site and you won't see the ones by Roc and Baen for sale. Maybe you'll hear about the Roc one from a blog or friend, but you still have to go and make two separate transactions and pay higher shipping costs. And then you might still miss out on the Baen book altogether because they're smaller and more niche.

Publishers can sell from their own sites, but they can't sell from them exclusively if they want to survive.

Now, what could work is multi-publisher retail site. All of them offer their works together, through a single storefront. It would work best with ebooks, since physical items would create supply chain issues they don't need. A company like Google or Yahoo might be a good partner for them.

18:

I don't think Amazon can use this tactic too often. They're taking a risk here because at the core, their business relies on offering customers what they want, quickly and easily, at a low price. If people don't find something on Amazon they'll go elsewhere and they might take other purchases in the same order with them.

If this happens enough times, Amazon won't be the retailer of choice for them. I could go to Buy.com right now, for example.

19:

Also Jim Henley does some math on the whole deal...

http://highclearing.com/index.php/archives/2010/01/31/10645

21:

Charlie, I suspected I might be off-base on that one. Do you know the taxable carbon footprint of ebooks or readers? Do you think it's enough to raise the price if legislation was in place?

22:

Amazon concedes:

http://www.amazon.com/tag/kindle/forum/ref=cm_cd_tfp_ef_tft_tp?_encoding=UTF8&cdForum=Fx1D7SY3BVSESG&cdThread=Tx2MEGQWTNGIMHV&displayType=tagsDetail

However, at this writing they don't seem to have gotten around to actually selling Macmillan books again.

23:

OK, I have a couple of questions.

So, the publisher first releases an expensive hardback (whose price may then fall), then after a while switches to a cheaper mmpb (possibly via something intermediate), whose price also falls. At the end of this, their average margins are very small. So are paperbacks selling for less than the mean cost of production, with the hardbacks making up the difference?

And second, are ebooks actually the wave of the future? The discussion on this topic has repeatedly indicated that production costs of ebooks are more or less the same as for paper books—a few percent less for publishers, but the publishers aren't generally bearing the cost of server farms and bandwidth (let alone the ebook reader devices themselves). But the product seems to be widely considered inferior to paper. So, same production cost, but worth less to the consumer, indicates that they can't work economically. That they are the flying cars and jetpacks of publishing!

(This can't be the whole story, because not everyone values them lower than paper, and overall production costs are perhaps a bit lower than paper. So there is at least a niche market potential. But will the ebook market really ever be dominant? What's the solid case for this?)

24:

Apparently, according to Boing Boing, Amazon has thrown the towel and accepted Macmillan's terms.

25:

Just as a side comment on the ebook thing, speaking as someone who earns his living with these lovely boxes, who loves gadgets, and who reads like some people drink, I'm not going go go buying an ebook (and never have bought even one), not until someone brings out an ebook reader that makes sense. The iPad isn't a bad idea - but to me, it's not an ebook reader, not with a bright, eye-tiring backlit display (I will probably buy the generic version of one or the iPad 3.0 version, whichever comes first, but it won't be for books). The kindle is more in the right direction, but it just looks so ugly, and I'm one of those people who thinks that a nice, leather-bound tome has a beauty that's intrinsic and seperate from the content, so that does matter. And these ebook readers from CES'10 that have lovely floppy eInk screens surrounded by hard, inflexible bezels? Argh. Talk about missing the point.

Look, you're putting all (bar the few leather-bound tomes) of my library on a device? Make it (a) very very usable and easy on the eyes when reading; and (b) easy on the eyes to look at as well.

The iPad is almost in the right direction there. I'd get one for my mother, for example, because she's not computer-literate, but that's Apple's target audience really. And I wouldn't mind one for using on the train for a half-hour or so, for browsing the web or watching videos, but I wouldn't curl up with a mug of tea to read the latest Laundry book on an iPad, and until someone invents the eBook reader I want, I'll stick to hardbacks. At least for the few writers whose work I want to keep on going anyway :)

26:
this is the third time Amazon have delisted work that competes with their business plans

I call bollocks again. In this case, Macmillan is trying to kill Amazon. (Or, at least, Amazon's current business model. And the business model of anyone who actually wants to be a middleman.)

