News

Two US publishers turn backs on Amazon.com

At least two of the big six publishers in the US are refusing to renew contracts with Amazon.com, with the giant internet retailer said to be downplaying the promotion of their titles as a result of the dispute.

The news was first reported by Salon reporter Alexander Zaitchik, who noted in a longer piece on Amazon, that "for the first time, the 'Big Six' publishers—HarperCollins, Random House, Hachette, Simon & Schuster, Penguin and Macmillan—have refused to sign Amazon's latest annual contract". Overnight PaidContent reported that "people familiar with the situation" confirmed to its reporter that at least two of these big-six houses have refused to sign new annual contracts, but it could not confirm whether the remaining four had taken a similar stance.

The problems have come to the fore after Amazon demanded increases in 'co-op promotional fees' for e-books. According to Salon, in some cases Amazon has been asking for promotional fees "30 times their 2011 cost". Publishers Weekly reported back in August that Amazon had been asking for a higher contribution to marketing costs, and in February this year, the US distributor Independent Publishers Group saw its e-book titles removed from Amazon's website after it refused to give in to demands.

PaidContent notes that none of the 'big-six' publishers' titles have so far been removed from Amazon.com, as has happened in the past both in the US and UK, but said sources indicated that it was not promoting big-six houses' books on the site or in marketing materials "in ways it once did". The report did not name the publishers it thought had seen their books lose Amazon promotional support, but Amazon's 'Best Books of April' campaign features titles from a range of publishers, across both print and digital formats, including books from Simon & Schuster, Macmillan, Random House, and HarperCollins, but none from Penguin or the Hachette Book Group--though books from these publishers do feature in the 'category' highlights.

It is unlikely that the 'big six' publishers would have decided in concert to not sign Amazon's new contracts, particularly since these contracts would renew at different times of the year.

The 'big six' remain under investigation for possible collusion over the shift to the agency model in 2010. In a separate report, Bloomberg writes that Apple and Macmillan are "preparing to be sued" by the US Justice Department over "alleged collusion in the pricing of e-books, according to two people familiar with the matter". The government is seeking a settlement that would let Amazon and other retailers return to a wholesale model, where retailers decide what to charge customers, the people said. However, Apple and Macmillan have refused to engage in settlement talks with the Justice Department, Bloomberg said.

 

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The anti-Amazon rhetoric is getting a little ridiculous. The Salon piece above is a joke - apparently Amazon funding literary prizes is part of some nefarious plot to co-opt its enemies.

As to the main issue, surely Amazon has every right to charge what it likes for co-op. Once again, as with the IPG situation, this article (and the pieces it links to) is short on details, and is very one-sided.

Amazon is no charity. Do publishers really expect to name their price to get access to Amazon's mailing lists and to advertise on its pages? Does Amazon not have the right to set it's own prices for such marketing?

There is also one *crucial* point left out of all of this. The e-book market has grown dramatically in the last twelve months. As such, the number of people visiting the Kindle Store will have grown dramatically also. If publishers can now advertise to, say, twice as many people on Amazon's pages, shouldn't the price go up?

I would also imagine that some of this co-op is now being reserved for the titles from Amazon's own imprints. Given a reduced amount of co-op places available and vastly increased traffic to Amazon's Kindle Store, it makes perfect sense that prices would rise.

Don't you think it's important to mention that? It seems you want any excuse to write a negative article about Amazon, no matter what the facts are.

David:

Do publishers not have the right to set their own prices for their products? I guess not, huh, as of today?

Do you not ever worry that allowing a single company to have a monopoly on selling ebooks to customers, and a monopsony on buying them from publishers, will lead to abuses of customers and publishers? Isn't that why we have antitrust laws in the first place - because those abuses are actually inevitable?

Amazon is not a monopoly by any (reasonable) definition of the word. Neither can they become a monopoly because they don't have exclusive control of the supply of e-books, not can they achieve same.

In fact, I challenge you to give me one single example of a retail monopoly that wasn't created by government legislation.

P.S. You said:

"Do publishers not have the right to set their own prices for their products? I guess not, huh, as of today?"

