Big Publishing is the Problem

A few weeks ago, I speculated that Hachette might be fighting Amazon for the power to price e-books where they saw fit, or what is known as Agency pricing. That speculation was confirmed this week in a slide from Hachette’s presentation to investors:

Pricing

So, no more need to speculate over what this kerfuffle is about. Hachette is strong-arming Amazon and harming its authors because they want to dictate price to a retailer, something not done practically anywhere else in the goods market. It’s something US publishers don’t even do to brick and mortar booksellers. It’s just something they want to be able to do to Amazon.

The biggest problem with Hachette’s strategy is that Hachette knows absolutely nothing about retail pricing. That’s not their job. It’s not their area of expertise. They don’t sell enough product direct to consumers to understand what price will maximize their earnings. Amazon, B&N, Kobo, and Apple have that data, not Hachette.

Beyond their ignorance of pricing strategy, Hachette also has a strong bias toward print books. Their existing relationships with major brick and mortar retailers gets in the way of their e-book pricing. This has been confirmed by my own publishers, who have admitted privately that they would like to experiment with digital pricing but don’t want to upset print book retailers. This puts their pricing strategy at odds with their investors’ needs, their authors’ needs, even their own profitability. In sum, they are making irrational decisions with their pricing philosophy. Hachette is making the same mistake that many publishers make, which is to think that harming Amazon somehow helps themselves.

The same presentation by Hachette to investors stressed the importance of DRM and the need to fight piracy. The presentation had very little to say about authors, which would be like an oil company giving a report to prospective investors and not discussing how its current wells are performing, the proven reserves it has on-hand, and what they are doing to discover new sources of oil. You know . . . the product they make their money from. Little is also said in the presentation about readers, possibly because Hachette doesn’t know who their readers are. Again, this is a presentation to investors by a company that doesn’t know its customers. Because they have too long relied on and been beholden to middleman distributors.

DRM, piracy, and high e-book prices are not what a publisher should be fighting for and bragging to its investors about. Many consumers aren’t even aware that Amazon isn’t the source of their e-book DRM. Publishers (and self-published authors) opt in or opt out of DRM as they see fit. Those of us who think about the paying customer first and foremost opt out, and we are rewarded with their repeat business and their advocacy. Those of us who don’t fret over piracy invest our time where it can actually achieve something. Publishers need to adopt these same policies with all haste. More importantly, they need to stop ripping off their authors and their customers when it comes to digital pricing.

We know publishers are ripping off artists and readers when it comes to e-books. Harpercollins released this slide one year ago this month:

profit

As author Michael Sullivan broke down in this damning blog post, it shows publishers making $7.87 on a $14.99 e-book while the author only gets $2.62. For a hardback that costs twice as much at $27.99, the publisher makes $5.67 to the author’s $4.20. What used to be a fair split is now aggressive and indefensible as publishers make more money on a cheaper product while the author makes far less. Publishers are ripping off readers and writers as they shift to digital, and they are getting away with it. They are even winning the PR campaign against Amazon, a company that has fought for lower prices for its customers and higher pay for its authors.

Let me repeat: Publishers are waging a war here for higher prices and lower royalties. $14.99 is their ideal price for an e-book that costs nothing to print, warehouse, or ship. That’s twice what mass market paperbacks used to cost, which is what they are replacing. Reminds you of how cheaper-to-produce CDs suddenly cost twice as much as cassettes simply because they were new, doesn’t it?

Publishers are also colluding with one another to offer lockstep digital e-book royalties of 25%, which is indefensible. Their every actions, when it comes to DRM, to pricing, to selling direct, to offering abusive services like Author Solutions, screams to anyone with ears that they don’t care about the writers and they don’t care about the readers. It doesn’t matter what they say, it matters what they do. And what they do is charge as much as they can get away with and take as much of the split as they possibly can. And they work with their competitors and against their retail partners to pull it off.

Their own authors defend them, partly because they don’t spend any time investigating or understanding the business in which they are engaged. One Hachette author — a good friend of mine — said something to me the other day that made me realize they don’t understand how their books are ordered by retailers or delivered by the publisher. I suppose it’s okay to write books and not worry about the rest of the business, but this same author and friend had much to say about the Amazon/Hachette dispute, but without the basic understanding of how the relationship between those two companies works. Part of the blame for not knowing falls to publishers, who keep authors at bay and away from the business aspects of publishing. It was one of my primary complaints in that old blog post. Publishers need to embrace authors as business partners, and any author who hopes to make a career at this needs to be at least a little curious about how the industry works.

So we can see in their own slides that publishers do not have the best interests of their artists and consumers at heart. What about Amazon? Here we have a company that forsakes profits in order to pass along the savings to: A) Readers in the form of lower prices and to: B) Authors in the form of higher pay. That’s what we know today based on their actions. Of course, some interpret Amazon’s behavior as: “Once they are big enough, Amazon will gouge customers and take advantage of authors.” If you press on numbers, you might hear that Amazon will raise e-book prices to $12.99 one day and pay authors a miserly 25% of gross. Both of which are better than what publishers offer right now.

This bears repeating: The very worst that Amazon might do, in some hypothetical future, according to their fiercest critics, is still better than what publishers brag to their investors about doing today.

Instead of operating under the hope that publishers will improve their business practices in the future and that Amazon will reverse course and start harming writers and readers once they gain more market share, why aren’t we condemning publishers for being the problem right now while celebrating Amazon for all they are doing to expand reading habits and to provide for artists? Why?

I think two reasons: The first is that we equate publishers to bookstores and Amazon to the loss of bookstores, and we all love bookstores. This is fallacious reasoning, though. Online shopping has impacted all of retail. These changes were inevitable, and they are the result of consumer choice. How those changes played out could have been publishers colluding with a distributor to price digital works higher than their paper counterparts. That would have been bad. Amazon leading those changes with their pricing philosophy has been good.

The second reason for the anti-Amazon bias is that some see Amazon as the giant and little old publishers as the underdog. That’s also wrong. The publishing and bookselling arm of Amazon is likely smaller than the combined earnings of the Big 5 publishers. Amazon makes a pittance on every e-book sold, while the Big 5 make out like bandits. Also, to say that these wings of Amazon’s operations are owned by a larger entity is to ignore that the same is true for the major publishing houses. If anything, Amazon is the clear upstart and underdog here. They are new to the market, rapidly innovating, blacklisted by brick and mortar retailers, setting up shop away from the established players, and ganged up on in an illegal manner.

I’ll go one step further and state something both outrageous and obvious: If the Big 5 had gotten together twenty years ago and DREAMED UP an ideal business partnership, one that would increase their distribution, provide excellent customer service to their readers, improve the livelihood of their authors, keep their backlists viable and books from going out of print, reduce their 50% return rate from bookstores to 4%, provide next-day and even same-day delivery, all while only costing them 30% instead of the 45% they lose to bookstores, they couldn’t have done better than what Amazon did for them.

Soak that in. Publishers should have engineered Amazon from the ground-up. A company that invests in distribution networks for their products rather than pocketing profits. And instead of celebrating all the hundreds of benefits, like pre-orders and customer reviews and the savings on print runs and returns that Amazon’s algorithms provide, they are trying to figure out how to put their best resource out of business. It boggles the mind. Like those authors who fear Amazon might take royalties away tomorrow, so are happy to give up those royalties today, publishers are siding with companies that are hurting them today out of fear of their greatest ally getting even more market share tomorrow. And readers and writers are the victims of this illogical behavior.

What is the solution? As a writer, the solution is to retain ownership of your rights. This has never been more important than it is today. E-book royalty rates are going to move to 50% of net. I know from some insiders that this is already happening for top-name authors and hot new acquisitions. Selling your manuscript now for half of what it will be worth in the very near future is a bad move. It takes years for books to come to market with a traditional publisher. If that is your publishing goal, exercise a bit more patience. Hold on to that manuscript (or self-publish it) while you write the next. Let the market come to you.

The other option is to embrace a smaller press that has more flexibility. Online print book sales and e-book adoption have helped level the playing field for small publishers. They are becoming more viable every single day. These are the true Davids. They now have the tools and ability to see their works sell to a wide audience and win awards. I put them as the second best option behind self-publishing, and I include Amazon’s imprints in this category. They offer higher royalty rates and terms similar to small presses, though some have grumbled lately that Amazon’s imprints are becoming more and more like the Big 5, so watch what you sign.

For readers, keep doing what you’re doing. Self-publishing and small presses are booming because you care about great stories, not where they come from. You are the disruptive force in this industry, and I say that with every ounce of love I can muster. Keep disrupting by doing what you do best: Read. Write reviews. Share your enthusiasm. Infect others. Spread the joy of this greatest of pastimes. And we will trust that those who cater to your needs and to the needs of the artists you admire will be the ones who come out on top. All others will need to change their ways or perish. If they do the former, let’s cheer for them. If they persist in the latter, let’s not be sad to see them go.

COMMENTS (177)

Following good advice is often hard (stop smoking, don’t eat that – whatever it is, exercise, write faster…), but in this case it is blessedly easy: keep your rights. Self publish. Listen to the people who are doing it massively ahead of you.

And be very very wary of the lashing of the tail of traditional publishing: its contracts are, ahem, draconian, and it will take you down as it dies. Which will take a while. During which time, if you are in their lair, you will be in mortal danger. And 70 years more.

We have been warned. There are none so blind as those who WILL NOT see.

Thanks for all the analyses – they are read and understood, and much appreciated.

Alicia

Hugh,

I just wanted to point out that there are a lot of consumer industries that have MAP & MSRP (Minimum Advertised Price, Manufacturer’s Suggested Retail Price) and, while these are only “suggestions”, the consequence to the retailer of not following those guidelines is – no more product.

Hachette may be an ogre, but I still maintain that: Monopolies have always proved to be bad for consumers (and suppliers); the word can be applied to Amazon’s actions, but not to Hachette.

It’s fairly easy to see that once Amazon has pushed the industry into subordination to itself that the next (and only) target for increasing shareholder return is an increased cost to consumers. I’m not saying that traditional publishers haven’t made monumental errors and need to really change the way they themselves do business, but the Amazon thing is largely independent of that issue. Amazon has enough market dominance and control to force suppliers to the point of selling to them at cost (at which point they’ll stop selling – after a brief period of believing they can make their profit through other sales channels); at which point we’ll be left with Amazon in-house brands (what kind of royalty are they going to pay authors when they are virtually the only game in town?) and independents, who will find themselves squeezed harder and faster than the trads were.

What percentage of retailers have fixed pricing? MSRP is just a way of setting the wholesale price based on discount. Are publishers pulling books from bookstores based on discounting? Nope. We discounted most hardbacks and all staff selections at my bookstores. Publishers didn’t care, because they got the full wholesale price.

Defending the $14.99 e-book because some other retailers (not mentioned) won’t help the problem. We need to fix this. Worrying about the market share of the one company working for readers and writers is not the way to fix this. We should throw all of our support behind the company we agree with until the others change.

Perhaps someone can correct me if I’m wrong here…

People who are defending trad publishing in general and Big 5 in particular are missing a HUGE and ultimately, decisive point.

At Amazon, our books are products. We are the sellers. Amazon is the middle man. They are not paying us “royalties” though that unfortunate term is applied. We are getting our 70% wholesale price to Amazon for our product. Period. End of Story.

Amazon has thin, thin margins. But in ebooks, they are getting one of the few points where they can capitalize on low labor, high return goods.