The post linked to in comment #19 gets that, and explains it fairly well.

If you want to object to Amazon demanding lower costs for book (electronic or otherwise), I won't argue with you. But that's only the smallest part of what Macmillan is doing here. (And, hey -- they're claiming they'll make less money. But, then, it's been fairly obvious what this was all about to me.)

27:

*Be warned, my contacts are fuzzy and I'm both wired and tired. I _think_ this makes sense...*

I think I may have a slightly unusual take on this:
I work in the Gas industry in the UK, where multiple organisations maintain the distribution network (National Grid, mediated by the Joint Office and xoserve).

Now therms of gas are about as far from books as can be (one of the difficulties of the utility sector is that a cubic metre of gas burns the same wherever it comes from) while each title is unique, however, in both cases the distribution is not the thing that the competition should be about.

It should be possible for the publishing industry to incorporate a body which is set up us a collective shop front to offer e-books (at least!) for sale. If it offered DRM free e-books on an agency basis with rules around agreed organisational profit levels (save for rainy days/plough back/award funding etc) it would enable the industry to establish a working model for the e-book industry.

I suspect it would have to offer this service to anyone (ie not just the founding publishers) and I'm not sure who would then take on the role of gate-keeper, however I think it's a model with potential.

I'd prefer it to offer PoD options not to mention collective purchasing & stock management solutions as a sideline to independent booksellers, but let's fix one problem at once.

Resources are currently being allocated inefficiently from readers to writers. As far as I can see, the best way to fix this is to reconfigure the market - making it a self-regulating entity whose success metric is the efficiency of the allocation of resources from readers to writers would seem to be a sensible way to proceed.

28:

I'm not surprised Amazon folded -- they always had more to lose. Macmillan can find other distributors, Amazon can't find other publishers of Macmillan's properties.

As for pricing, I think ebooks should start out the same price as trade paperbacks, then drop to a bit less than mass market paperbacks after a year. After 3-5 years items could be sold for very little, since at that point you're competing with libraries and used books.

Pricing them at the same point has hardbacks is a bad idea, because the market for hardbacks are fans who want the physical object. If people don't want that they'll just wait or find it in a library.

29:

My famously slow brain finally spit out a simile some time after the Amazon/Macmillan analyses hit your and related blogs...

A hardcover is like a movie, and a paperback like a DVD: the one comes out first, and at full price, is advertised heavily and has a burst of sales to early adopters who want it now and in a particularly appealing package.

The latter comes out, well, later. It's at a substantially lower price, and the reviews are already out. There is a bit of advertising done, and some reviews reprinted, to refresh customer's memories. The second form sells to a larger audience, so it can introduce the author to a new bunch of readers, but the profit is less.

If you then introduce a new format, you need to decide if it's to be sold to the early adopters (movie-goers, hardback buyers), or to everyone else (DVD- and paperback-buyers).

If the new format is poor quality, you're pretty well trapped into pricing it with the poorer-quality offerings, so the first e-books were sold cheap, to go with the cheap-jack readers. If the e-book comes out at the same time as the hardback, you get some part of the early adopters saying "give me the cheap one now", and you lose sales of the hardback. At the hardback margins.

If the format quality is good, however, you can sell it at a premium price and at the same time as the hardback, and with a good margin.

IMHO, that's the contribution of the Apple reader: if you chose, you can sell a high-quality, high-price e-book at the same time as the hardback, and catch some early adopters.

--dave (former samba book guy) c-b

30:

Except that, for many of the hardcovers Amazon sells, they sell them at a discount from the MSRP. (E.g., for the last Stross book I bought, I got it for something like US$18. That was a pre-order, so it shipped first day it was available.) B&N and Borders do this as well, and they do it at the physical stores as well. Stores do this, as well as sales, to distinguish themselves from the competition that sells exactly the same products.

Now, for ebooks, you can say goodbye to any price variants. And that's why I said Amazon was fighting for their life.

31:

(Reply to Sean @ 28)

Amazon can certainly sell for less, as can a physical bookstore, if they're prepared to take the price difference out of their proportion of the price. What seems to be the dispute here is on the price at which the publisher sells to the retailer.

However, it's late, and I may have misread your thesis: feel free to whack me with a clue-stick if applicable (:-))

--dave

32:

I CAN HAZ LOTS OF OTHER FISH IN THE SEA.