The situation is not analogous. Amazon was willing to pay the price the publishers set. The publishers didn't have an issue with the price Amazon was willing to pay, they were protesting the discounts Amazon applied to their own customers (i.e. the readers, who get left out of all these discussions).

The EU stung BA for monopolistic practices when its share of the market was less than 40%. Amazon has, what, 80, 90% of the ebook market in the UK?

The DoJ's complaint is entirely about the readers having to pay higher prices.

Here's a question for you: do you expect their share of the UK market to rise or fall in the future?

I fully expect it to fall because of competition from Kobo (smart partnership with WHSmith), Apple (device leader in tablets, finally starting to focus on e-books), and Barnes & Noble (finally entering the market, probably in partnership with Waterstones).

Doesn't sound like a monopoly to me. In fact, it's the exact same thing that happened in the US. Amazon identified a market when most people scoffed at it (remember the guffaws when the Kindle was released in 2007?) and built up an early lead.

After proving their was money in e-books, Apple, Google, Kobo, and Barnes & Noble all entered the market in various ways and grabbed a piece of the pie.

Again, doesn't sound like a monopoly to me. Perhaps you define that word differently.

They do try to be a monopoly. If we sign up for their ebook promotions we have to give them exclusive rights to sell our ebooks and can't sell on Kobo or anywhere else. Given the huge share Amazon has in the ebook market this is a difficult decision to make, but we won't give them exclusivity. It's important for the competitors to build up.

You can argue in various ways that Amazon isn't a monopoly but it feels like one. Another example. They won't supply our books or the books of many other smaller publishers (just look at Ward Wood Publishing books on their site and compare them on Book Depository - the books are easily available via Nielsen and a major distributor). They display the books and they take the orders and keep emailing the customers to say the book isn't available yet.

Other online retailers don't do this - if they display our books they supply them. What they want to do is push us into having to sign up for Amazon Advantage. If we do this they take the orders and we supply the books. You'll need to check the figures on Amazon Advantage to see why many/most small publishers can't do this. I believe the commission they take is 60% and they can discount the books to any price they like. Again, check this and correct me if I have any of it wrong. If they discount our books, which they do in line with Book Depository, which they have now bought up, then take 60% commission, and we pay our authors royalties, plus the postage, then we aren't even left with enough money per book to print them. Depending on how much they discount the book it could be a large loss to us.

Now tell me this. If they aren't a monopoly then why do authors and publishers sign up for this and tell me they are selling the books at a loss because Amazon can make or break a book at the moment and they absolutely have to be listed there with the books actually supplied and not just displayed?

The need for competition is essential, I'm glad to hear the big 6 are opting out of the unfair agreements as the smaller publishers need this extra weight behind them, and I do believe Amazon's market share will fall if the awareness grows that they are practically a monopoly and it's doing serious damage.

@David - The discounts do affect both readers and publishers in many cases. I've said more about this in my other post. The discounts make it impossible for many publishers to sell their books on Amazon. I won't repeat the reasons why as they're clear in my previous post. Of course readers are important. They are our customers, and also our authors want to reach out to as many readers as possible. But deals from Amazon that mean smaller publishers would make a loss are not good for readers and reader choice. I'm glad the big 6 are doing this as it will help the many smaller publishing companies and help readers buy books other than the bestsellers, if that's their taste in reading.

I think there is a little bit of a knee-jerk reaction to Amazon, David, but there is some justification to that concern, as Adele says.

Amazon aren't really interested in furthering literature; it's a business, pure and simple. They are not doing this for the good of their fellow man. They aspire to monopolize the e-book market, but this is all part of capitalism and business. Publishers can't complain about them because they allowed this situation to occur anyway, and authors can't complain about them either because they have profited from Amazon, as do self-published authors.

The danger for both traditional and self-published authors is where one company doesn't so much monopolize, but dominate the market-place and forces publishers and self-publishers into disadvantageous terms that effects their small profits to increase Amazon's larger ones. Sure, that is what business is, but publishers and self-published authors need to protect themselves to ensure that no one company can dictate aggressive terms on sales.

There is a fine line here, and both Amazon and the Big Six have crossed it on numerous occasions, as they will in the future.

That's true, but the EU is insane on these sorts of things. Long term, business will be unsustainable if things do not change.