To keep a full length novel on a server is a fraction of a penny. We pay the delivery costs if the book is at 70% wholesale rate. They keep the money if on a low wholesale rate (35%) due to low cost. No warehouse workers. No warehouse space. Just an IT and KDP staff for a volume that probably earns out the daily costs by 7 in the morning.

In truth, Amazon is unlikely to substantially change the wholesale pricing to self-pubbed authors very much. The only thing that might change that is if the quantity of “almost no sales” inventory requires server farm expansion. And it would take hundreds of millions of those to justify that. Before that happens, they would have a purge of those things that never sold at all.

Someone, please, correct me if I’m wrong. But I don’t think I am. We are wholesalers, they are the virtual retailer. No reason to monkey with the percentages. It’s probably one of the few places they make a clear and defined profit.

Ann, you are right on with this assessment. However, the traditional publishing apologists will be on your ass shortly.

“Your margin is my opportunity.”

–Jeff Bezos

Amazon already has lowered royalties (or the percentage of the wholesale price they keep). ACX lowered royalties from a sliding scale 60-90% to a flat 40%. Unfortunately, there aren’t a lot of competitors out there for authors to turn to so their options are to accept the new 40% or not create audiobooks.

If Amazon reduces rates for ebooks (which rumor has they’ve been trying to do with traditional publishers) indie authors/publishers have other outlets, the same way that Hachette et al do. So long as those outlets don’t follow suit and also lower rates (the argument that they wouldn’t do so in order to capture a larger share of the market is one I’m not sure of — if they truly wanted a larger share of the market, why haven’t they raised rates above Amazon’s already?).

Ann, I agree with your analysis.
However, when that day comes and Amazon realizes they COULD make tons more money by simply slashing the Author’s share, the temptation to do so might prove overwhelming. Even 1% is going to be more than a little bit of extra cash. 2% or 3% is obviously more.
Amazon’s still the best game in town, tho.

Yeah, but even if they take 10% more, it’s still more than trad pubs pay. Fast payment. NO funny accounting. No rights grabs.

But Mir, this is the problem — of course you’d still be better off than if you trad published. But at a certain point, this has to stop being about trad vs. indie. If the only baseline is “it’s better than trad” that sets a low floor!

“In truth, Amazon is unlikely to substantially change the wholesale pricing to self-pubbed authors very much. The only thing that might change that is if the quantity of “almost no sales” inventory requires server farm expansion. And it would take hundreds of millions of those to justify that. Before that happens, they would have a purge of those things that never sold at all. ”

No by that time storage and processing costs would allow them to easily hold everything and purge nothing for the sake of cost efficiency.

I’ve worked in tech for 12 years now and can tell you server farm technology is growing so that it’s becoming more efficient and cheaper as I write this. We will be able to store and process far more for far less. By the time Amazon amasses even a third of what it has now the cost to store and process it will be a fraction of the cost it would be today. Remember the scene in the Futurama cartoon where they peer into a library of the future? There are two discs on a table containing the sum information of the known galaxy (not of just the human species but of all sentient cultures!) and one disc is marked “Fiction” and the other “Non-Fiction”. It’s like that.

Ann, you are correct by my understanding of the situation, and you have summarized it nicely. At some point Amazon will be faced with the problem too many almost-no-sale works, but the marginal cost of each is so small that it takes a while before they become a burden, Until then, they’re up there, and who knows, once in a while one may catch on, new blurb from someone well known, right subject at the time in the news, miracle — meanwhile they didn’t cost much to leave up there.

Amazon knows exactly how much of each product it sells, a lot about who it sells that product to, and just how much profit it makes from each sale. Because they have kept their profit margin thin, few are tempted to burn capital to compete with them, giving them an effective monopoly, but it’s not a legal monopoly: make the margins too high and there’s lots of room for competitors. We’ve seen it happen on the web many times…

Jerry Pournelle

Please read the detail of what I wrote: in an open market where there are numerous retail outlets available to manufacturers, they can effectively control the retail price by withholding product if the retailer does not comply with their suggestions.

Please also note that I referenced the fact that there ARE numerous things that traditional publishing needs to do in order to fix itself, but that was not the focus of my comment. I’m not defending a $14.99 retail anything. I am addressing the monopoly/near monopolistic influence that Amazon has on the market place.

Sure it is “great” for indies now – go make your scratch and as much of it as you can, but realize that you are contributing to your own eventual squeezing in the future by doing so. Who knows, maybe the “whatever” will come along and knock Amazon back in its socks, but I certainly don’t recommend relying on something like that to insure my future earnings.

This is NOT an attack on indies; it is NOT a defense of traditional publishing. It IS a suggestion that you look at the whole picture and ask yourself if one company, only beholden to shareholders and profits, is in your best interests. I suggest that it is not.

If one company is treating myself and readers right, and everyone else is screwing with us, how do we apply pressure in a positive direction except to put all our eggs in the best basket?

You’re saying that basket might grow harmful. Fine. I’ll move my eggs. But arguing for diversity is not a way to fight for progress. It just isn’t. So we’ll have to disagree on this one.

I think the key is to make sure you’re not putting all your eggs in one basket. Amazon (or any other retailer) can only get away with lowering rates if (a) there’s no other place for indie authors to go get better rates and (b) the other retailers follow suit by lowering their rates.

ACX is a good example here — there’s little option other than Audible so they lowered rates.

I think we indie authors can continue to laud Amazon for their amazing accomplishments and for all the do for indie authors, while at the same time being wary of them. My fear is that folks seem afraid to criticize Amazon as thought that will somehow undermine their arguments in favor of indie publishing over trad.

Frankly, when you say “Well, Amazon is the best now so why worry about what may happen down the road?” I wonder at the author a decade ago who said, “Well, Hachette is the best now so why worry about what may happen down the road?”

You speak as if Amazon were the only ebook outlet in existence. It is not. In fact Amazon sells fewer of my books than any of the five outlets I use. I don’t think they will hurt me even a little bit if they go gestapo on us.

Please read the detail of what I wrote: in an open market where there are numerous retail outlets available to manufacturers, they can effectively control the retail price by withholding product if the retailer does not comply with their suggestions.

Perhaps they can control prices for their goods that way. OK. But does this open market also have competing goods that retailers can sell in place of a given price-controller’s goods? If so, that is what the retailer orders and sells. He drops the price-controller’s stuff and sells something else.

Does this open market have more than one publisher? If Amazon drops Hachette’s goods, it can then make a deal with Random House or Harpers. Unless they collude to uniformly enforce agency pricing. But that strategy already failed.

This kind of price control only works on an unwilling retailer when supplier collusion is sufficient to cut off the supply of alternative goods. That is what the price fixing suit was all about.

Who knows, maybe the “whatever” will come along and knock Amazon back in its socks, but I certainly don’t recommend relying on something like that to insure my future earnings.

Agree. But I will go a step further. I recommend independents don’t rely on anything for their future earnings. They don’t know what the future holds. Lots of things will change. It’s far better to exploit the opportunity sitting right in front of us. Then exploit the next opportunity. That’s what the rest of the world does. Nobody has ever had long term success without a long series of short term successes. That’s what long term success is.

I am so tired of the endless doomsday scenarios where Amazon “might one day” start screwing over authors–something the major publishers have been known to be doing for years. Also, B&N blacklisting bestselling authors like myself for having the audacity to use CS to print my books, even though they are available through Ingram–and–Baker & Taylor, is absolute, indisputable, and factual proof that Amazon is nowhere near the Devil that B&N is.

But let’s put that aside. Amazon disappears. “Poof!” They are gone. B&N charges insane rates to publishers for floor space, and the amount of books they carry is pitiful.They are the gatekeepers who decide what the public will read, and their selection misses everything but the current popular books. This is tantamount to censorship.

Having to order books online through B/N by going into the store and requesting that they buy a copy and sell it to me (in a few weeks) is stupid and monopolistic. B&N fiddled while Borders burned (from its own mismanagement–FACT). How stupid do you think we are, that we believe we “might” get screwed one day, when the capitalistic market that made Amazon will also make a company that eats away at their profits the moment they are the only major book retailer? Supply and demand is absolute. If people can make money selling books, they will. You need to get your butt in a city college economic class and learn how the market actually works.

If you admit in your post that you are addressing something which does not exist, it is very difficult to take the rest of your post seriously.

I totally agree with Steve Davidson. The irony here is that indie authors have more in common with their trad pub brethren, trad booksellers and with trad publishers esp. the smaller houses than they’ll ever have with Amazon. The former depend solely on books as a livelihood. The latter uses books to sell other products. Amazon is not a champion of books, authors, reading or book culture. Amazon is a merchandising platform and data aggregation company with one purpose: to grow and sell and grow and sell and dominate its universe.

Back when I ran record stores in the 90s, respecting MAP was a pretty big deal especially for a small regional chain like the one I worked for. IIRC, docking co-op was the penalty for a first offense. Windowing after the second offense. Death penalty on the third. Still, MAP didn’t prevent us from discounting… we just couldn’t use sub-MAP pricing in ads (which didn’t affect us because the only ads we ran were paid by co-op) and it only applied to front list titles for a limited time.

That said, knowing what happened to the retail record biz, and the record biz as a whole, as digital emerged should be instructive to publishers. After all, they’ve had nearly 20 years to watch and learn on a full flight of relevant fronts. Eventually, the labels wised up to a degree. I hope publishers can. I’m not, however, optimistic they will.

This argument is based on the fear that Amazon is after total and complete market supremacy. Picture the Amazon dictator standing over a map, wringing his hands as the red that represents the company bleeds all over the world. Not only is this view wrong, in my opinion, it credits Amazon with a completely old fashioned approach to doing business. They’ve proven they don’t need that sort of dictatorship when they continually find new and innovative ways to not only serve their customers but to do right by the people who produce the products they sell.

Amazon didn’t close bookstores. Do we blame Netflix because the local Blockbuster closed? Or do we look at Blockbuster as being a behind-the-times business model that imploded on itself?

Not to mention that while we weren’t looking, lots of new ebook retailers have popped up. We may not know them all by name now, but they are out there, they are growing and they will keep Amazon on their toes in terms of finding new ways to keep and attract ebook customers. If you stop for a moment to see Amazon as something other than a lurking monster, you might be able to see it as the company that changed the publishing world as we know it and that is a good thing.

“Amazon didn’t close bookstores. Do we blame Netflix because the local Blockbuster closed? Or do we look at Blockbuster as being a behind-the-times business model that imploded on itself?”

Great analogy!

Blockbuster **killed** the local (independent) video store, and engaged in massive censorship, due to their religious views.

How quickly we forget ;-)

Amazon, *can’t* set abusive prices. There are: Wal-Mart, Nook, and author websites to stop it. Amazon understands simple math. Trad. 5 would rather sell 1,000 at $10, than 200,000 at $1.50. Every competent business person (that manages to _stay_ in business for long) understands the concept of “sweet spot pricing.” It *used* to be taught in business classes. The point at which you sell the _maximum_ number of items, at the _maximum profit_. A _fact_ that publishers seem to refuse to understand.
If _I_ owned _any_ publisher’s stock, I would file class action suits against the executives, on the grounds of malfeasance, misfeasance and failure of fiduciary duty. (Note: that is the kiss of death to an executive’;s career, to found guilty of that.) Executives and _board_ members, have a mandated duty to maximize profits, and ensure them, for stock holders. It’s in the Securities and Exchange Commission regulations, *and* well settled case law. There is no way that they can “spin” this, as anything but “bad behavior.”