33:

Looks like Amazon decided to cave in.

I'm still scratching my head about how badly screwed up the writing business is. See below:

According to Tobias Bucknell on the basis of a small survey, the average advance for a first novel is $5000. Also according to Buckell (using the link provided by Charlie earlier), the average cost of running a book is $7,000 to $20,000, NOT counting the author The cost breakdown is
* editing ($2,000--apparently a wild guess and the source of most of the variability),
* proofing ($1,000),
* design ($1,000)
*cover art ($3,000)
Oddly, Buckell's got good numbers for the trivial aesthetics (cover and interior design), and no numbers at all for how much an editor costs. The breakdown is for a low level job.

Now, I don't know about you, but most, say 95%, of the pleasure I get out of the book comes from the words. Admittedly I'm weird, but covers don't sell books to me anymore. I prefer to read a chapter to see if I like it before buying it.

But the nasty lesson from these numbers is that the only person whose time is NOT valuable is the author, that poor sod who, in the end, is actually responsible for creating almost all of the book.

All I've got to say is, THANK YOU CHARLIE, for going through that particular hell to give us the stories we enjoy.

Excuse me, that's right, it's not a book anymore. I guess it's just content now, right? Not even a story or words. Just content for someone else to cluelessly package and market.

Anyway, we're arguing about whether Macmillan or Amazon has the right of this particular pissing match, but you know, the authors are still getting shafted, no matter who wins. Fuck 'em both.

34:

Looks like this is resolved, at least for now: BoingBoing is reporting that Amazon will agree to Macmillan's terms.

Now, can someone hit Amazon with the clue bat please? Severely irritating authors and bookbuyers is not a good idea when the company is primarily known for selling books...

35:

It's after supper, and time to add a couple of orthogonal points.

My own purchasing pattern for fiction is bimodal:

  • I buy lots of unknown authors in paperback, to see what their work is like. I also buy a fair number of mildly interesting authors in paperback, because they're only mildly interesting.
  • I buy a smaller number of authors, or more properly series, in hard-cover because they're too good to miss. The "Merchant Princes" series, Lois McMaster Bujold, C.J. Cheryh, S.M Sterling's "Protectors War" series and a few others.

I tend to lump e-books below paperbacks, because of the really quite horrid quality, so new authors aren't going to get read by me electronically. If they want to get onto the A-list, they'd better keep working with publishers who do paperbacks, so I'll try them out.

If the Apple device really works, I might be a target for expensive, readable-quality early releases, the way I'm a target for hardcovers today.


My purchasing pattern for nonfiction is, on the face of it, completely different. To me it's completely the same.
I buy technical books in hard cover and trade paper that I can read in their entirety on-line.

A sample chapter of a reference book is useless: it could be the only good chapter. Worse, I probably need to read the book before it can be shipped to Toronto, so full text on-line is a prerequisite.

When the book arrives, I tend to read it cover to cover, something that's inconvenient to do in the bathtub, on an aeroplane or the subway. And I mark books up with stick-on tabs and with private indexes in the end-papers. For my current project alone, I bought Elliotte Rusty Harold's two-volume XML tome and Bruce Eckel's "Thinking in" book in the first week on-site, because I could see they were both quality references I'll want to keep for years.

It doesn't look like it, but I'm really using the e-book instance as the test for goodness, just like fiction paperbacks, and the hardcover as the thing I want to actually own. The electronic copy hangs around because ad-hoc search is better than even the best professional indexer, and I may need a reference to excerpt. But that's about it.

So for non-fiction, authors should have the full text available to me, at least on O'Reilly's "Safari". I need your book yesterday, and I need it searchable in full text. If I refer to your book, I'll buy it in trade paper or hardcover for future use, so provide it in a high quality form, and you are entirely welcome to a nice profit margin.


The latter pattern is derived from my reader's observed behavior. I once wrote all but two chapter of "Using Samba", and for marketing reasons made it available on-line in full text. It sold like hotcakes, beating out two other books on the same subject that has beaten it to the bookstore shelves. When we realized what was happening O'Reilly and I asked around, and the nerds were buying physical books that they regularly referred to on-line.

