MacAmazonGate
By Therese Walsh | February 2, 2010 |
The Intertubes were abuzz this past weekend, and not just because of Apple’s iPad. At least not directly.
Amazon.com, retaliating against Macmillan books for demanding that their ebooks be sold using an “agency model” (where Amazon takes 30% of a seller’s set price for a book) instead of continuing to allow Amazon to set low prices for those ebooks (generally at or below $9.99, even for bestsellers and new hardcovers), decided they weren’t going to support the publisher’s books at all — and took them off their site.
Yep. Gone.
Said Macmillan author John Scalzi in his post All The Many Ways Amazon So Very Failed the Weekend:
Hey, you want to know how to piss off an author? It’s easy: Keep people from buying their books. You want to know how to really piss them off? Keep people from buying their books for reasons that have nothing to do with them. And you know how to make them absolutely incandescent with rage? Keep people from buying their books for reasons that have nothing to do with them, and keep it a surprise until it happens.
In case this is news to you, here’s a MacAmazonGate recap. The CEO of Macmillan, John Sargent, issued a letter via a paid ad in a special edition of Publishers Lunch on Saturday, which summarized things pretty nicely:
This past Thursday I met with Amazon in Seattle. I gave them our proposal for new terms of sale for e books under the agency model which will become effective in early March. In addition, I told them they could stay with their old terms of sale, but that this would involve extensive and deep windowing of titles. By the time I arrived back in New York late yesterday afternoon they informed me that they were taking all our books off the Kindle site, and off Amazon. The books will continue to be available on Amazon.com through third parties.
I regret that we have reached this impasse. Amazon has been a valuable customer for a long time, and it is my great hope that they will continue to be in the very near future. They have been a great innovator in our industry, and I suspect they will continue to be for decades to come.
It is those decades that concern me now, as I am sure they concern you. In the ink-on-paper world we sell books to retailers far and wide on a business model that provides a level playing field, and allows all retailers the possibility of selling books profitably. Looking to the future and to a growing digital business, we need to establish the same sort of business model, one that encourages new devices and new stores. One that encourages healthy competition. One that is stable and rational. It also needs to insure that intellectual property can be widely available digitally at a price that is both fair to the consumer and allows those who create it and publish it to be fairly compensated.
Under the agency model, we will sell the digital editions of our books to consumers through our retailers. Our retailers will act as our agents and will take a 30% commission (the standard split today for many digital media businesses). The price will be set the price for each book individually. Our plan is to price the digital edition of most adult trade books in a price range from $14.99 to $5.99. At first release, concurrent with a hardcover, most titles will be priced between $14.99 and $12.99. E books will almost always appear day on date with the physical edition. Pricing will be dynamic over time.
The agency model would allow Amazon to make more money selling our books, not less. We would make less money in our dealings with Amazon under the new model. Our disagreement is not about short-term profitability but rather about the long-term viability and stability of the digital book market.
Amazon and Macmillan both want a healthy and vibrant future for books. We clearly do not agree on how to get there. Meanwhile, the action they chose to take last night clearly defines the importance they attribute to their view. We hold our view equally strongly. I hope you agree with us.
Amazon responded on their site:
Dear Customers:
Macmillan, one of the “big six” publishers, has clearly communicated to us that, regardless of our viewpoint, they are committed to switching to an agency model and charging $12.99 to $14.99 for e-book versions of bestsellers and most hardcover releases.
We have expressed our strong disagreement and the seriousness of our disagreement by temporarily ceasing the sale of all Macmillan titles. We want you to know that ultimately, however, we will have to capitulate and accept Macmillan’s terms because Macmillan has a monopoly over their own titles, and we will want to offer them to you even at prices we believe are needlessly high for e-books. Amazon customers will at that point decide for themselves whether they believe it’s reasonable to pay $14.99 for a bestselling e-book. We don’t believe that all of the major publishers will take the same route as Macmillan. And we know for sure that many independent presses and self-published authors will see this as an opportunity to provide attractively priced e-books as an alternative.