I’ve never understood why heads haven’t rolled over traditional publishing’s business practices. Printing thousands of books in anticipation of selling only half of them? Paying $10 million for 3 books? Completely misreading the future of their own business? This makes No. Fiscal. Sense. It never has, and it took a complete outsider, and as Ann Cristy points out above not a publisher but a retailer, to bring the business into the future by creating a model that actually works for the people whose work is the foundation for the entire industry: The writers.

Business in general has lost sight of this. Which is ironic because it is the basis of capitalism. When sales fall they raise prices to maintain their profit. Which leads to less sales, then higher prices, etc.

Movie theaters, food, cars, etc. Follow this flawed model.

Their solution. Use marketing ie advertising to brainwash people into buying the product based on brand loyalty or coolness factor versus return on investment or price comparison. Madison Avenue has destroyed the foundation of economic theory and we have been brainwashed into going along with it.

Sandro Rettinger

It’s fairly easy to see that once Amazon has pushed the industry into subordination to itself that the next (and only) target for increasing shareholder return is an increased cost to consumers.

I’m sorry, but that’s simply not true. There are other options. The most obvious of these other options is “growing the market”. And Amazon is in a great position to do that, simply by virtue of being the place that can cater to all the tiny little niche markets. If you turn a person who previously didn’t read because there was nothing that interested them into someone who buys five books a year because he can now find things that interest him, they have increased shareholder value, without necessarily having increased the per-unit price of anything.

Even people who are voracious readers (like, if I may be so bold, myself) who read hundreds of books a year… being able to simply find things, (and especially things that are self-published e-book-only titles from new authors) has me buying more books than ever before. Which, again, means a “bigger pie”, not just a bigger slice of the existing pie.

Disclaimer: I am a die-hard Amazon fan. I buy lots of stuff there. I suspect that some day I may personally be responsible for an increase in the price of a Prime membership. ;)

Hugh, I’m behind you 100% here, but I thought I’d point out that due to a Supreme Court ruling back in 2007 (Leegin v. PSKS), manufacturers can, and do, set price floors on retail items. Ever look at a “20% off everything!!!” coupon from a dept. store? Chances are, it’ll have a whole pile of fine print at the bottom letting you know which brands it doesn’t apply to; those brands have set price floors. (Apple is the largest by a huge margin… notice that i-Whatevers never go on sale)

SirWired,

I get your point. Most of the time, those disclaimers are there because the other brands haven’t agreed to run a sale, and the stores don’t want consumers showing up at the registers and saying, “But your ad said cotton t-shirts. THIS is a cotton t-shirt, too….”

With Amazon, a self-publisher can set the price of a book at whatever price floor s/he wants. If Amazon decides to run a sale on that book, they take the hit and still pay the self-publisher the agreed-upon split of the publisher-set price as long as the book isn’t being sold for a lower price elsewhere. That’s more than fair.

No, Amazon pays the royalty rate from the discounted price, not the list price. It is not fair, and it does not agree to pay a royalty on the list price in its contract. At minimum. it uses the ebooks as loss leaders to sell other products, and is not interested in preserving any fairness in its business practices. Whatever anyone else has told you about how “fair” Amazon is is wrong. I know because I was there. I know because I went through the wringer twice, and in each case Amazon thought it could prevail. I choose to keep my titles off KDP because of these contractual problems, and it has been a fact that I sold more books on other retail sites. I do not deal with Amazon because of Amazon’s habit of concealing or remaining silent on any questions put to them, or hemming and hawing and deflecting the questions with vague answers which do not put the questions to rest. I don’t care that Amazon has raised the cut it wants from suppliers, because I never earned enough from Amazon to make it relevent. Amazon only does what is good for Amazon.

1- The big (bleeding) HDTV manufacturers have been trying to force limited discounting on the market for over two years. So far all it does is dry up their summer sales, send customers to Vizio, and force them to allow even bigger discounts in the fall to clear out the pipeline.

2- None of the companies that “successfully” engage in vertical price maintenance have been found guilty of horizontal price fixing collusion. Which allows for the interpretation that Hachette attempting to force agency *again* is a continuation of the already-agreed upon illegal conspiracy. This is one area where BPH publishing is now really and trully a special snowflake.

This was a great read, and I wholeheartedly agree. Thanks man.

Brilliant and insightful, as always. And I love how you’re always thinking of all authors, from beginners to vets, and what is best for them (and readers!) in this industry.

My only caution is about small presses – some can be great (look for the ones who are doing innovative things with marketing), but many really don’t offer much beyond what you can do for yourself (and take half the royalties for it). Often, they seem to strive to be like “the big guys” rather than taking advantage of their nimbleness as a smaller player. I don’t want this to be true – I’d like to see more small presses really offer a value-add to their authors – but more often I’m seeing life-of-copyright contracts and loss of control on covers and pricing as the main difference.

Susan – You’re right on the money there, at least in as far as I’ve had offers. It’s less hybrid and more small-wanting-to-get-big mentality. The contracts I’ve seen are no less bad for the author. Worse in some cases (I keep one of them handy so I am reminded when I get sick of organizing my own “stuff” what my alternatives are.)

Caution, but optimistic caution, is called for with any publisher at this point.

I agree with both of you. I rank self-publishing the most advantageous, then some small presses who take limited terms of copyright and offer higher e-book royalties, then major publishers, finally vanity presses.

Self-publishing is far and away the best option.

Blogged about rights being the #1 thing authors need to focus on, especially considering how the music industry changed with digital. People still aren’t listening:

The #1 Thing Authors need to consider http://writeitforward.wordpress.com/2014/05/28/the-1-thing-authors-need-to-consider-ref-amazon-hachette/

Money follows rights. Follow the rights, and you get to the money.

Thanks for this post, Hugh. I am HUGELY grateful to Amazon because, without them, I wouldn’t have a shot at making a living doing what I love and have wanted to do my entire life. For years, companies have been ripping off artists while enjoying obscene profits from the art produced. Every day I am glad I hang on to my own rights and have no one telling me what I can and can’t do. I admit that I was wary of self-publishing at first, but, two years in, I can say without equivocation that it’s one of the best decisions I ever made, and I recommend it to any author who’s on the fence.

And I definitely don’t want to forget about the readers, who are some of the most supportive, generous, passionate, fantastic people I’ve ever had the pleasure of meeting. Without Amazon, they couldn’t have read any of my books. Without self-publishing, huge swaths of readers would continue to be ignored. I think what self-publishing has done for niche markets is one of the most underreported stories out there. I’m not just an author, I’m also a voracious reader (100+ books per year), and indies have given me far, far more choices than I’ve ever before had.

It never ceases to amaze me how smart people are sucked into the fear mongering of what “might” happen when Amazon becomes the only game in town.

Remember when every business used an IBM PC? Oh sure, some folks used Mac, but IBM held a monopoly on the business. Seen an IBM-branded computer lately? Market forces will ALWAYS seek a lower-priced option.

Remember MySpace? How long did it take an upstart competitor made them irrelevant?

Today’s consumers DO NOT HAVE BRAND/BUSINESS LOYALTY!!!! The days of an effective monopoly that can successfully distort free market pricing no longer exist! Bigger just means cheaper and more effective at doing their job.

If Amazon were to attempt to screw over readers and writers, they would simply move on to the next online bookseller looking to take over the market. And Amazon knows that.

Excellent point! Also, we could pivot away from Amazon quickly because Indies retain the rights to their works. Traditional Publishing doesn’t offer the same mobility as they hang on to the rights even when they aren’t doing anything with the book.

True. Jeff Bezos has said he remembers what it was like making his first deliveries out of the trunk of his car, and how fast a dot com company can fade away if they are not innovating and staying on top of trends.
There is a greater variety of quality books available because of self publishers. That psychic parrot mystery line a publisher wouldn’t pick up because they didn’t think there was much of a market for it? Well, the author is tickled pink to be selling a 100 of them a month, and readers, who have a fondness for smart crime solving parrots are happy too.
This is the beauty for readers and authors: those with similar micro interests can now find each other.

Thank you for continuing to shed light on this subject, Hugh. Emotions are high on both “sides,” but calmly sorting through what publishers and Amazon are doing and what the effects are for the only two critical players in the game — the creators of the product (writers) and consumers of the product (readers) — is eye-opening.

Buggy whips, anyone?

You are absolutely correct. Unfortunately, I don’t see things changing in a major way any time soon. People have imbibed the Kool-aid for too long and there will be no shortage of writers willing to indenture themselves for a chance to grasp the brass ring, no matter how tarnished it is. We only have to look at the music industry as an example. Even with a thriving indie culture, the big labels are still around and signing artists to minimal contracts, searching for that one who will inexplicably break out and make their year. The Big 5 operate in much the same manner and will continue to do so regardless of whether they force Amazon to bend or not.

I don’t mean to be such a Negative Nate. I want you, Hugh, to remain “stupidly happy” and not become bogged down with shouting at the mountains because they won’t move. Informing newcomers is laudable and necessary, but we also have to remember that ignorance is a choice, not a condition.

Hear, hear. And remember that advertising dollars are what make the books so popular, not necessarily the quality or importance of the books. The Big 5 use those dollars to promote the books and keep them in the forefront of shoppers’ minds. Amazon claims to help them do that, and manages in various ways to “hide” the rest. We don’t need any retailer to do that, we need them to give equal treatment to all books, and let the customers decide when to buy.

I am a self-published author through Amazon. I have retained every right. The moment I do not like what Amazon is doing, I will move. I can do that because I hold those rights.

I know for a fact that I would not have been able to quit my job without Amazon’s support of the independent author. I think that people often forget that independent means exactly that. It is not Amazon’s responsibility to publicize my work. It is mine.

Amazon’s job is to make its investors money. Hands down. I laud that. I have been able to stay in the top 20 with both my books in my category for seven straight weeks. Not necessarily because I am the best writer, or that my series is next Game of Thrones, it is because I took the time to learn how to make an author platform, publicize my own novel since I don’t have a publishing house to do it for me.

Amazon is not my publishing house. They are a storefront that has chosen to carry my book at a percentage of sales. They are no different to me then the local bookstore who is carrying my book on their shelf, strangely enough, for the same exact percentage.

We must never forget as independent authors that we have the responsibility to let our consumers aka readers know.. our book is in the house!

Cheryl
Where will you move?
What other platform offers the opportunities that Amazon offers? And if others offer those opportunities now, why did you choose Amazon to begin with?

The reality is that Amazon already controls the indie publishing market, and indie authors are desperate to remain in Amazon’s good graces.

And that’s why Amazon will slowly find ways to maximize the value of your content to itself, while minimizing the money you make.

Hugh,

I hope and pray authors listen to you when you urge them to HOLD ON TO THEIR RIGHTS. In this rapidly changing publishing landscape, what’s true this year — especially when it comes to the Big 5 — will most certainly not be true next year, or the year after, or the year after that, and you most certainly need to be more aware of the business side of this business if you’re to roll with the punches and succeed.

In my opinion, self-publishing at a professional level — editing, formatting, cover art, marketing — and offering work that can go toe-to-toe with the Big 5 or signing with a Small Press with a history of publishing strong work and marketing it effectively are the way to go.

Call me crazy, but I’m not even sure the Big 5 will be around five years from now! If you’ve heard the same chatter I have, Hugh, you’d probably agree.

A beautiful summary of my feelings on the topic. From now on I’ll just point people here when the discussion arises. Thanks, Hugh.