I am not surprised that there is a pushback against Amazon's policies. What I am surprised about is that the DOJ has not included Amazon in the price-fixing suit since the retailer has been price-fixing for years. I have taken the steps of removing my ebooks from Amazon's Kindle list because of them, and have set my print books to wholesale instead of direct distribution to Amazon. Thanks to Amazon's new lending program, thousands of authors are losing sales, including me. Those who have registered with it are thinking twice about it thanks to that exclusivity clause, which cripples outside sales. By capping the price of an ebook at $9.99, Amazon willfully forces sales at a loss instead of allowing market forces to lower the price for it. By the same token, it also discounts ebook prices to whatever it thinks it can get away with even if the list price is reasonably low. It also manages to get away with paying authors less than agreed to by assessing "delivery costs" and setting ebook sales on different tiers for each of its foreign markets; which means that any author who does not sell more than $10 in foreign currencies will never get paid. One time it actually waited three more days than policy allowed to pay. For this and many other reasons, I no longer work with Amazon. Apologists for Amazon should do well to look at the facts before criticising business decisions which do not advantage Amazon and grant others the right to control the sales of their own content.

The anti-Amazon rhetoric is getting a little ridiculous. The Salon piece above is a joke - apparently Amazon funding literary prizes is part of some nefarious plot to co-opt its enemies.

As to the main issue, surely Amazon has every right to charge what it likes for co-op. Once again, as with the IPG situation, this article (and the pieces it links to) is short on details, and is very one-sided.

Amazon is no charity. Do publishers really expect to name their price to get access to Amazon's mailing lists and to advertise on its pages? Does Amazon not have the right to set it's own prices for such marketing?

There is also one *crucial* point left out of all of this. The e-book market has grown dramatically in the last twelve months. As such, the number of people visiting the Kindle Store will have grown dramatically also. If publishers can now advertise to, say, twice as many people on Amazon's pages, shouldn't the price go up?

I would also imagine that some of this co-op is now being reserved for the titles from Amazon's own imprints. Given a reduced amount of co-op places available and vastly increased traffic to Amazon's Kindle Store, it makes perfect sense that prices would rise.

Don't you think it's important to mention that? It seems you want any excuse to write a negative article about Amazon, no matter what the facts are.

David:

Do publishers not have the right to set their own prices for their products? I guess not, huh, as of today?

Do you not ever worry that allowing a single company to have a monopoly on selling ebooks to customers, and a monopsony on buying them from publishers, will lead to abuses of customers and publishers? Isn't that why we have antitrust laws in the first place - because those abuses are actually inevitable?

Amazon is not a monopoly by any (reasonable) definition of the word. Neither can they become a monopoly because they don't have exclusive control of the supply of e-books, not can they achieve same.

In fact, I challenge you to give me one single example of a retail monopoly that wasn't created by government legislation.

The EU stung BA for monopolistic practices when its share of the market was less than 40%. Amazon has, what, 80, 90% of the ebook market in the UK?

Here's a question for you: do you expect their share of the UK market to rise or fall in the future?

I fully expect it to fall because of competition from Kobo (smart partnership with WHSmith), Apple (device leader in tablets, finally starting to focus on e-books), and Barnes & Noble (finally entering the market, probably in partnership with Waterstones).

Doesn't sound like a monopoly to me. In fact, it's the exact same thing that happened in the US. Amazon identified a market when most people scoffed at it (remember the guffaws when the Kindle was released in 2007?) and built up an early lead.

After proving their was money in e-books, Apple, Google, Kobo, and Barnes & Noble all entered the market in various ways and grabbed a piece of the pie.

Again, doesn't sound like a monopoly to me. Perhaps you define that word differently.

That's true, but the EU is insane on these sorts of things. Long term, business will be unsustainable if things do not change.

P.S. You said:

"Do publishers not have the right to set their own prices for their products? I guess not, huh, as of today?"

The situation is not analogous. Amazon was willing to pay the price the publishers set. The publishers didn't have an issue with the price Amazon was willing to pay, they were protesting the discounts Amazon applied to their own customers (i.e. the readers, who get left out of all these discussions).

The DoJ's complaint is entirely about the readers having to pay higher prices.