So where do things stand now? As of this writing, Macmillan’s books are still off Amazon–even if Amazon did say it would have to capitulate, eventually.
“Publisher Wins Fight With Amazon,” says The New York Times, and it’s true that many, many people are hailing Macmillan for standing up for themselves and taking an important step in evening out the ebook-reader playing field.
Amazon’s decision is also a victory for Apple’s chief executive, Steven P. Jobs, who first pitched the idea of selling e-books under the agency model to book publishers earlier this year. Now Apple, whose iPad tablet is due in March, can compete on fairly equal footing with Amazon.
Others, though–including Forrest Research’s James McQuivey –say, whoa, not so fast: “Amazon is the Winner.” McQuivey makes a good case, expanding on something Macmillan touched on (Amazon’s profit margin) and perhaps explaining the retailer’s sudden about-face:
1. Amazon will now make money selling Macmillan e-books. Currently, Amazon eats a few dollars on most of the e-books it sells at $9.99. By capitulating to Macmillan (and any others that might jump on this bandwagon), Amazon will now make more money than before on each of these books, because they’ll get a whopping 30% of $14.99, or nearly $5 a book.
2. Publishers will ultimately be compelled to bring e-book prices down. If Macmillan is the only publisher to move to an agency model, its e-books will be at a disadvantage compared to other publishers in the Kindle store, which is a bad place to be when you’re trying to sell to the more than 5 million people who will own a Kindle by year-end 2010. But even if the other publishers move to the same model, they’ll suddenly realize that with great (pricing) power, comes great (pricing) responsibility, and some will start to lower prices, promotionally at first and then on a more lasting basis. Because there is always a publisher who is hungrier than the rest.
3. In that future, Amazon will make more money than it does now. At that point, even if prices come back down to $9.99, Amazon will be making $3.30 from each book sold. Amazon wins in the short run and the long run. And publishers will make less money than before on each book sold.
Notice no one is writing about the Author winning in any of these scenarios. Said McQuivey:
If publishers make less off of e-books (and Amazon makes more), even at $14.99, then publishers have less to give to authors, who are increasingly reconsidering their contracts (especially authors with big followings like Steven R. Covey and Paul Coelho) in light of new promises from Amazon to offer dramatically higher royalties for authors who work directly with Amazon. Hmm, smells like round two of this fight may also go to Amazon as well.
Thoughts? Write on, all!
(Oh, and thanks to Rebecca Woodhead, who created the term MacAmazonGate but unselfishly said, “Don’t give me 100% of the credit. I want 70% of the credit so I’m iPad compliant!” Follow her on Twitter @rebeccawoodhead.)
Therese Walsh (she/her) co-founded Writer Unboxed in 2006 and is the site’s editorial director. She was the editor of WU’s only book, Author in Progress, and runs the Writer Unboxed UnConference.
Her second novel, The Moon Sisters, received starred reviews and was named one of the best books of the year by Library Journal and Book Riot.
Learn more about Therese on her website, and sign up for her newsletter to be among the first to hear about any new projects.
This is a great “debrief” of the recent kerfuffle, Therese. Thank you.
As one of the authors affected by this issue, I’ve been deeply frustrated that — like so many new authors and midlisters — my #1 revenue stream, Amazon, has ceased to exist for the time being. This effective ban is a punishment for deeds I never committed, which is beyond unreasonable. Further, this severe punishment against Macmillan wasn’t warranted. It’s bad, destructive, bullying business tactics from Amazon.
I wonder how much money Macmillan is hemorrhaging each day its products remain unavailable on Amazon. It must be staggering. If nothing else, I admire the Macmillan’s tenacity.
The end result for me is a personal revelation that Amazon clearly doesn’t care about content creators, if it ever did. But more important, it revealed that authors’ livelihoods remain ever at the mercy of market forces well beyond their control, and that our careers remain ever-threatened by yet another pressure point: the thug-like behaviors of irrational retailers.