There is also the issue of physical delivery. Amazon had a business model that requires minimal stocking and quick delivery from its suppliers of physical items – doesn’t matter if it is socks or teapots or books. Hachette either can’t or won’t do this and can’t understand why they should. They have always dictated terms such as delivery. With Amazon if you want to ship off a skid of books in a month or when the mood strikes while Amazon is sitting with delivery commitments they don’t need you for a partner. Hachette thinks they are the big dog when they are the tail. The tail can try to wag the dog but it doesn’t work.
Some authors will support their publisher because they are tied to them by contracts and they will sink or swim with the house that prints them. Good luck on ever getting your rights back while anybody has a chance to claim them even off a failed business.
Other authors just disdain e-publishing as uncouth and low quality and want the prestige of a traditional publishing house. Especially if they are from an academic background that basically looks down on ‘popular’ books which are not LIT*ER*A*TURE. I’ve run into this shocked horror that I think my books are good just because common people BUY them. For some only the approval of their peers – academics and god-like editors matters.
Amazon treats me well. The minute they don’t I won’t raise a fuss and try to publicly complain – I’ll go elsewhere. Not to some dominating place Hachette. My contract for physical books says that if my works are not for sale for 180 days my rights come back to me. Try getting that out of someone like Hachette. Traditional publishers hold their authors in serfdom. They make no decent accounting of each book sold or remaindered – just estimates. Guess who estimates will favor when money is involved?
None of my books have DRM. If somebody is desperate enough to steal my book after I set the price low enough for almost anybody to afford it is still cheaper in the long run than treating ALL my customers like thieves.
Hachette is just another company like J.C. Penny and Sears. Dinosaurs who lay twitching and crapping cash for years because they are too big to just die quickly. But they don’t have anybody running them that can change from what they have always know. They’ll try to use government regulation to force people to accept what is obsolete. They will yell and smirk and lie too. But they are becoming irrelevant.

Hugh,
Maybe I missed it, but in the 14.99 e book example what would Amazon’s take be? Just trying to complete the equation…

If Amazon charged full price, their take would be 30% or $4.50. But Amazon knows customers will balk at paying that price. They will leave 1-star reviews in lieu of paying for the book and enjoying it. Nobody will adopt this awesome new reading technology. So Amazon discounts the e-book and takes the hit. If they discount to $9.99, then they make roughly 50 cents.

My guess is that Amazon is offering Hachette the same pricing deal that self-published authors get. It’s what I would call Incentivized Agency. Hachette can price the e-book wherever they want, but if they price it above $9.99, they only get 35% of the sale price. Same if they price the book below $2.99. Amazon does the same for self-published authors. It not only incentivizes pricing between $2.99 and $9.99, it gives Amazon the breathing room to discount higher MSRP e-books without losing their asses.

Just read an article in defense of Hachette by a very famous author. He said he didn’t understand the desire to drop ebook prices because they were already what? 3.99? I’ve written for Hachette, and they don’t charge 3.99 for ebooks. Mine was 13.99 (good luck with that). I was shocked to find the author had no idea what his ebooks were selling for.

They don’t even sell their backlist for $3.99!

Most of the pro-Hachette noise is coming from people who don’t understand the industry. You don’t need to understand the industry to be a reader or a writer. But pontificating when you don’t is dangerous.

Exactly what’s happening, Hugh. And your analysis of the numbers is spot-on.

Since self publishing has taken off on Amazon, I’ve read nothing but self published books. And it is one of the best reading decisions that I’ve ever made. I have found some amazing stories that have taken the place of those by more established authors in my list of favorites. There is a lot of incredible talent out there. The lower prices on self published books makes it easy to find it.

I agree completely, Hugh. But in the interest of helping to tighten the argument, there’s one point you made that I think bears closer scrutiny.

You said: “Little is also said in the presentation about readers, possibly because Hachette doesn’t know who their readers are. Again, this is a presentation to investors by a company that doesn’t know its customers.”

But publishing companies do not sell to readers. They sell to book retailers. And that is a huge distinction, which complicates this debate. Publishers cannot concern themselves with the interests of readers if those interests are perceived to be at odds with the interests of their primary customers: the retailers. In the old days, this distinction didn’t really matter, because consumers had no alternate vector of supply. But these days, things have changed dramatically, and publishers are now trapped between two very different definitions of who their customers really are. No wonder they seem to be hacking off their own feet all the time. They’re trying to ride two different horses that are now galloping in opposite directions, and they can’t afford to let go of either one.

This in no way excuses the draconian contracts, or the heavy-handed tactics, but I find this an interesting lens with which to try to understand where things might be going next. Sadly, I don’t think it’s anywhere happy.

Amazon is their BIGGEST RETAILER, then. They should be keeping Amazon happy, by that standard.

However, Amazon is not keeping Hachette happy. This is the crux of the matter. If Hachette wants to charge $14.99, Amazon is still within its rights to sell the book for $9.99. The problem is that it wants every other retailer to sell the book for $9.99. In order to compete, the other retailers are forced to charge less, creating a downward spiral on price. This is the sticky wicket, because Amazon is basically setting the market on the book’s price. It will continue to discount the price until there is no price for the publisher to profit from. It is willing to send the product into a tailspin until the other retailers crash and burn. Meanwhile, the readers are very happy to buy the book at the discounted price, but Amazon has made it very hard to buy. This punitive measure will only backfire on Amazon when the readers go elsewhere to buy the book. And most of them will not come back. This is what Amazon refuses to understand.

I guarantee the major publishers have vast amounts of info on their readers.

Hello Mr. Howey,

I commented on one of your other discussions but I’m at the end of a long list. I had some questions regarding this and hope you don’t mind me asking them here.

Aside from the obvious lack of a physical printed book, is there much else different in publishing an eBook? Do the publishers format it or the writer? Does the book go through the same review process? Is there a breakdown of the costs involved that shows the difference in traditional publishing and eBooks?

How did Amazon arrive at it’s $9.99 price? Did they consult with authors? Publishers? Was this a random choice? Is what they did any kind of price fixing?

I’m currently in college and one of my current classes is on publishing. This subject with Amazon and publishers just came up, so this is very relevant to what we’re being taught.

In closing, I’d like to leave you with a link to an article on Amazon. It indicates the operate with very little profit margin. I don’t understand how they remain so successful.

http://www.forbes.com/sites/greatspeculations/2013/05/21/amazons-thin-margins-do-not-support-sky-high-valuation/

Thank you for your time and information.

Roseann

Roseann,

Just because someone self-publishes doesn’t mean there’s no physical printed book. My self-published novel is available from Amazon both as a Kindle ebook and as a professionally printed paperback, via Amazon’s CreateSpace print-on-demand subsidiary.

In today’s world, there are few remaining reasons for an author not to self-publish.

Hi Morgan,

I haven’t looked into Amazon’s services yet, so I was unaware of that.

Thank you for that information. Something new to consider. :-)

Roseann

There are several inconsistencies in CreateSpace’s distribution program you need to study before you publish with them. CS limits the distribution based on which ISBN you use; theirs or yours. The price of the book will also be skewed upwards a bit. Go to Ingram Spark or Lightning Source instead. Based on the number of pages and binding, you can have a book published and in worldwide distribution in a matter of days, and Amazon will be forced to buy at your wholesale discount rate, not theirs. Ebooks can be handeled through Smashwords for distribution to the other retailers and device makers. In fact, you don’t have to work with Amazon at all if you don’t want to. But if you do, be careful.

Hi Theresa,
Thank you for the insight into CS. And for mention of the other options.

Roseann

Amazon understands what many do not. It is “better” to make $0.015 on 10 _Million_ sales, than $.10 on 10,000 (Hint; it’s $1,000 versus $15,000.) You’re in College, and haven’t heard of that?

Except most if not all self-published authors make way less than that, from far less sales overall. You’re counting your chickens before they hatch. I took an A in Accounting. Check your figures.

Better for Amazon. Not better for the author.

Lots of good stuff both in this post and in the comments. I think the thing to remember is that we’re in the middle of a major seismic shift and different folks get to the future when they get there.

Mrs. Kent had a Kindle a full two years before me. It wasn’t until the Kindle fire that I got in on the action and she was laughing at me the whole time I was carrying around stacks of paper books to her one lightweight tablet. To this day, if I blog about my preference for ebooks to print, people come out of the woodwork to leave comments assuring me that ebooks are a fad and print is better. I didn’t switch from cds in the car to mp3s (mostly audio books) until last year, and I know folks who are still listening to their books on tape.

Technology moves faster than people, that’s all. Plenty of readers have embraced indie authors (including me, happily enough), but there are plenty who still believe in reading books by major publishers simply because that’s the way it’s always been done. Here’s an excerpt from a review one of my stories got recently titled “pleasantly surprised”: “This book was $0.99 and I expected it to suck. It was actually very good.”

I’m not sure why this person spent their money, even a buck, on something they expected to suck, but of course, I’m glad they did and that I appear to have won them over. Every reader who buys Wool and discovers its better than 99% of traditionally published books is a new convert.to taking additional chances on $0.99 stories that might suck, which is great, but the shift takes time. To be fair, some indie titles do suck, but so do some stories that cost 14.99, which is, in my opinion, a harder suck:)

I think some of the ire from both sides of the “traditional vs. innovative” debate stems from the fact that not everybody arrives in the glorious world of the new publishing model at the same time. So controversies like this Amazon vs. Hachette will continue to occupy our attention because they’re interesting, but the future is coming regardless. Authors will make more money and have more control because when there’s no way to lock down distribution, there’s no way to prevent them from acquiring it.

If you think publishers are making a fuss, wait until 3D printing becomes perfected and widespread and manufactures lose their lock on distribution. This revolution has only begun.

I’d like to point out that when you say the $14.99 ebook is replacing the mass market paperback, that’s not exactly true. Books that are released as only a mass market book tend to have ebooks with similar 5.99 prices. The books that have high ebook prices are those that are released as hardcovers first.

Publishers have windowed lower priced versions of their books for a very long time. First the hard cover is released. People who want to spend the money for a higher quality book will pay that amount. The authors make higher royalties off of them, and publishers traditionally make higher margins off of them. When the sales of the hardcover slow down (usually within about a year), the paperback is released, though sometimes the trade paperback is released and then the mass market. This does two things: it captures readers at every price level and it extends the life of the book on the shelf.

If a publisher releases a $20 hardcover and a $5 ebook at the same time, sales of the hardcover will suffer. Even people who prefer having a physical book that will last a long time would probably purchase a significantly cheaper ebook if given the chance. What other options are left? Either publishers offer ebooks at a price high enough to dissuade people who want the hardcover from buying the cheaper ebook instead or they simply hold back the release of the ebook until they’ve captured the hardcover sales.

Both of those situations kind of suck, but if publishers offered a $5 ebook alongside a $20 hardcover, eventually it would become unfeasible to print hardcovers any longer. I love ebooks for their convenience, but I prefer a nice hardcover. They’re easier to loan to friends, they hold up better when I want to pass them down to my nephews, and they smell better.

Publishers have made many mistakes, and they’re certainly not perfect, but ebook pricing is not as simple as you want people to believe it is.

Amazon (and Angry Robot) are trying to get around that problem by bundling the Hardcover and the eBook. Unfortunately, it hasn’t really taken off yet.

My publishing company isn’t as big as Angry Robot, but giving away the ebook with a print copy (hardcover or paperback) was one of the first things we decided to do, and none of us had even heard of anyone doing it before.

If we thought of it, you can be sure others have, too… it’s just a matter of time before it goes mainstream.

So, the problem with that is that ebook rights are still handled like all other rights. When I sell a book, I sell a publisher the electronic rights. If publishers were to bundle the ebook with the hardcover, they’d still have to pay me, which means they’d eat the cost. If Amazon bundles them, they still have to pay the publisher, which means they’d eat the cost. If my publisher tried to give me a contract that allowed them to have the ebook rights but to give copies away without paying me for it, I’d refuse. There are self-published authors like Hugh who keep their ebook rights and sell only the print distribution, but most authors haven’t got that kind of clout within traditional publishing yet. I think bundling would be great, but they’ve got to figure out how to compensate the writer, because I’ve got bills to pay.

