On May 23rd, The Bookseller reported:
Amazon has removed from sale key front and backlist titles from across the Hachette Group: the UK's largest publisher and online retailer are believed to be locked in a dispute over terms.
Apparently Hachette decided to go public about Amazon's quiet efforts to strong-arm publishers into more favorable terms. This past Friday, The Bookseller had another story. Here's an excerpt:
Amazon's current sanctions against Hachette are "effectively creating a breach of trust between Amazon and its customers", Hachette Livre UK c.e.o. Tim Hely Hutchinson has said in a strongly-worded letter to authors . . .
Hely Hutchinson's letter explains Hachette's position in its current terms dispute with Amazon, which has seen the retailer remove the "Buy New" button from key front and backlist titles from across the Hachette Group, and also take them away from promotional positions on the website. Titles such as Kate Mosse's Labyrinth (Orion), Stephen King's Duma Key (Hodder) and James Patterson's The 6th Target (Headline) continued to be affected this week, a fortnight after The Bookseller first reported the issue . . .
The letter says that despite advantageous terms, "Amazon seems each year to go from one publisher to another making increasing demands in order to achieve richer terms at our expense and sometimes at yours", and affirms Hachette's intention to stand firm against conceding additional terms.
More than one person chastised me back in April for over-reacting and being too idealistic. My viewpoint was that I was being pragmatic. You see, I've had the benefit of seeing this game played out before.
Back in February and March of 2006, I did a series on Wal-Mart. The tactics Amazon is currently employing are exactly the same tactics that Wal-Mart used to gain its position of hegemony in retailing. To understand how the tactics work and their consequences, go here and here.
Such strong-arm tactics depend upon the little guys keeping their mouths shut out of fear of reprisal. Otherwise the giant retailer might face legal consequences in terms of unfair business tactics and antitrust issues.
I'm going extrapolate the logical consequences of Amazon's present strategy. If Amazon is not stopped, a chain reaction will begin. Some of you will laugh as I follow the chain to what seems an absurd conclusion. I'm not laughing:
- First, the smaller presses, POD presses and e-publishers will disappear as Amazon's margins squeeze them out of business. Amazon will help the process along by offering better terms to authors if they will use BookSurge's POD press and Kindle's e-book to publish. Even if authors don't embrace Amazon initially, as their publishers go out of business, they will be forced to do so.
- Brick-and-mortar stores have two constraints which Amazon does not: (1) limited shelf space and (2) a limited geographic range. Bookstores carry books "on spec," filling their shelves with stock they hope readers will seek. Amazon, on the other hand, has unlimited virtual shelf space and unlimited geographic reach. Amazon does not have to warehouse stock. They can wait until a book is actually ordered and the money is in hand before using a digital file and BookSurge to print the book. Because they cannot match the deep discounts Amazon offers, bricks-and-mortar bookstores--already under siege--will be squeezed out of existence.
- Like Wal-Mart, Amazon will continue to apply pressure on publishers to give more favorable terms. Wal-Mart's suppliers used cheaper materials and out-sourced to cheaper overseas labor. As the publishing houses' profit margins are squeezed, their cost-cutting efforts will take three directions: (1) Focus even more attention on signing best-selling authors whose work is guaranteed to sell; (2) Begin to pressure their mid-list authors to accept lower advances and lower royalty percentages; and (3) Sign fewer and fewer new authors because of the uncertainty and the expense of growing a new writer.
- Mid-list authors and new authors, unable to either find a publisher or unwilling to accept the low royalties, will seek to self-publish. Where will they go? Since, by that time, most of the self-publishing houses will have gone out of business, they will go to Amazon's BookSurge or to Amazon's e-book division, Kindle. Amazon will welcome them.
- The next death on the food chain will be the publishers and agents themselves. First the mid-level publishers will die. Well-known agents and the larger houses will be protected for a period of time by their best-selling authors who are loyal to them. However, as those cash cows die off, so will the agents and larger houses. A new paradigm will emerge: Amazon as both publisher and retailer.
- Eventually Amazon will have so much power, they will be able to decide WHAT is worthy of being published.
Welcome to the future of publishing.