They obviously had a good idea so I copied them. They also had good taste, you understand (;-))

--dave

http://broadcast.oreilly.com/david-collier-brown/

36:

kenzoid @15

You missed the point of my post above. There are choices, "now", but the delisting sets precedent for all other online sources. The cost of books on the retail side is from distributors and the "bookstore". When publishers can drop ship to a handful of online distributors like Amazon, then distribution and bookstores vanish.

Right now, I cannot find a physical bookstore that carries even a fraction of the books I buy weekly from Amazon, or that matches the cost. Ordering through the bookstore is not an option when most of the people working there have as their second job asking, "Do you want fries with that."

I am a consumer. I actually buy books. I want them now. This impacts me deeply.

Nostromo @22, and Andrew G @26, and Benjamin Wolfe @31

Nope, as of Sunday night, the books I want are still delisted.

And whether Amazon blinks or not, they showed what can happen once all of the bookstores are gone and it is all online. The model is broken. You should be afraid. You should be very afraid.

I shall now go watch disaster movies, and sulk.

37:

The word "monopoly" appearing in Amazon's capitulation makes me wonder if they had it in on the brain when making the decision.

Perhaps their lawyers decided they would run afoul of the law somewhere for boycotting Macmillan (though my understanding of US monopoly law says it generally does not work that way). Perhaps they even got a call from the justice department (or corresponding entity in another major jurisdiction).

Apple entering the market couldn't have hurt either.

38:

Interesting, in that I got this from a link off your website from KFM(personal aside: I like "Leverage").

This Christmas, Amazon sold more Kindle files than physical books for the first time. Unless I'm smarter than Jeff Bezos (the correct answer, btw, is a hearty laugh), then you'll see Kindle(tm) quickly fall in behind the Netflix(tm) strategy, rushing to become as ubiquitous on as many platforms as possible while Bezos personally dynamites whatever 19th century manufacturing base is churning out the Kindle chassis.

Or, perhaps, content?

39:

David@29: Check Macmillan's press release again: they're saying that Amazon will not be a reseller, only an agent, and will collect 30% of the sale price. They are, essentially, going for the same model that the iPhone App Store uses, where the seller sets the price, and the agent has 30% to cover all costs and profit.

I'm not the only one to interpret it this way. Naturally, we could be wrong, in which case I'm not upset at Macmillan. But the timing of all this really does convince me that Macmillan got an App Store-like deal with Apple's pending "iBooks Store," and they are going to require that same contract for all ebook deals. (There was a post-iPad-announement interview with Steve Jobs in which he said that all ebook sellers would have the same prices.)


40:

Amazon folded? How wonderful! I can't wait to see which producer of products next decides that they are entitled to set retail prices. Hell, why even have a separate Amazon.com at all? Just fold the company into Macmillan, since Macmillan apparently regards Amazon as a subordinate entity to be dictated to rather than a fellow business to be negotiated with.

The widespread support for Macmillan is dangerous as hell for retailers- imagine trying to run a store and being unable to set the prices which seem right for your customers because everybody you buy stock from has got it into their heads that they have the right to tell you how much to charge. What's next? Will Macmillan demand that their ebooks be sold on special pages with "Amazon are our bitches" tiled on the background? It sounds like they could get it if they wanted it, and half the internet would back them up.

41:
How wonderful! I can't wait to see which producer of products next decides that they are entitled to set retail prices.

Actually, a lot of vendors have minimum advertised prices, which admittedly is something different. And a recent case (in the US, of course) which reached the SCOTUS decided that vendors could contractually require minimum prices. (There are some legal complexities, and I don't fully understand the decision in that case. So do your own research, please :).)

Apple products have very, very little variance in prices. I've seen some retailers have sale prices that were US$1 off the official price, and that's about it. I don't know if that's different in other countries.

42:

Sean, if you read the Kindle terms and conditions, Amazon have never been "a reseller" -- they're sub-licensing the right to publish the work on the Kindle platform, i.e. claiming to be a publisher (and a wholesaler and a retailer rolled into one).

Huge legal difference there, because publishers get to do things like set the number of books they're going to print, and set the price, and set royalty levels. Booksellers (or wholesalers) don't do that.