Eat what cost?

Are you saying you’d want to be paid for both the hardcover AND the eBook? That seems like it’d have the opposite effect from what you want though.

USing just myself as an example, I read on my Kindle. I’ve read like two dead tree books in the last year and they were both ARCs that I couldn’t get a hold of eVersions of. If I have to pay for eBook OR hardcover, I’m going to go for the one that I’ll actually use the eBook, usually for 8-12 dollars. If I can pay for the hardcover and get both, I’ll go for that, even when that runs 22-26 bucks.

THe same psychological effect happens with autorip at Amazon for me. I still like having CDs, but hubby prefers MP3s. And if I only like 1 or 2 songs on a CD, I’ll just get the MP3s. BUT…if there’s a CD with autorip, even costing more than the MP3 album alone, I go for the CD + MP3 combo. It’s like having a special deal and, psychologically, it sells me.

I only have 3 authors I’d buy hardcovers. I wait for reduced ebooks on everyone else. BUT..if I got the hardover AND ebook, that would be a huge temptation, because I could give the hardcover as a gift or get it signed when the author comes to town.

So, I think sales would go up for hardcovers if ebooks came “autoripped” with them. And I say that as someone who mostly avoids hardcovers unless under 5 bucks from used booksellers. I own 3 thousands print books. I have NO ROOM for more, hence my avoidance of hardcovers (those baby take up a lot of space.)

Actually, lower ebook prices IS as simple as it sounds.

99% of self-published and small press authors (like me, for instance) won’t ever have a hardback book. We, nor readers, care about having a hardback book. Readers of trad pub books might, but I’ve yet to hear anyone bug me or my self-pub author friends and acquaintances for a hardcover version. Paperback yes, hardcover no. Sure, some would probably dig getting a hardcover book of our work, but I haven’t experienced that yet.

Which brings us to what is essentially a publisher’s problem, not an author problem, and not a reader problem. It also brings us to a disconnect: ebooks might disrupt paperback sales, but they typically don’t disrupt hardcover sales. Hardcover buyers (like me, for instance again) buy hardcover books because we like having such things. Hardcover books are a luxury item in a tier above ebooks and paperbacks because of the cost (and somewhat the bulk/space it takes up).

But the publisher’s problem of ebook sales possibly eating into hardback sales is exactly that: a publisher’s problem. Readers (again, me included) don’t give a hoot about publishers and how much money they make, how their sales are affected, etc. We care about getting quality books at a no-brainer price (typically $4.99 or below). If we really want a hardcover of an ebook we love, we’ll buy it. If we want an ebook version of a hardcover book to carry around, we’ll buy it.

But the publisher’s problem isn’t our problem. It’s the publisher’s problem. Which means it is also the author who is under contract from that publisher who has the problem. Which means that’s that author’s fault for getting stuck in a prison of being a partner-in-name-only with a publisher who takes the rights to the author’s work, pays very little in royalties, has archaic accounting, pays once or twice per year, doesn’t have near real-time sales / ranking info, doesn’t allow the author to run price promotions… (I could go on, we all know the arguments about self-pub vs trad-pub).

As I’ve been saying lately… we should abandon our crusade to get publishers to change by complaining about publishers to publishers or the public. We need to focus our crusade (I suppose you maybe wouldn’t call it a crusade, but sometimes it certainly feels that way) efforts convincing traditionally published authors that they are getting the fecal end of the stick.

Only when there are no more authors willing to sign draconian contracts will publishers actually change. Only when trad pub authors finally understand that selling 100,000 copies via self pub + Amazon is actually better in every single way than selling 100,000 copies via trad pub will authors finally revolt and cause the entire publishing industry to either collapse or evolve.

There’s a smart kid somewhere in the bowels of one or more trad pub houses that understands digital technology and technological evolution and has a plan in his (or her) head that could not only revolutionize the industry (aka ‘bring it into the modern digital age’), but his/her company would be the one that leads the charge, sets the parameters, forces the others to follow suit or fade away.

Of course, with the kind of collusion that the big publishers are now famous for, it will be so very, very hard for anyone to make the first move. Look at what happened to Hugh when it came to the print-only contracts. He blew up the industry, then others followed suit, then someone got really scared and shut it all down because it was bad for ALL publishers somehow (because it made all trad pub authors sit up and take notice, and there’s nothing more fearful than having the serfs and peasants suddenly realize that the king bleeds red blood and breathes the same oxygen and is no longer worthy of being king).

And as Alex said, Amazon and others are trying to get around that. I use the “Matchbook” program with my KDPS books, and anyone who buys a paperback version of my book gets the ebook version for FREE. That’s right. If you are willing to spend the $10-$15 my paperbacks cost, then you earned the right to also have the ebook version for free, because carrying around a single paperback when you could be carrying around 100+ paperbacks in a device smaller than a paperback is what readers/customers like. They also like having a physical book sometimes, and so I give them the best of both worlds (assuming they don’t hate the book haha).

But ebook pricing possibly hurting hardcover sales for big publishers? Who cares, other than big publishers? I don’t. None of my author contacts care. This is, once again, the publisher’s problem, not anyone else’s. If it becomes unfeasible to print hardcover books, then again, that’s a publisher’s problem, not a reader’s problem, and not an author’s problem (well, authors who aren’t trad pubbed and authors who are midlist and don’t get hardcovers).

My “author problems” are:
1. Keep control of my rights
2. Make a living by choosing to get the highest ‘royalties’ possible
3. Keep my eyes open for anything that might affect #1 and #2 (aka UNDERSTANDING THE BUSINESS OF WRITING).

My “author problems” are not:
1. Anything that involves traditional publishing
2. See #1

Well said, Travis.

I and everyone else at my publishing company actually laughed when Matchbook came out on Amazon, because we’d been giving away ebooks since our inception, three years before (http://bit.ly/1qNaXkv).

All our ebooks are free with any print purchase, for the same reason. It’s just a whole lot easier for everyone if they can get it direct from Amazon rather than having us send it to them directly.

It’s things like this (free ebooks) that will keep readers coming back and will, eventually, hasten the decline of the traditional publishing system. Then we’ll start to see – if it’s not already fully in place – the “Age of the Author,” where we actually get a fair share of what wouldn’t exist without us.

As I stated upstream, bundling will absolutely convince me to upgrade to print. I don’t read that way anymore, but getting a signature on a book you love and putting it on the shelf is one of the great joys in being a fan.

I think you guys made a wise decision.

I use Amazon’s Matchbook program for all of my paper editions. Any reader who buys the paper edition gets the ebook for free.

I don’t see why not (and I do see it happen on Amazon) that the first release of the ebook can be at a higher price (e.g. the “hardcover” first release that the true fans want right away) and then the price can come down in time for those who want to wait.

“Even people who prefer having a physical book that will last a long time would probably purchase a significantly cheaper ebook if given the chance.”

Then they wouldn’t prefer a physical book. You keep using that word “prefer.” I do not think it means what you think it means.

Hint: To an economist, everything you do is basically an expression of your preferences. If you buy a cheap ebook instead of an expensive hardcover, you are stating, in the clearest possible terms, that your preference is for cheap ebooks over expensive hardcovers.

Now, it might very well be true that if the cost were the same, you’d prefer the hardcover over the ebook. But you cannot separate the price of a thing from the fundamental preference of the buyer. Price is part of preference. “Please stop me from acting rationally according to my preferences” is not a particularly inspiring call to action, nor does it engender much sympathy. At least, in my opinion.

I prefer a quality print book. I mostly buy ebooks. There are conveniences to ebooks (saving space, don’t have to dust it, cost less, can fit 1000+ books in my purse). But in the reading experience, yes, I PREFER to READ a beautifully bound, elegantly fonted and spaced print book.

But the pros to ebooks make me choose ebooks. In and ideal world where I had a 15 bedroom house and someone else to catalog, maintain, dust–yeah, ok, I might buy more print than ebooks (or both, cause if I’m rich enough to have a 15 bedroom manse, I could buy both).

Most of us who choose to self-publish prefer the paperback instead of the hard cover book, precisely because it costs less to print and one can print on demand. The big publishers have never learned that saving a tree can often lead to better sales, because they don’t have to have massive print runs which will mostly likely be returned for pulping in a month. “If you build it, they will come” does not apply. Most people have never been able to afford the hardcover books, choosing to wait until they are reissued in paperback. For that reason, bundling of the hardcover and ebook will never work.

According to someone at the Passive Voice comments section, the real reason for the stock price drop was a coincidentally timed dividend.

http://www.lagardere.com/investor-relations/dividends-423.html

Thanks for this. It wasn’t even germane to my arguments, so I removed that shot.

1000% Hugh.

Insightful, on point, and devastatingly truthful as always. Well said, Hugh.

“The very worst that Amazon might do, in some hypothetical future, according to their fiercest critics, is still better than what publishers brag to their investors about doing today.”

Thank you! When people bring up the bogeyman of “Amazon is gonna cut percentages to 35% for YOU next,” I always say, “It’s still better than what the Big 5 publishers offer, and it’s way better than what my books earned sitting in a drawer.

Except that publishers do offer real services as part of the bargain while Amazon will cut your royalties while offering authors nothing more than they get now: an empty stall in a flea market.

If publishers want to control prices, then perhaps they should sell through Amazon Marketplace/Fulfillment by Amazon, instead of selling books to Amazon.

Very well-thought-out arguments. When you put the numbers there like that, and like Sullivan’s been doing, it really makes it seem to a lot of those still on the fence, or maybe in the cage, that they not only should start considering their options, they need to.

Phyllis Humphrey

Hugh: Thanks a million for your excellent post. It says everything about what’s going on and what to do about it. Keep up the good work.

Hugh,

Once again, you unravel the Gorgon’s knot and simplify what the Big 5 would love to keep shrouded in mystery.

Thanks,
Peter

As usual, a clear concise explanation of the situation, thanks Hugh!

I just feel an overwhelming need to use the term “Hachette Job.”

Excellent article. I feel sorry for the traditional publishing houses. They’re in the same situation banks were back in the 70’s when they were deregulated. Suddenly the banks had to compete with savings and loans and credit unions.

All they had ever done in the past was sit there and rake in the money. Heck, they didn’t even make anything, their customers brought the money to them.

Banks had no idea how to be competitive. They floundered, many went under.

Being thrust into a competitive and completely different situation is difficult for people and for companies.

The traditional publishing houses are not reacting very well at all. Things like Author Services and other schemes designed to rip off new authors destroy their credibility. They are struggling, but we need to protect ourselves from their unethical reactions to their new situation.

Excellent article. We need to all be aware of what’s going on in this industry.

Fascinating post, Hugh!

There’s a quote from Hatchette a few days ago that Passive Guy highlighted in http://www.thepassivevoice.com/06/2014/hachette-reveals-amazon-digital-sales-share/ that caught my attention:

“Publishers need size and muscle in order to keep control over relations with authors over pricing and distribution,” Hachette said.

What does that mean?

I think what publishers think it means is “we have to be big enough to negotiate the best deals to our authors and other partners.” Or this is at least what they want everyone (their own authors especially) to think they mean.

What it sounds like to self-pubs is “we need to be able to keep authors from signing a better deal with one of our competitors, whether another Big 5, indie pub, or self-pub, by locking them into contracts that take away that choice, using legal or market share muscle (or collusion) if necessary.”

