Amazon vs. Hachette: Amazon leads by 3 points

What?

There’s an epic battle in the publishing world between Amazon and Hachette. Amazon has delayed its shipment date for Hachette books, pulled pre-order buttons and delayed shipment of existing Hachette books. Hachette and its authors and its literary agents and publishing industry consultants have cried foul, and Amazon has responded.

Why are people upset?

It kills the sales of Hachette authors, which not only costs them money, but can end the careers of debut authors. This is a full-on house fire for them and my heart goes out to them. They contracted with Hachette to get their books into bookstores with the kind of power one expects from a legacy publisher.

Also, there is a visceral hatred of Amazon among some in the legacy publishing industry and its authors. Some have called this Amazon Derangement Syndrome. It boils down to Amazon being big, successful enough to knock out other bookstores, pushing for lower prices, allowing indie publishers in without a gatekeeper, and not treating publishing like a ‘special snowflake’ industry that is not held to typical business standards.

Why is Amazon playing hardball?

Amazon and Hachette are negotiating a new contract for distributing Hachette Books. You know how sometimes you lose a cable channel because the cable company and the channel are negotiating a new contract and one or the other plays hardball? It’s probably that (or it could be something else – no one knows anything about internal business negotiations). Except, Amazon isn’t blocking purchase of Hachette books like the cable company may block The Weather Channel.

Isn’t Amazon being a bully/monopolist/Vladmir Putin for strong-arming Hachette?

Amazon is a business. It doesn’t have to carry products it doesn’t want to, or when the producer doesn’t agree to its terms (to some extent).

Hachette is also a business. It doesn’t have to sell through Amazon or deliver its books quickly to them.

It’s not clear who is strong-arming who, on net. It appears that they are both trying to strong arm each other simultaneously. Both are multi-billion dollar corporations with banks of lawyers and negotiators. Barnes & Noble did this last year to Simon & Schuster, Apple did this to Random House; it’s business.

But Amazon is bigger than Hachette, right? It must have more leverage.

Comparing the market caps of multinational corporations who have business units deadlocked on contract negotiation is meaningless. Neither company is throwing every dollar of shareholder value into this fight. Amazon’s book unit is not the entire company (they make video game machines, stream TV shows, sell bedsheets and lawn mowers). Neither is Hachette its parent company’s only concern.

If anything, these units are making both congloms look bad and they may get internal pressure to wrap this up before the costs of this spill over to the other operating divisions. If that happens, Amazon’s larger market cap gives Hachette the upper hand, because misguided Amazon boycotts (sorry Ron) are a much bigger deal to Amazon, which makes 80% of its money on non-book sales.

Why are people all up in arms? Scott Turow, James Patterson, the New York Times?

Legacy publishing hates Amazon because it’s disrupting its sloppy but profitable business model. The old line publishing houses have been making big profits off of the lower royalties they pay authors for e-books. Amazon may want a piece of that margin, or more likely lower e-book prices for its customers.

Also, there’s Amazon Derangement Syndrome. Which could be fueling a lot of angry outbursts that are all uninformed because no one but Amazon and Hachette knows what’s really happening. But that doesn’t stop the New York Times from ‘reporting’ on it in a mix of poorly-sourced hearsay and outright opinion.

Who is the bad guy?

No one knows except for the two companies, who are the only ones who know what’s really happening.

What? That’s not good enough for you, is it? You insist on knowing who the good guys and bad guys are based on no actual knowledge? FINE. Here is my tentative score (most points is the good guy). It can change as new shit comes to light:

  • Amazon removed the pre-order buttons for Hachette books and existing books are now shipping much, much later than usual. Hachette: 1 point
  • The government found that Hachette colluded with other big publishers and Apple on price-fixing e-books and forced Hachette (and the other publishers) to renegotiate with Amazon. Amazon: 1 point
  • When Amazon got into a contract fight with another publisher (Macmillan) a few years ago and removed the buy buttons for Macmillan books, they created a fund to compensate the screwed authors, and the authors did get paid from it. So far, Amazon has offered the same to Hachette, but the latter has refused, leaving its authors to twist in the wind. Amazon: 1 point
  • Hachette apparently laid out the strategy of making Amazon look bad publicly in its consent decree, and announced an astroturf campaign to shame Amazon into a better deal using its authors and the publishing industry. Amazon: 1 point
  • Amazon continues to offer customers other places to buy books by Hachette authors, and the Hachette e-books are available immediately, as usual. Also, this is limited to books sold in the US Amazon site. Amazon: 1 point
  • Tentative score: Amazon: 4, Hachette: 1

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