My reading: Kindle was a huge power-grab when it first bootstrapped, 2-4 years ago. The publishers went along due to lack of alternatives. Now there's an alternative.

43:

Something else that publishers give to authors: egoboo.

There's an argument that any published author has to have a degree of aggressive self-confidence that I maybe don't have, but isn't it nice when your editor, who reads stuff by many authors, says your book is worth the effort.

It doesn't put coffee in the mug.

As a reader, the publishing process filters out some of the rubbish, and that's what is getting forgotten in the whole current mess. Amazon would be happy to list my self-published crap, even do the Print-on-Demand (and tangle me up with US tax laws), and they're that close to being a vanity publisher, as well as all the other stuff they do.

Amazon is, to some extent, marketing. Until now, a reader could be confident that if they went to Amazon, they would find out what was available by Charlie Stross, regardless of how many publishers he used. That's worth a little bit to the publishers. There's room to argue about the precise discounts Amazon might get.

For physical books, partly because warehousing and shipping gives an advantage to Amazon, there might be something close to a monopoly. And what Amazon did was to attack Macmillan in that particular space.

For ebooks, Amazon are always challenged by Google. It will, I suppose, take a bit of time to work through the Google updating, but all those authors dropping Amazon links will have some effect.

This might just have opened the Second Front. Amazon might think they have an Atlantic Wall, but Charlie, and people like him, are turning up with the Mulberry Harbour, rather than getting pinned down on the beach at Dieppe.

44:

You have a Borders! Ours closed own and we have only a Waterstones. Which is almost exactly like not having a Waterstones except that the building could be used for something useful.

Broders was a good shop, I bought a lot of books there. However when I wanted a particular book, as opposed to liking a book I found on the shelf, Amazon was my first and almost only port of call.

If Amazon start to be arses about this then I will be reading even less books.

45:

If it walks like a duck, and quacks like a duck, I'll call it duckoid.

The specific terms may be sub-licensing, but they were in all other aspects behaving as resellers: they bought at whole-sale prices, and set the final price themselves, based on their desire for market-share, for profitability, to attract customers.

Macmillan wants to take that away.

You know, a couple of months ago, I got yelled at on boingboing for raising the notion that ebooks didn't have to have the same discount as normal books. "The whole publishing model would die!" were the responses (to hyperbolize).

The next step would be for Macmillan to insist that physical books be sold at a specific price, and only allow Amazon to collect 30% of that price.

You'll be happy when that happens, right?

46:

SEF @45: frankly, as an author, I'd love it if Macmillan could go back to the old Net Book Agreement days (which agreements I will note are perfectly legal in places like France and Germany, where book price maintainance is seen as necessary in order to maintain a cultural commons).

Of course, that wouldn't solve the existential ebook problem ...

47:

39, 42: Looking at the flip side, Amazon isn't a "reseller" for dead tree books at present, either — it's already merely an "agent" (or, to use the correct term, consignee). Since the individual copies of the dead-tree editions are fully returnable, Amazon doesn't have full legal title to them... and therefore is not a seller. The fiascos over possession and ownership of stock during the iBooks bankruptcy (US) and several recent bookshoppe insolvencies (UK) is more than adequate demonstration.

Yes, this does make a difference. In both legal and economic terms, this was a battle over who gets to set the consignee's commission, and simultaneously on what the commission gets based upon. The dead-tree book trade is (not quite, but almost) unique in giving the privilege to set commission to the consignee (store/distributor), but the privilege to set basis to the consignor (publisher); in most of the legal and economic world, both the commission and the basis are set by the consignor, albeit largely through trade custom. Amazon's program, functionally, moved both privileges to the consignee; Macmillan objected that this was inconsistent with trade custom, and demanded the privilege to set basis; and Amazon bowed to legal and economic reality.

However, there is one other consignment business model in which the consignee sets both the commission and the basis: Art galleries. Y'all might ponder the question of whether Amazon was being [insert string of unbelievably foul and offensive expletives here] insane trying to adopt such a business model for products that, by their very nature, are not inherently and individually unique.

Yes, the industry is doing its very best to ensure that nobody notices. (And you wonder why all the marketing of books seems so incompetent? It's because marketing the books is less important to their business model than maintaining ignorance of their business model...)