But… I’m a self-pub, so I’m a bit biased. I do tend to wonder if I see every statement such as that as evil-intentioned or such. You know how it is when your mind is made up about something, especially when there’s emotion/passion involved (because it directly affects you).

But every time I wonder if I’m just completely biased to the point of never being objective about anything big publishers say, they say something that once again makes me feel like they are just ignorant/greedy/think authors won’t ever figure out what’s going on.

Especially when they make such blatant statements that just sound… you know… like authors are stupid, illiterate children that don’t know what’s best for themselves.

It sounds like a bad translation to me. I think the main point there is that they want to be able to muscle distributors like Amazon over price and whether their books are even listed (distribution). The “relations with authors” is an extension of that muscle and power. That is, having Hachette authors rail against Amazon in public is part of their muscle. I think people are misreading that statement. Not that it’s a good sentiment. If you read the rest of their ideas, you see that they are using their authors to fight for policies that are bad for their authors.

Hugh,

I agree with everything you said, but I can’t help but wonder why Amazon and indie writers are fighting so hard to make Hachette and the other big pubs competitive.

If Hachette and their most successful authors want to force Amazon to sell their titles for $15 isn’t that good for indie writers? I am starting to feel like we are fighting to keep them viable to our detriment.

As a reader, I have 200+ books on my Kindle waiting to be read, so I only purchase books that I must read (which are few) or books that I think are a deal and may want to read in the future (which are many), so if the next Patterson book is $15 or $150 it really doesn’t impact me. I will read something else.

Are we concerned that they might kill the eBook market? I think that ship has sailed at this point.

So, what’s left? Let them use their eBook catalog to subsidize their print business and, as a result, make the indie books even more competitive on a price basis. Seems like a win. What am I missing?

What you’re missing is that this is a fight for ALL authors, not just indies. Even the authors who love their publishers and don’t see they’re getting ripped off. Even the authors who blog about how ‘evil’ Amazon is and how great their publisher is.

Just because we’ve seen the light doesn’t mean we should turn our back on those that haven’t. Many of the trad published authors had no choice, they signed years ago when it was either sign or give up. They weren’t ‘stupid’, they made the best possible decision under the circumstances. We need to keep fighting for them. This isn’t about being anti-publishers as much as it’s about being pro-author.

So yes if trad pubs keep their book prices high indies will sell more, good for you. But that leaves their current authors worse off, so it’s not good for authors as a whole.

I agree with what you are saying, Matt. I don’t want to see any authors suffer.

I guess my thought is that if we are fighting for Hachette to remain competitive, that is more years of them signing authors to unfair contracts. I wonder, in the long run, if it would be better for them to be successful with their current practices or let Hachette make (what I think is) bad choices which will possibly accelerate their decline resulting in their adoption of a new business model or their being replaced by a more competitive publishing house.

I’m just wondering if by Amazon pushing Hachette to allow them to sell Hachette’s books competitively at a detriment to everyone except Hachette (Amazon makes less per book, authors continue to make their smaller royalties, but Hachette still makes their full wholesale price) are we helping authors in the long term?

I imagine it would be beneficial to the author that signed with Hachette 5 years ago, but would it be beneficial to the author that signs five years from now, if nothing changes?

I’m just thinking out loud. I probably haven’t thought this all the way through.

Sometimes I think the same way. I mean, if Amazon and Hachette can’t finalize an agreement then all Hachette titles are removed from Amazon wouldn’t that hasten their downfall? So some short term pain for their authors for long term gain. Part of me wants to see this happen.

I don’t know what is going to make the publishers change the way they do business but I’ll be something that impacts their bottom line. One day, very soon I think, a big publisher is going to break from the pack and offer higher ebook royalties and print only deals. And they’re the one that will survive the coming storm. After that all authors will be much better off, and all we can do is put as much information out there as possible to try and hasten the inevitable. This new world is coming sooner than people think. I suspect resistance to change comes from the bean counters and big business types rather than the people who really love books, readers and authors.

What Matt said.

Five years ago, I had a manuscript and a lot of questions. I didn’t know how to publish, what the various costs or opportunities would be depending on which path I took. Since then, I’ve tried every path there is to take. I’ve become friends with dozens of authors on both sides and well acquainted with hundreds of authors. I’ve gotten to know thousands of my readers.

Working in bookstores and being an avid reader got me interested in the publishing business a long time ago. As I published and learned more, and as I saw the economic and long-term benefits to owning my rights, I saw more and more hopeful artists making decisions that I knew many of them would regret. I saw even more artists chasing a fantasy that didn’t exist. As a bookseller, I saw what happened to most debut novels. When I self-published, I felt what it was like to have a work in the wild so you can move on to another. A work that wouldn’t vanish or grow stale. The difference was massive.

When I had 6 titles out and was making $200 or so a month from my writing (most of those sales from POD paperbacks), I knew this was the future and the best way for writers to start their careers. I’d only been writing for 2 1/2 years. Anyone could do this if they put the hours into it. I saw how this resembled other art forms, who slowly build their skills and an audience by getting their work out in the wild. The other publishing path, where you work alone and hope to woo one expert and then hit the market with a finished product and no following seemed absolutely crazy by comparison. Why would anyone do this? This is why 80% of big publishings’ books fail.

Sure, I could rub my hands together and see how much money I can make while people make ill-informed and damaging decisions. If I was someone I’m not. I love books. I love writers. Right now, they are being abused. Once you know that, it becomes imperative to warn people or to advocate for change. I’m doing both.

As a writer, I’m grateful for your persistence in pointing out that the emperor wears no clothes. As a reader, what I love is that you practice what you preach. Right now on Amazon, the first five Wool books are available in an e-omnibus edition for $6. Clicked, downloaded, later… (And thanks, Hugh, for everything.)

Hugh, do you regret signing with your traditional publisher any? If so, why specifically?

Not at all. The only regret that I have is that the unique deals we have put together have not become more widespread. I thought we were setting precedents. And maybe it will turn out that way eventually.

My deal in the US was for 7 years, after which I get all my rights back. And it was only for print, only for one book, and with no non-compete clause. This is the sort of deal I would urge any author to consider. Sadly, publishers are moving away from them, even though the deal has been profitable for my publisher (and continues to be).

All my other deals have been overseas, which are rights that I had no plans on exercising on my own. And I’d be happy to publish with major houses again in the future if they offered reasonable terms. The problem they have is the time to market. I’m going to keep self-publishing and allow them to make offers afterward. The reader comes first. Not many publishers are willing to be second. They want to control the release cycle, slow it down, send out ARCs, prep catalogs, pump up the sales force, and all the things that slow them down and don’t work 90% of the time.

Hugh, thanks for the many insights from your blogs. With regard to your suggestion -self publishing first, then small presses etc, would you include selling to trad publishers for foreign language rights given the difficulty of translation? Most of the dialogue on the indie publishing vs trad does not cover foreign, audio and other rights (and for audio ACX is not available to authors outside US and UK). Could be another blog in that lol (or maybe I’ve missed one)

Hugh, you’re absolutely right that Hachette’s presentation is a damning indictment of the type of industry they’re fighting for. If anyone’s still fooled by the idea that the Big 5 are friends of the author or the reader, it’s time they wake up.

Of course, some of your comments about Amazon almost made me heave, but I do agree that at this point they have made an impressive contribution to the publishing industry, as well as in empowering authors, and both increasing access and decreasing prices for readers. I do, however, want to play devil’s advocate on a couple points.

We’ve long heard about the boogeyman that is agency pricing, but I honestly can’t get myself worked up about it. I understand it will result in higher ebook prices from the Big 5, at least in the short-term, but there’s a part of me that sees little issue with that. I can see why the reseller model has been used in physical retail for numerous years, but when it comes to digital products and selling licenses, I’m not sure I see the rationale for that model to continue. Retailers don’t have to buy piles of licenses, they can buy them as they need them, at least to my knowledge, so with that change I don’t see why we shouldn’t allow publishers (or whoever owns the rights) to set their own price.

To continue with that point, if we are to force publishers not to use agency pricing, should self-published authors still get to use it? Should they not also have to sell licenses to online retailers and lose control of their pricing?

Finally, to your point that publishers should’ve built their own Amazon, I simply don’t see how they could have, not because of resources, but because of the nature of corporations. The current corporate model is focused on profit-maximization, above all else. I sort of see the Big 5 as I do oil companies. Sure, they toy with alternative energies and are slowly growing their stakes in those sectors so as not to be caught by surprise when we do shift, but up until that point comes they’re going to do all they can to keep us where we are because it’s at this point that they’re making the most profits, the future of humanity be damned. Obviously the irresponsibility of publishers doesn’t take place at such a decisive scale, but they follow the same worldview: to keep us in stagnation in order to maintain profits.

We don’t have agency pricing as self-published authors. We have an incentivized price structure. If we price outside of Amazon’s preferred price window ($2.99 – $9.99), they drop our royalty in half. In this way, Amazon exercises a lot of control over the price of their e-books.

To continue with that point, if we are to force publishers not to use agency pricing, should self-published authors still get to use it? Should they not also have to sell licenses to online retailers and lose control of their pricing?

Independents don’t have agency pricing. I agree many think they do. They are wrong. The Amazon KDP contract says Amazon has the right to set retail price anywhere it chooses. Amazon can set retail price at five cents or $100, and the author has no recourse. That is the opposite of agency pricing.

Hugh,

Sound and reasonable arguments as always but I have a follow up question for you. Your author earnings reports and the anecdotal evidence that I see across the web suggest self published authors are having their greatest success in the areas of Romance, Science Fiction, Thrillers, Mysteries. Is your advice to do whatever you have to do to “keep your rights” mostly directed at authors writing in those categories? Or, would your advice be the same to someone writing outside of those categories. For instance, I write mostly Middle Grade books and I’m wondering based on the data you are seeing and the buzz you are hearing, what you’re advice would be to authors writing outside of the big genre categories? Thanks Hugh for all you are giving to the writing community!

Dan

I’m not Hugh, but as a fellow author, my view is that it is absolutely essential to keep ALL of your rights to work and never sign them away to anyone for an unreasonable amount of time (like current contracts of lifetime + 70 years).

If one day publishers are willing to sign 3, 5, 7, whatever year contracts, with ALL rights returning to the author at the end of that period with no way for publishers to weasel out with “number of copies sold” or such, and of course, paying much better royalties than they are right now, then I would probably go for it. I’d do it knowing that the contract was iron clad and I most definitely would retain my full rights after the contract period expired (I’d have my own IP attorney verify all of the things I’d want).

The thing with the digital age is that nothing will ever go out of print as long as you continue to publish under whatever new technological platform evolves from whatever we are using today (epub, mobi, pdf, smartphones, tablets, ereaders, etc). Say your current self-pub books aren’t doing so well at the moment, but as long as you leave them published where potential readers can see them, you never know if suddenly one or more titles will take off.

I created my artistic works. There’s no reason I shouldn’t ever receive the largest return, regardless of the services provided.

The economics of self-publishing apply everywhere. There are just more writers and more readers in the genres you list. It isn’t like literary fiction sells very well with traditional publishers.

Readers can’t tell how a work is published if you put a good cover on it and have the work edited. So if you’re writing something for which there’s an audience, self-publishing will give you a longer time on the market, higher pay, more control over price, and the ability to change the work up in a few years if it isn’t moving.

If you’re writing something for which there is not much of an audience, it doesn’t matter how you publish.

