Amazon Offers Authors 100% Of Ebook Sales To Get Them To Recognize Its Fight With Hachette Isn't About Screwing Authors

from the wake-up-authors dept

Last week, we had a post from author Barry Eisler, responding to a bunch of other authors who were attacking Amazon over its current contract dispute with Hachette. As Eisler noted, nearly all of their complaints were either misleading or didn't make sense. There's no doubt that there's a contract dispute going on, but claims of "boycotts" and other attacks seem really directed to people misunderstanding what's going on in the dispute -- and thus, those authors are defending the traditional gatekeeper publishing model in which Hachette gets to keep nearly all of the proceeds of book sales. Of course, the authors' main "complaint" was that they felt like they were being used as pawns in the fight, and that the dispute might impact their sales directly.

To show how bogus that claim is, Amazon today went directly to Hachette authors with a proposal Amazon claims Hachette rejected: offering to give authors 100% of the proceeds on ebook sales.
The letter extends and develops a proposal Amazon made earlier in the dispute, which was dismissed by Hachette. It now offers Hachette authors “100 percent of the sales price of every Hachette e-book we sell.” Amazon also offered to suspend all its shipping delays and price adjustments, which it put in place in an effort to bend Hachette to its will.
Of course, defenders of the publishers insist that this is all a ploy for Amazon in its never-ending mission to take over the world:
Roxana Robinson, president of the Authors Guild, dismissed the proposal.

“If Amazon wants to have a constructive conversation about this, we’re ready to have one at any time,” she said in an email. “But this seems like a short-term solution that encourages authors to take sides against their publishers. It doesn’t get authors out of the middle of this – we’re still in the middle. Our books are at the center of this struggle.”
Once again, it's confusing to figure out which side the Authors Guild is really on here. Since we started covering that organization, it appears that it sides 100% with the publishers and rarely sides with what matters for the vast majority of authors.

The whole situation is quite bizarre when you think about it. At the same time you have Hachette and the Authors Guild insisting that they're trying to "protect the book" by keeping book prices artificially high, they're loudly complaining that Amazon won't discount their books. Notice some hypocrisy here? If you want to understand why this is happening, the best explanation I've seen so far comes from Hugh Howey, one of the super successful self-published authors who is firmly in Amazon's camp on this fight. Writing in the Guardian, he notes the perverse incentives of the traditional publishing world on Amazon:
Under the previous wholesale model, publishers might price an ebook at $14.99, and with the 50% discount, an online retailer like Amazon was able to discount to a more reasonable $9.99 to serve customers. Customers who expect digital books to cost less than the paperbacks with which they were familiar. With the new discount rate, Amazon stood to lose money by offering that same price. Publishers, meanwhile, were less than enthusiastic about lowering the offered wholesale discount.

Publishers like Hachette now found themselves in enviable territory. They could price ebooks high – protecting their relationship with high-street booksellers – and rely on Amazon to cut their own margin to the bone in order to move quantities of ebooks. This new situation created the bizarre scenario where authors who once complained about Amazon's discounting are now complaining that they aren't discounting enough. And during these negotiations, parties from Hachette's side are accusing Amazon of raising prices by offering something close to what the publisher itself is setting.

In a presentation to investors, Hachette has stated as a primary goal the control of ebook pricing. Breaking their habitual silence just last week, a representative from Amazon confirmed that the sticking point in these negotiations is indeed price. So both sides have confirmed what's at stake. History would indicate that Amazon thinks ebooks should cost no more than $9.99. Their agreement with self-published authors supports this, as the royalty rate paid halves if the price exceeds this amount. Hachette, meanwhile, would very much prefer to offer ebooks at $14.99 or more and leave any discounting up to Amazon (or any pain up to their customers).
In other words, everyone really knows that ebooks should be priced lower, but the old publishing world wants to be able to set much higher prices, forcing Amazon to basically make no money at all on pricing the books lower. Given this scenario, it actually makes sense for Amazon to then make this offer to authors directly: it will hand over 100% of ebook revenue, because under Hachette's proposal, Amazon would make no money at all (or even lose money) on ebook sales anyway.
Update: Adding the text of the letter:
Dear XX,

I wanted to ask your opinion about an idea we’ve had that would take authors out of the middle of the Hachette-Amazon dispute (actually it would be a big windfall for authors) and would motivate both Hachette and Amazon to work faster to resolve the situation.

Our first choice would be to resolve a dispute like this through discussion only. We tried that already. We reached out to Hachette for the first time to discuss terms at the beginning of January for our contract which terminated in March. We heard nothing from them for three full months. We extended the contract into April under existing terms. Still nothing. In fact we got no conversation at all from Hachette until we started reducing our on-hand print inventory and reducing the discounts we offer customers off their list prices. Even since then, weeks have gone by while we waited for them to get back to us. After our last proposal to them on June 5th, they waited a week to respond at all, promising a counteroffer the following week. We are still waiting a month later.

We agree that authors are caught in the middle while these negotiations drag on, and we’re particularly sensitive to the effect on debut and midlist authors. But Hachette’s unresponsiveness and unwillingness to talk until we took action put us in this position, and unless Hachette dramatically changes their negotiating tempo, this is going to take a really long time.

Here’s what we’re thinking of proposing to them:
  • If Hachette agrees, for as long as this dispute lasts, Hachette authors would get 100% of the sales price of every Hachette e-book we sell. Both Amazon and Hachette would forego all revenue and profit from the sale of every e-book until an agreement is reached.
  • Amazon would also return to normal levels of on-hand print inventory, return to normal pricing in all formats, and for books that haven’t gone on sale yet, reinstate pre-orders.
Here’s an example: if we sell a book at $9.99, the author would get the full $9.99, many multiples of what they would normally get. We can begin implementing this arrangement in 72 hours if Hachette agrees.

We haven’t sent this offer to Hachette yet — we’re sending this to a few authors and agents to get feedback first.

What do you think? Would this be helpful, especially for midlist and debut authors?

Can we talk on the phone later today or tomorrow once you’ve had a chance to digest?

Thanks and look forward to talking.

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