48:

Put simply because shifting body clock has left me brain fried.

Amazon is trying to do a Wallmart (Look up Wallmart & Pickles sometime) setting a price below cost for the manufacturer (Publisher) and expecting them to fall into line or lose the market share that Amazon offers.

This is a side effect of the American (Now Global) Corporate business model that says that every decision has to be made in terms of making the most profit for the short term investor.

Good on Macmillan for holding their ground vs a lingering death by Amazon's price capping.

49:

Croaker @48: you nailed it.

50:

sigh

No, he didn't.

I mean, yes, that's no doubt going on Amazon's side, and bully for any publisher who says "no" and doesn't lower their wholesale prices. The appropriate response to that would be for Amazon to choose to either raise their prices, or make less profit.

But refusing to lower their wholesale prices is, once again, not what Macmillan did. In fact, they did lower the amount they will be getting. And are, more importantly, dictating what the retail price is -- and exactly how much money Amazon gets to keep.

Those are the important parts of all of this.

Given that, Amazon's only choices will be to accept the terms, no matter how it affects their ability to survive, or to not sell the books.

And we've seen what everyone thinks of them if they choose not to sell the books, haven't we?

51:

It just occurred to me, I may be missing something in your perspective entirely: do you think everyone, everywhere, should pay exactly the same price for an item? Or, at least, your books?

It just occurred to me a few minutes ago that that might be a valid (to you) concern; it's pretty alien to me, which is why I haven't factored it in, I suppose. (This would be my failing, I'm not trying to say that concept is nuts. :))

But I remember the firestorm that began when Amazon was found to be offering different prices to different people, and I understand that a lot more. So maybe it's along those lines?

52:

Sean: It just occurred to me, I may be missing something in your perspective entirely: do you think everyone, everywhere, should pay exactly the same price for an item? Or, at least, your books?

That's a moral question. The answer is, "everyone participating in the same market should pay the same price for an item."

(The "participating in the same market" bit is a weasel option to explain that prices of commodities may vary between different countries depending on local currency strength, sales tax, and general affluence -- it's no surprise that paperbacks are a lot cheaper in China or India where average per-capita GDP is lower.)

To explain why I believe in uniform pricing, let's turn the question upside down: I am a retailer who sells bottles of water for $1.99 to most folks because that's what the market will support, but I will charge more if I can see a way to make a profit. I am in the happy situation of manning my stall on the edge of a desert one day -- with no other water sources within thirty miles -- when I see a plane crash survivor, maddened by thirst after three days of dehydration, crawling out of the desert, croaking "give me water!" The survivor is a millionaire. He's going to die if he doesn't get water. Is it ethical to charge them a million bucks for a bottle of water that I would normally sell for $1.99?

And my answer is: no it fucking isn't ethical to squeeze somebody until the pips squeak. (But justifying that answer will take an entire book, so I'm not going to unpack it for you here.)

I don't like discounting and differential pricing -- absent special circumstances, such as free talking books for the blind -- because it's the mirror image of predatory pricing.

53:

Okay. As I said elsewhere, I think I understand your position a lot better now. I don't know that I agree, but that's a different matter.

One of the problems I have with all this is that, to me, the "markets" are a bit more distinct: there's the wholesale market, where you pay less but have to buy lots; and then there's the individual market, where the wholesale-purchasers are competing with each other to get customers, who pay more but buy smaller quantities.

You believe it would be best to completely eliminate the middleman, and sell directly to the consumer from the wholesaler. Possibly with one or more aggregating agents who takes a set commission but offer multiple wholesalers' wares.

Is that about right?

54:

Sean, that's about right. I don't like rent-seeking. I don't like price-gouging. I do like the idea of primary creators being able to earn a living, and of consumers getting a fair deal. And I will note that publishers perform a bunch of valuable services for authors which fall within the "primary producer" circle on the chart, alongside other services which, in the world of ebook publishing, may well be obsolete or undesirable.

55:

Okay. As I said, I disagree -- fairly strongly in some aspects of it, but not much in others.

Speaking pseudo-economically: having a middleman is, to some degree, inefficient. It adds a layer, and separates the price setters (customer and supplier).