What it comes down to is that both Hachette and Amazon are big corporations with their own agendas. Hachette writers caught in the crossfire shouldn’t be so quick to blame Amazon. As you rightly point out, Hachette doesn’t know anything about retail. If Hachette works with Amazon they have options other than paying their writers less. I hate that writers are further divided into camps based on how they are published, with more and more push that self-publishers are somehow “bad” for literature while corporate publishers are the good guys. More ranting on my blog which can be linked by clicking on my name.

Very clear and to the point again, Hugh.

I wish everyone who chipped in to this debate would research and learn what they’re talking about BEFORE commenting. I’ve read some very distressing and wrong articles on various sites about this entire thing. Some would call them lies. Maybe those were intentionally biased I don’t know, maybe not, but they’re damaging when people read them as Gospel without fact checking.

Mark E. Cooper

I am not very familiar with the ins and outs of the publishing industry, but it does sound like their are some similarities with the music industry. Once MP3’s came out, everything changed. It put a lot more power into the hands of the artists and the fans. The major labels (once it was the Big 6, now it’s the Big 3 – a change that occurred in just over a decade) no longer had the artists at their mercy by controlling all the distribution. Artists were now able to take their product straight to the consumer and everything changed. The labels have really struggled to stay ahead of technology and suffered greatly from it. The publishing industry could be on a similar curve here.

Yup. I’ve been following other entertainment sectors for years, and the same patterns have been playing out everywhere.

This is why the fear of Amazon-opoly is overblown. As the Big 5 fade in power, Amazon may indeed squeeze readers and writers to generate more profit. But ultimately, indie authors will ride the same technology tide Amazon has. Hugh sells his books directly to readers, right here on this site, sans Amazon. Social media and cloud services allow authors to sell directly to readers, whether the books sit on servers run by Amazon, Google, Apple or one of a hundred other companies – just like bands who sell their music directly to listeners. Amazon knows this.

Very clearly spelled out, Hugh. Thanks.
I came here via ThePassiveVoice where I made this comment:
“Big Publishing reminds me of a man jumping off the Empire State Building, and on the whole way down, denying that anything bad could be about to happen.” -or that he might have made a poor decision.

Brilliant article. You really have been a light for all writers, Hugh. Rock on.

I have decided that although I will publish on Amazon—I love what they have done for the self-publishing author—I will also go with Smashwords. I won’t put all my eggs in one basket, even when that basket is incredibly big.

Now I just have to lay some eggs to put in the basket!

http://www.suzannewhite.com

My first book was published in NY in 1975. I refused to sign the contract until they removed the “audio visual rights’ clause was removed. “Why would you want them?” She asked with a sneer.
“Maybe one day I would like to make t-shirts or bumperstickers or a movie out of my book.”

She laughed. How could a newbie author know how to make a t-shirt? I made those t-shirts and I gave them away across the country during my book tours. 17 cities in 21 days. That’s a lot of t-shirts.

Since then I have signed ten or twelve publishing contracts all over the world, routinely refusing to sell audio visual and or electronic rights. They don’t like my keeping e-rights. I keep em anyway.

In 2000 I had my first web site. Thereupon we advertised and sold my books. I shared with a more computer savvy woman who did the techie parts. I wrote the books. She did the accounts. We made about $500 each per month – if that.

Then along came Amazon. And Joe Konrath. And I became a card-carrying self published indie author. I owned my digital rights (with 2 exceptions) to all my books. Soon, I started to actually make a living from my books with Amazon and B&N and the other retailers and e-book distributors. It was extra work. Covers. Formatting. Uploading 24 books to each retail site. But it started to bring me monthly royalty payments of 70% of retail price based on sales I could track every day on the Kindle Dashboard. I was paid 12 times a year. Publishers pay 10% and send out royalty statements that no writer can decipher twice a year around and about April and February. We have nothing to go on as far as checking how many books they sell and to whom at what price. Authors, beware. Doing your own books is a cinch. Once you have learned the weather flukes; you will have developed some strategy and carry on. Trust in Good. Cheers, Suzanne White

I am an author. Indie variety. Run into snags when uploading? I write to or call Amazon with a problem, they answer right away and help solve my problems. I have been writing to Macmillan London and St Martins Press NY (a single company called Von Holzbrink which owns half of Germany) for months about the fact they are not selling a single copy of a book of mine and asking for the rights back. They either do answer or they blame the other for not being on the stick about this matter. I can change the cover and make it work for me with Amazon Createspace and Kindle. But the publishers are holding out. They don’t make a bean from this book. I still do, selling some on Kindle etc. I can do a better job than they can. They do not want that to happen. So they are refusing to release my rights. I have the same thing in Paris. They sell no books (because they don’t know How) and refuse to relinquish my rights. What are they going to do with rights to books they can’t sell? I may have to break their plate glass window in Paris to get some action.

I stopped taking window breaking lessons.I have been waiting years for these slackers to give me back my rights. When I have has enough, I will out them on Facebook and I will name names. All over ever UK and NY book blogs till they get the point. Or I get arrested.

DRM is our choice (authors I mean). Yet my books are pirated everywhere and given away for free. It’s unstoppable.

Shameful that publishers are treating you like that. And they are doing this to a lot of authors I know personally.

So don’t ask for your rights back. Assert that as per the contract, the rights have reverted to you, as their edition is no longer selling or earning you any money. I mean, if the licensing period has run out.

We have to stop ASKING. If they are not doing what the contract requires to keep the rights, we need to say that, and say the rights have reverted. Too many authors are waiting for some benevolent someone at the old publisher to wave a wand and give back the rights. And that’s necessary if they’re keeping to the contract or the original licensing period isn’t up– you have to get permission. But if they’re not keeping selling it– they don’t HAVE the rights anymore, do they? They had to do something affirmative (sell X number a year, or whatever) to keep the rights. If they aren’t doing that– just tell them.

I mean, sure, consult an attorney. But if they aren’t following the rights process in the original contract, they don’t get to keep the rights just because they refuse to respond to a letter “requesting.”

I just informed my old publishers that pursuant to XYZ clause, my rights had reverted. Announcement, not request. Agreed, some newer contracts are much cagier about keeping rights no matter what. But someone is going to have to bite the bullet (not me– I took back all of my rights, and no one even noticed ) and say, “You are not making me any money on my own creation. I’m declaring you in default of the contract, and taking back my rights, and putting the book up for sale myself. Sue me if you must. But you can’t keep the rights to something without appropriate consideration.”

That is, someone’s going to have to get sued, and a court is going to have to look at these contracts and see that the reversion clause is impossible. It’s going to hurt. He/she is going to need a legal fund. But it’s got to happen at some point. Contracts can’t last long past the stage where both are willing. (Divorce, case in point. :)

It will be really scary. But someone eventually has to do it. We should all stand with that someone when the time comes.

Most authors have no idea what to do with subrights. Rights are worthless if you don’t know how to sell them. And most subrights are of little value coming from unknown authors. On the other house, a major house selling sub-rights through its channels can actually place books and make money for the author. This fantasy world in which authors keep their rights and make bundles of money via them becomes reality for only a small group of self pubs.

Suppose publishers ignore all this advice. Suppose they continue doing what people don’t like? So what?

Let them fail. Books will still flow to consumers. Nobody will notice. We don’t have to know exactly how that will happen, but history shows that is how markets work. Nothing special about books.

I care about the authors they’ll continue to harm.

I have friends who have quit writing because of how soul-crushing their traditional publishing experiences have been. Some of them were NYT bestsellers. How can I sit by and watch that happen?

I hope publishers will become more efficient, figure out some basic business principles (embrace pricing tiers; embrace free promos; cut costs by moving out of NYC; stop windowing; sell direct; partner with artists) and pass that savings along to readers and writers.

I think we can watch this because there is a very robust alternative available. Authors can hit the Amazon KDP upload button. We can identify the opportunity costs involved so they can make informed decisions. But after that, I simply respect their informed decision and wish them luck. They don’t answer to me.

I don’t care if the publishers become more efficient because history shows that the goods will continue to flow to the consumer via some efficient system. Doesn’t matter if the publisher has it. Inefficient players drop out. That fact that some specific player drops out means books will get to the consumers some other way.

I’m really not sure what publishers can do that will
1)eliminate the cited problems,
2)increase the profit to authors,
3)increase publishers profits, and
4)save money for the consumer.

The market is indeed eliminating problems identified in this thread, increasing author profits, and saving money for the consumer. It’s doing it with independent eBooks. So the market is responding by providing the desired situation. For fiction, I don’t think it is reasonable to expect a failed model to work in the new market environment. Nor is it reasonable for authors to expect someone to create exactly what they want.

Lots of people couldn’t figure out how they would get along without telephone operators. Half the population today doesn’t know what they are.

You’re probably right. Be interesting to see where we are ten years from now.

Honestly I can’t believe people still think Amazon is a monopoly. It’s NOT! There are plenty of competitors to Amazon, albeit not very good ones. People can choose other brick-and-mortor stores to shop from online, yes ONline, like Target, Wal-Mart and so on and even get some same-day stuff. Amazon isn’t the only one doing it.

But what Amazon *may* be a monopoly on is amazing customer service, wide variety of content and products, and an efficient and useful website that isn’t difficult to operate. It’s the google of merchandising! Is that sacrilege to say? ;)

Hugh Howey is just, in my small opinion, telling it like it really is and not sugar coating bullshit and calling it candy, the way the big 5 are trying to do and then blaming Amazon for all their misfortune and idiocy.

Except, when you read the complaints of actual customers on various consumer protection sites, you see that the bloom has been off the rose of Amazon for years. Yes, Amazon is not a monopoly and will never be, but it has amply demonstrated its lack of concern for everyone who have inconvenienced by its draconian decisions (some of which have made no sense) and its treatment of suppliers and buyers as mere cogs in its massive money machine. Every couple of years or so someone starts a class action suit, and Amazon manages to sweep each one under the rug. One can pull the wool over one’s eyes only so long. It’s a good think I looked into the retailer’s closet and discovered its skeletons early.

As a librarian, it’s fascinating to see what some of the big publishers have been doing during this shift to e-books, largely to the detriment of authors and readers. Some of their actions toward libraries, in particular, during the last couple of years is downright atrocious. For those interested, I’d strongly recommend that you check out http://www.ala.org/transforminglibraries/frequently-asked-questions-e-books-us-libraries. Mr. Howey, I’m not sure if you’re aware of Authors for Library Ebooks or if you have any interest, but here’s the link: http://www.ala.org/transforminglibraries/a4le.

Absolutely right. This doesn’t get nearly enough press, but the e-book pricing for libraries has been draconian and downright mean. Publishers operate with way too much fear.

I get the gist of the blogger’s article – he doesn’t like big publishers. He implies that they’re greedy crooks, if you define “crooks” as those who rip off authors.

And he’s right about that. Big publishers certainly rip off authors. They squeeze every nickle they can out of a book sale, leaving the author with crumbs. And small-time self-publisher/writers like myself definitely owe an enormous debt to Amazon for modernizing the publishing business – both print and digital; something traditional publishers failed to do during the century or so that they dominated the business.

All that said, I’m uncomfortable with Amazon setting book prices. Amazon controls something like 85% of ebook sales. (We don’t know the exact percentage since Amazon keeps that a secret). Jeff Bezos might wake up tomorrow and decide he wants to drop all ebook prices to $.99, so as to increase the sales of his Kindle devices. And there’s very little to prevent him from doing that.

That’s too much power. So in this case, I’ll hold my nose and root for the publishers.

There’s something very, very big to keep him from doing that.

If he drops the price to the point where authors do not make sufficient revenue to justify being on Amazon… they’ll stop being on Amazon. Because he can’t stop them leaving. This is the principal difference between Amazon and a Tradpub.