@David - The discounts do affect both readers and publishers in many cases. I've said more about this in my other post. The discounts make it impossible for many publishers to sell their books on Amazon. I won't repeat the reasons why as they're clear in my previous post. Of course readers are important. They are our customers, and also our authors want to reach out to as many readers as possible. But deals from Amazon that mean smaller publishers would make a loss are not good for readers and reader choice. I'm glad the big 6 are doing this as it will help the many smaller publishing companies and help readers buy books other than the bestsellers, if that's their taste in reading.

They do try to be a monopoly. If we sign up for their ebook promotions we have to give them exclusive rights to sell our ebooks and can't sell on Kobo or anywhere else. Given the huge share Amazon has in the ebook market this is a difficult decision to make, but we won't give them exclusivity. It's important for the competitors to build up.

You can argue in various ways that Amazon isn't a monopoly but it feels like one. Another example. They won't supply our books or the books of many other smaller publishers (just look at Ward Wood Publishing books on their site and compare them on Book Depository - the books are easily available via Nielsen and a major distributor). They display the books and they take the orders and keep emailing the customers to say the book isn't available yet.

Other online retailers don't do this - if they display our books they supply them. What they want to do is push us into having to sign up for Amazon Advantage. If we do this they take the orders and we supply the books. You'll need to check the figures on Amazon Advantage to see why many/most small publishers can't do this. I believe the commission they take is 60% and they can discount the books to any price they like. Again, check this and correct me if I have any of it wrong. If they discount our books, which they do in line with Book Depository, which they have now bought up, then take 60% commission, and we pay our authors royalties, plus the postage, then we aren't even left with enough money per book to print them. Depending on how much they discount the book it could be a large loss to us.

Now tell me this. If they aren't a monopoly then why do authors and publishers sign up for this and tell me they are selling the books at a loss because Amazon can make or break a book at the moment and they absolutely have to be listed there with the books actually supplied and not just displayed?

The need for competition is essential, I'm glad to hear the big 6 are opting out of the unfair agreements as the smaller publishers need this extra weight behind them, and I do believe Amazon's market share will fall if the awareness grows that they are practically a monopoly and it's doing serious damage.

I think there is a little bit of a knee-jerk reaction to Amazon, David, but there is some justification to that concern, as Adele says.

Amazon aren't really interested in furthering literature; it's a business, pure and simple. They are not doing this for the good of their fellow man. They aspire to monopolize the e-book market, but this is all part of capitalism and business. Publishers can't complain about them because they allowed this situation to occur anyway, and authors can't complain about them either because they have profited from Amazon, as do self-published authors.

The danger for both traditional and self-published authors is where one company doesn't so much monopolize, but dominate the market-place and forces publishers and self-publishers into disadvantageous terms that effects their small profits to increase Amazon's larger ones. Sure, that is what business is, but publishers and self-published authors need to protect themselves to ensure that no one company can dictate aggressive terms on sales.

There is a fine line here, and both Amazon and the Big Six have crossed it on numerous occasions, as they will in the future.

I am not surprised that there is a pushback against Amazon's policies. What I am surprised about is that the DOJ has not included Amazon in the price-fixing suit since the retailer has been price-fixing for years. I have taken the steps of removing my ebooks from Amazon's Kindle list because of them, and have set my print books to wholesale instead of direct distribution to Amazon. Thanks to Amazon's new lending program, thousands of authors are losing sales, including me. Those who have registered with it are thinking twice about it thanks to that exclusivity clause, which cripples outside sales. By capping the price of an ebook at $9.99, Amazon willfully forces sales at a loss instead of allowing market forces to lower the price for it. By the same token, it also discounts ebook prices to whatever it thinks it can get away with even if the list price is reasonably low. It also manages to get away with paying authors less than agreed to by assessing "delivery costs" and setting ebook sales on different tiers for each of its foreign markets; which means that any author who does not sell more than $10 in foreign currencies will never get paid. One time it actually waited three more days than policy allowed to pay. For this and many other reasons, I no longer work with Amazon. Apologists for Amazon should do well to look at the facts before criticising business decisions which do not advantage Amazon and grant others the right to control the sales of their own content.