Sunday, June 08, 2008

And So It Begins . . . Part II

To continue my narrative from yesterday about Amazon's efforts to dominate publishing:

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:
  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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.
  6. 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.


spyscribbler said...

I am equally horrified, but, on the other hand, it's just as likely it could work out better for authors.

First, BookSurge costs, but CreateSpace offers a similar arrangement as Lulu. Amazon has the gears in place where social consensus pushes good books up to the top. So the numbers of writers switching to self-publishing could start to increase.

And, face it, the current system does not seem to be supporting a whole lot of authors. Most have day jobs or spouses with day jobs. The average author makes $6,000 a year.

If authors could cut out the middlemen--agent and publisher--would that be so bad? There would probably be an explosion of writer's publicity "shops," to take care of the internet marketing, and much more freelance editing and cover design.

Things are going to change. I don't know which way they'll go, but I know this: agents and publishers make a full-time living from authors, but authors rarely make a full-time living from their work.

However it shakes out, I'm praying that it's TONS better for authors.

spyscribbler said...

I forgot to mention, CreateSpace is also an Amazon print on demand service.

Maya Reynolds said...

Spyscribbler: I've been saying for two years that the advent of digitization and the Internet would shift the balance of power for writers. Publishing houses held the upper hand only because they owned the means of production.

If I follow your reasoning, you believe that Amazon--once they hold the exclusive means of production--will offer better terms to writers?

That certainly doesn't appear to be their modus operandi vis-a-vis publishers.

While the publishing industry has been moving to centralization over the last fifty years, my hope was that digitization and the Internet would lead to a decentralization where writers would have MORE choice, not less.

Instead we have Amazon centralizing print publishing and e-book publishing under one umbrella.

That does not fill me with hope.

Sean McLachlan said...

While I agree with basically everything you put in your post, I think your step-by-step future of publishing is overly bleak. Yes, this is the direction Amazon is heading, but there will be resistance along the way. First, other online retailers like B&N, Booksamillion, and WalMart will fight back. Also, publishers might start getting organized to resist Amazon's bullying. Nor do I think brick-and-mortar stores will entirely disappear. And one must also remember that a lot of book buying is done from the supermarket and chain store shelf. There are chinks in Goliath's armor, and I think if enough Davids get together, the sucker is due for some bruising.

Maya Reynolds said...

Sean: I agree. By necessity, most serial prognostications are generalizations, each step being dependent on the ones before.

At the same time, I've been disappointed by the smug attitude displayed by most industry insiders. I've heard from writers who applauded Amazon for doing pest control of the bottom-feeding self-publishing presses with their POD announcement to those who are making money from referrals through Amazon's Affiliate program and didn't want to rock the boat.

I was mocked for removing the Amazon "buy" button from my website by writers who pointed out that I was hurting myself in a quixotic quest.

The most effective response is if a whole lot of readers join together and let Amazon know that they will no longer purchase books from the site until Amazon begins acting like a responsible member of the publishing community. That means not forcing small publishers to use BookSurge and not using strong-arm tactics verging on extortion to get better terms from publishers.

Unless and until Amazon sees a hit in its bottom line, it will continue its march toward becoming the Wal-Mart of publishing.

Wal-Mart does bring cheaper (and lower quality) products to consumers. It also eliminates small competitors in a community and encourages the rape of the environment in other parts of the world.

And we'll have no one to blame except ourselves.

Keefieboy said...

Clearly Amazon is attempting to monopolize a vertical market. There are laws against stuff like that, but they take a long time to work through the system. It would be nice to hear some serious responses from Ingram/Lightning Source: or are they just going to roll over and die?

Michele Lee said...

Heck, Maya, if a "buy button" is that big of a deal then I can whip you up one in about a minute with paint shop and you can link it to any store you want.

Maya Reynolds said...

Keefieboy: Good question.

Maya Reynolds said...

Michele: [grin] Have you thought about contacting Hachette? They might be interested.