If you can afford it, you can take the publisher to court and break the contract if you can prove that it gives no consideration to you as the 2nd party. There is an out but it is more expensive than trying to negotiate a replacement, and most of the time the tradpub won’t sign off on it if there is a disadvantage. Yes, with Amazon you can leave, and I am surprised that most authors have not done so already.

To quote the ephors of Sparta, “If.”

If you can afford it.

If you can prove your case.

If the traditional publisher doesn’t use its in-house legal resources, which are essentially a fixed cost, and huge capital base to keep your case in court until you are broke, dead, or have given up.

Also, I don’t understand your last sentence. Why would they leave Amazon? The fact that they can is one of the best indicators that they do not need to, and one of, if not the, greatest motivators for Amazon to ensure that they do not want to.

Wow, this is some of the worst publisher bashing I have heard in a while. First, actually Hachette probably has lots of sale data. It also has its production and cost data. It has a lot information about what books readers like. Which is probably why they keep making popular books. Lots of publishers, like Simon & Schuster, for example, understand popularity and are always looking for popular books.

As far as manufacturers not setting prices, it is called MAP. The camera industry does this all over the world. You can also learn about it here:

http://www.huffingtonpost.com/2014/06/16/amazon-hachette-knife-wusthof_n_5492582.html

The great thing about MAP is that consumers get great products, retailers and manufacturers get to stay in business.

You know, the publishing industry, and this includes Amazon, have been exploiting authors for a long time. If I am an author, knowing my costs and knowing my market, what exactly is wrong with me being able to set the price of my work? In order to continue to make work, I need to make a profit. Why is the vendor working, in its own interest, the best organization to dictate my business model? (I certainly don’t think Amazon/Audible dictating price and then giving only 40% of the sale to an author who has to incur the production costs of an audiobook is really looking out for the customer.)

I think what would be better then bashing different players in the distribution system is to make author more business savvy in their own careers. Whether you are a traditional, hybrid, or self publisher, you need to learn to navigate the landscape. I think the race to the bottom, lowering prices of creative works so low that they have no value and are only supporting the large organizations that control distribution, is not the answer. (The argument for free is that a reader might not take a “risk” on a book. Really? Is five bucks a risk? Most risk more at Starbucks.) Especially when a book is not likely to sell millions of copies. What we have is a system that supports those at the top, whether authors or distributers, while the rest are left scraping and subsidizing that system. What is the saying, life is really equitable?

Actually, if you really want the greatest model for exploitation, look at academic publishing. Where else can you get tax payer money to fund research and then hand over the rights to that and pay the publisher to have it put in print. The publisher then charges the consumer for access to that information.

Make no mistake, both Amazon and Hachette are working in their own self interest. This is normal. I guess where you come down in this fight is where you make your money. A plague on both their houses!

I make a lot of money through traditional publishers. It hurts my bottom dollar to speak out about the industry. I agree with you that the best thing is for authors to educate themselves and treat this like a business. But I disagree about Hachette knowing how to price their e-books. They don’t. Heck, they can’t even get their royalty statements right and end up just guessing how many books they’ve sold.

If you read their stockholder report they do have the numbers. But they openly admit that they are a relatively small player in the book publishing business, and are promising better deals for quality authors if they can get them. At this point Random House Penguin is a big draw because of the merger, and Hachette is still mostly a French book publisher. That is a big difference in terms of book sales.

“Make no mistake, both Amazon and Hachette are working in their own self interest. This is normal. I guess where you come down in this fight is where you make your money. A plague on both their houses!”

Well said, sir. Authors should never make the mistake of thinking these entities have their interests at heart. on the other hand, doing business with them is a viable compromise if you go in with your eyes open.

Hugh, many of us would appreciate it if you would riff on the state of e-books and the public library. More specifically Overdrive, the big 5, and the way that the public library is getting hammered on pricing.

I’ll see if I can put some thoughts together. But having never worked in a library, it wouldn’t be a well-rounded analysis.

Mark, I always charge the same price to public libraries that I do to regular readers because with a public library more eyeballs are getting to read the one copy. Sometimes I will discount the price 10% less on average, but I don’t see that it makes a difference overall, and as I charge about half to one third of print for an ebook I am trying to maintain a decent profit margin.

Right on Hugh. Here’s what I’ve been saying. When is one of the Big 5 CEO’s going to break ranks and redo their model to be at least somewhat fair for the author? It’s obvious to me that the one that does this will be hated by the others, but will, in my opinion, be the one that wins not only the love of authors, but also profits and grows the most in the next few years.

So who will it be to break ranks first? If I’m running one of those Big 5 I’m seeing the writing on the wall and I’m going to take the opportunity to be a hero and grow my business. Of course, these guys seem to have their heads so far up their you know what I’m not sure this will ever happen.

However, a smart business person would see this and do it. Run the numbers; it would be very profitable. They could dominate if they did it. Imagine the press they’d get.

Hello, Hugh,

Great article and couldn’t agree more with you. Indiepub has single handedly save authors from being consigned to the scrapheap of tradpub derision, in the same way that Amazon has saved us from obscurity. One can bleat on about how Amazon has done this and done that but the inescapable fact remains that it has provided a global distribution platform for indie authors that would otherwise have been difficult, at least in the beginning, to obtain. I am reminded of when in the 80s the 4 track Teac came along and kicked the music biz in the ass, and we all know what happened to them.

My tiny upstart imprint, U.S. iNDiE BOOKS pays authors on an 80/20 split. They retain their rights and we cover the cost of most everything else: cover design, formatting, layout, digital conversion, publicity. It is a given in this brave new era that we must work together to publicize our work/company and, in point of fact, it’s a partnership, not a dictatorship. We do not use DRM as I view piracy as publicity. Many will disagree but digital pilfering is not going to go away, ever, so it’s either adapt or die. Our eBooks are priced at $3.99 and our paperbacks at $9.99 – we’re working on the audiobook versions and will be offering bundling to our customers once we launch, which will not be ’til September.

For me, Amazon, as I stated above, is a boon not a bust.

I also sell my books direct from my site, both books and ebooks. However, thanks to Amazon my profit margin is relatively small because Amazon has a way bigger presence on the internet. As more and more frustrated customers go looking for books that will change, and as the playing field becomes more leveled, there will be a better opportunity for everyone to sell their books at decent prices. I am patient and satisfied that I have done whatever I can, short of selling my soul. Buy from your local book store, or ask for a book there, instead of feeding the beast.

Your profit margin cannot be affected by anything Amazon does, unless you are buying server space from them. Maybe you mean your gross revenue?

People who don’t know anything about business should probably not be surprised when their businesses don’t do as well as they might hope.

My, aren’t you a happy one. All you’ve done is spout negativity. Pray tell, which publisher are you trolling for?

If self pubs actually learned how business operates they could have better discussions and not resort to accusing anyone who disagrees with them of trolling for publishers. It’s just that simple, really. The ignorance about how the publishing business operates and how business in general operates undermines most self-pubs’ comments.

What is the significance of Hatchette Livre’s ‘Anglo-Saxon presence’? Are they appealing to xenophobic investors? I’m flummoxed! Can anybody help me out?

JB (Great post, Hugh. Thank you.)

Hey, Hachette,

The 1990s just called. They were going to ask for their business plan back, but decided it was too out of date.

You can keep it.

Hugh,

Great article on the Hatchette/Amazon issue. You covered it from the author’s viewpoint without ignoring either of the ‘main’ parties involved in the forefront of the story. So much that has been said in the media ignores authors and without us, there are not books, we are a major part of the overall equation. I fully agree that we shouldn’t be too quick to let our rights go.

The “Amazon will screw you someday” language reminds me of what pimps do to control their stable. “I love you, honey. Nobody takes care of you like I do. We’ll make magic together. You need me – you’ll never make it on your own. Any other guy will just take advantage of you, and if you DO ever think of leaving me I’ma cut him AND you. Now get out there and make me some money.”

etc. It’s sort of shocking when you look at it in that light.

If that were a valid analogy.

@ Deborah Smith
It _is_ a valid analogy.

Even if it weren’t valid, it doesn’t matter. What Dave said is that “A” reminds him of “B” and he finds it shocking. Even if they’re not analogous (when in fact they are) why would it matter?

If Aristotelian logic and Platonism are the only valid forms of discourse on this blog them you’ve failed repeatedly.

A few comments from an agent;

1) Traditional publishers invest in their authors by paying advances. This is to enable the writer to concentrate on their work, not to have to keep their day job. It’s a shared risk between publisher and author that the book will sell. With self-publishing you are only compensated for your time if your book sells.

2) Traditional publishers at their best do market their books. Not every author is an extrovert capable or willing to blog, Tweet, and Facebook twice a day, as is recommended. Not every author wants to devote their precious writing time to this either. Example – Stephen King.

3) Not every author is technologically adept at the mechanics of self-publishing. We do this a lot for our house authors at our agency.

4) Not every category of ebook sells. Genre fiction, with it’s capabilities of word-of-mouth publicity and huge fan bases, is far and away most popular: fantasy, science fiction (of which Hugh is an excellent example) thrillers, romance and erotica are the winners here.

5) We must get 50 queries a week from self-published authors looking for an agent to “take them to the next level” – i.e. get them a traditional publishing deal. Why? Because nothing still says you’ve arrived more than being published by Scribner.

6) Academic marketing is still wholly the province of traditional academic publishers. No university would seriously consider ordering self-published books. This is an extremely lucrative part of publishing, often overlooked.

7) Of the vast number of ebooks published, how many truly make their authors real money? I know,you could say the same for traditional publishers, but this question is offered more to bust the bubble of self-publishing for hopeful authors. Hugh is a shining example of total success. How many of those are out there?

8) Even with his ebook success, Hugh still wanted a traditional publishing deal with Simon & Schuster. I suppose you could say that’s because they offered him a lot of money, but it extended his market to all those who still prefer physical books, plus guaranteed placement on the front tables at that anachronistic old place – Barnes & Noble.

9) Most editors at traditional publishing houses really do edit. I have a bestselling author whose editor has led her through five rewrites to get the book just right. Very few writers are as gifted as Hugh (no flattery intended – it’s true) and could sorely benefit by being professionally edited – and not by their friends and relatives. In fact, when I do get a self-published submission, I’ll always read it if the author says they’ve been professionally edited. If nothing else, it shows the writer is humble enough to see that his work can always be improved – “writing is rewriting” as they say.

10) Finally, a positive plug for self-publishing. Everyone has stories in them, and many people are good at writing them. There is such a thing as native talent. Getting published is better than not getting published and leaving your work in a drawer. It’s a way to explore the medium. If you put aside the whole economics of it – good or bad – and just concentrate on the art of writing and of getting better from book to book, that should be it’s own reward.

It’s hard to come by knowledgeable people for this subject,
however, you seem like you know what you’re talking about!
Thanks

Why all this conversation about being ripped off and nothing said about how to get more exposure for our books? Ever since the dawn of publishing, the sore point has always been: How do I get word out about my books? What you complain about, i.e. being ripped off or raw deals from the publishing industry is, in my opinion, a distraction from, not writing the next book, but thinking of ways your titles can gain more exposure.

No one routes for the evil villan who’s run off with the hero’s
beau, same applies to a site that’s been stuck in Google‘s naughty corner.

* Let you know there are things you can do to
improve y0ur ranking. Any time you create new content or share new links on your website or blog, be sure to do so by diversifying all of the link and anchor text you implement,
regardless of the market you represent or the industry you are working in.