However, the's a problem with taking that approach: most suppliers are pretty incompetent when it comes to finding, or coming to the attention of, customers. But the middlemen known as retail stores... that's all they do. Either they are good at it, or they go out of business from the competition. (And "good" can mean something other than price -- it can refer to the level of service, the quality of the goods, location, etc.)

As an example you've alluded to before: you have an agent. How well would your agent fare if you told your agent, "You will sell this book to a publisher at exactly US$20,000, no more, no less, and your total commission will be exactly 5%, no more, no less"? In this case, you've got a middleman, whose job it is to find a buyer, and you've now constrained her (I think you've said?) ability to do so. And you've limited her reward for doing so.

Bypassing the middleman is certainly doable. There are quite a few authors who don't have agents, for example. And the Apple App Store is largely the same way.

But the retailers do a lot of the customer-finding, that publishers simply have been unable to do. Put another way, they offer a very valuable service, and the cost of that service has traditionally been price flexibility.

I'm not sure that the end result you desire is bad; I do, however, think that the transition there is going to be ... ugly, to put it mildly.

I don't know how much sense I'm making about this.

56:

Sean, retail is useful -- if it doesn't occupy a monopoly position. Monopolies are generally bad all round, unless they're providing vital infrastructure and regulated sufficiently to enforce fair provision. Monopsonies, ditto: I can think of only one monopsony I wholeheartedly approve of, and even there I've got some reservations about how it does business.

Amazon is damn close to becoming a monopoly on online book sales, physical and ebook. This bodes ill for all.

57:

I disagree that Amazon was close to becoming a monopoly on ebook sales -- the Nook has just come out, and Apple threw a huge wrench in the mess with the iPad. (I do not at all disagree about monopolies. And Amazon's market power is worrisome to me, even as I sit here arguing against Macmillan. And I don't disagree that they were trying. But they weren't going to get there once Apple entered the fray.)

I think that the model Macmillan is going for is more likely to promote monopolies (or oligopolies), but it's nowhere near a given, and there are still some potential players who haven't spoken up yet. (Yes, I'm looking in Redmond's direction. And Mountain View's.)

58:

This can get complicated very, very quickly — so this is just an outline.

Antitrust law isn't as simple as "Monopoly or not?" It concerns unduly restricted competition. That can arise from (for the moment, ignoring directional distinctions that really do matter, such as monopoly v. monopsony):
* A classic monopoly, usually defined as a single actor controlling more than 68% of a market that has nontrivial entry barriers
* An oligopoly, usually a definite set of a handful (the number in that handful depending a great deal on market characteristics, but usually ranges from 2 to 6 or so) of actors controlling more than 74% of a market that has nontrivial entry barriers
* Conscious parallelism, what is really at issue here: Although a single monopolist or oligopoly does not control the relevant portion of the market, or the market has only trivial entry barriers, over 90% of the market has essentially noncompetitive characteristics due to "follow the leader(s)" behavior by other market participants

What should be fairly obvious here is that the definition of the relevant market is critical; in actual antitrust litigation (both in Europe and the US), market definition determines who will win or lose about 90% of the time. Kithrup and Sean quite clearly disagree with Our Gracious Host on the market definition for e-books; I'm reasonably sure that Kithrup and Sean don't agree with each other, either.*

In this particular instance, it makes substantial sense to adopt a market definition for e-books that is consistent with Our Gracious Host's interests. If someone wants to argue about the broad ability to read text on a screen without an active internet connection, they can go ahead and do so; if someone wants to argue about downloaded legal authority being used in court on a Kindle/Nook-like device, they can go ahead and do so; but those seem to be separate markets to me, and are certainly not what is at issue here.

* Real-world historical example: Pan-slavism... which came in multiple, incompatible flavors. Think about the implications -- particularly in 1912-14 -- of whether Serbia (a largely non-ethnically/linguistically Slavic nation) was in the definition of pan-Slavism or not.

59:
I'm reasonably sure that Kithrup and Sean don't agree with each other, either

"Sean" and "kithrup" are the same person, just signed in differently. So you can imagine my laughter here -- it's not your fault at all, it's all my fault, but it's still hilarious.

Any change in my position has been due to both clarification on my part, and learning from the discourse.

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This page contains a single entry by Charlie Stross published on January 31, 2010 6:42 PM.

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