The fate of new and midlist authors often solely hinges on book sales — it’s one of the few tangible ways we justify the worth of our work, as well as the investment a publisher makes in giving us advances, and incurring cost to manufacture, distribute and promote our books. The more books we sell, the better we look … and the more likely we’ll be given opportunities to sell new books.
I imagine that many new/midlist Macmillan authors like me probably rely heavily on Amazon’s market presence and low prices to help generate those sales. But in this current impasse, authors cannot generate those sales. Our very careers are threatened. How can my book be a success in the eyes of my publisher (whom I’m desperate to please) when my sales from my #1 revenue stream have plummeted to zero?
This is deeply distressing, and authors’ absolute helplessness in the situation compounds that distress. I’ve lately been thinking hard about how authors can prevent such helplessness by embracing innovative and disruptive content creation and business models.
If authors crave to ever truly control their creative fates, they should all be pondering this right now.
.-= J.C. Hutchins´s last blog ..A Call For YOUR Creativity: Crowdsourcing Kilroy! =-.
Lol to Rebecca Woodhead’s 70% remark.
And SIGH to all this mess. I don’t even know what to say about it, really.
.-= Kristan´s last blog ..Loving, and writing, in spite of rejection =-.
Thanks for the recap! I missed all this somehow.
As a business woman/consultant who is also a writer I typically am pushing authors – once they are done creating of course – to think about their work in terms of products and markets, etc. But even for me, this makes me so sad. We want to create art and people want the art. Why does it have to be so contentious? Sigh.
.-= Rebecca´s last blog ..The Long And Winding Road =-.
Thanks for this recap, Therese. Great post and a great synthesis. I wrote a more ‘me’ post about my “Nightmare on Amazon Street” as a MacMillan/St. Martin’s Press just- released author. It feels like someone tripped me just as I started a race. https://www.randysusanmeyers.com/blog/
This is all about who owns the distribution model, and until now, Amazon did. Apple is threatening that model with the iPad. But instead of figuring out an equitable solution, Amazon knee-jerked it. They look like bullies because who really believes they are doing it “just for the customer?” The market will determine what people are willing to pay for a downloaded book, and instead of warring with teh content provider (MacMillan) Amazon should have backed off and continued to negotiate, imo.
It feels like someone tripped me just as I started a race.
Randy, it’s a bad situation, but I can imagine how you must feel. I hope it resolves soonest!
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I really believe that the authors will be most hurt by the agency model pushed by APPLE and eagerly embraced by MacMillan and then the others. You authors seem to feel that Amazon is the villain here since it de-listed your books for a week. But, you were getting more from the Amazon book sales at $9.99, then you will under the new model.
Read James McQuivey again (listed above), again. He is clear that the market will force a reduction of the $14.99 ebook price, down very close to the “dreaded” $9.99. Now, though, your publisher will get only about $7.00. from that sale rather then before, Amazon was paying them closer to $10.00 +. And guess who’s pocket that will come out of- yours!!
For mid-level authors not getting large advances, the publishers will sacrifice your royalties for their profits (Madison Avenue addresses, for example).
You would do better going with Amazon’s Digital text Platform (self-publishing) for 70% of the purchase price yourself. Don’t buy John Sargent’s drivel. His goal is to end ebooks, which won’t happen. But in the damage, the authors will get hurt.
Once more- Apple is NOT your friend. Look what Steve Jobs did to the music industry. He has never ever published a book, and he has forced a whole re-structuring of the publishing industry. You are getting in bed with the wolf, and he will eat your lunch.
You’ve been dealing with Amazon for years (mostly, but not entirely, to the good). They will be in books for the long run to your benefit, NOT Apple.
Be careful which horse you bet on.
AND, don’t anger readers/customers by supporting higher prices. You’ll be singed by the back-blast!