After news surfaced last week that Amazon was slow in stocking and fulfilling orders on various titles published by Hachette Book Group, it became apparent that another major publisher was in tough negotiations with the retailer over sales terms. Among the issues on the table between Amazon and HBG are details of new e-book terms, sources familiar with the matter said. Industry insiders, however, see this latest fight as symptomatic of a larger, pressing issue: the ongoing battle to maintain a diverse retail marketplace.
Hachette, along with Simon & Schuster and HarperCollins immediately settled e-book price-fixing charges with the DoJ in April 2012, and the settlements were approved in September, 2012, meaning they will expire this fall. Under the settlements, the publishers were required to allow e-book retailers to discount consumer e-book prices by as much as an aggregate 30% across a publishers' entire list for two years. With that discounting power set to expire with the settlements, the question is whether the publishers can—or want to—negotiate a return to the straight agency model they adopted in 2010.
Complicating the negotiations, Judge Denise Cote's September 2013 final order in the Apple case extended the amount of time during which Apple must retain unlimited discounting power of consumer e-book prices, and, to guard against future collusion, staggered Apple's first post-order publisher negotiations into exclusive six-month windows for each publisher. Under the terms of the order, Hachette is to be the first to be free to renegotiate a straight agency deal with Apple, 24 months after the "Effective Date" of the final judgment—which would be around mid October, 2015. That order gave Amazon leverage: in individual publisher negotiations, Amazon is surely insisting that its e-book contracts give it at least the same power to discount e-book titles as its competitor Apple has, per its court order, even though Apple has said it won't be a price-discounter.
Publishers, for the most part, believe it is necessary to hold the line with Amazon--and refuse being too generous on discount terms and co-op--in order to ensure that various retailers can remain viable. In other words, publishers see caving into Amazon's demands on terms as a direct blow to smaller retailer players, and independent bookstores.
While Amazon helped to expand the market for books when it grew its online bookstore and jump-started the e-book market with its introduction of the Kindle, many feel Amazon is now focused on driving its competitors out of business. As the head of a major house put it: “Every nickel more we give Amazon will help them accelerate their efforts to put another independent out of business.”
What is frustrating to others in the industry, is that the tactics Amazon uses to get a better deal from publishers on terms often places authors in the crosshairs. There is no doubt that the efforts used in the Amazon negotiations with HBG are aimed at getting authors to put pressure on HBG to reach an agreement, one publisher said, adding that publishers need to communicate to authors and agents about what is at stake—a diverse retail landscape.
Agents contacted by PW were generally supportive of publishers’ efforts to maintain a vibrant bookselling ecosystem...with a few caveats. If an author’s titles are to be “collateral damage,” as one agent put it, in a fight between Amazon (or another major account), this agent said they don't want to hear about slipping numbers when it the time comes to sign a new contract. This agent continued: "Hearing 'oh, the numbers, our hands are tied,' after a smack down between two corporate entities tanks an author through no fault of their own, is a fabulous way to sour author relations."
Robert Gottlieb, chairman of Trident Media Group, said this was an unsurprising turn of events as Amazon looks to seek profitability, over growth, under growing pressure from stockholders. "We're seeing [Amazon] apply pressure across the board, and not just in books," he said, referring to the fact that Amazon is now seeking better terms from seemingly all of its retail partners. Gottlieb said that, ultimately, it's best for Amazon and Hachette to handle these negotiations "quickly" and keep the consumer in mind.
Agents agreed that whatever happens between publishers and large accounts will trickle down to authors. One agent outlined the usual fallout in a fight between a publisher and Amazon. “Amazon squeezes the publisher for more favorable terms. The publisher doesn’t make as much per book. The P&L estimate is less profitable now when they plug in the higher discount numbers. So what does the publisher do? They’re not going to take the loss—they’re going to pass it on. They’re going to offer lower advances.”
Summarizing the feelings of many book publishing professionals, this agent added: "We as an industry are in the odd position of pushing Amazon away with one hand and hugging it closer with the other. We need them…but we need them to be reasonable.”