The Amazon v. Hachette Squabble in a Nutshell

I just posted this in a slightly different form to Teleread, but I thought Scrivener fans might find it helpful. It’s what is happening behind the scenes in the Amazon v. Hachette dispute and what that means for independent writers.

The Wall Street Journal has an excellent summary of the legal mess that ebook publishing is in at present: … 1401661151

If that link hits a paywall, Google “The Antitrust Book Boomerang” to bypass it. (Handy with all paywalled WSJ stories).

Here’s how it summarizes Amazon’s POV:

That’s why independent authors will lose if Hachette loses. The core battle is over how much Hachette pays Amazon to get special treatment for its ebooks. The more Amazon is able to get, the more heavily it’ll favor (though online display) those who cough up money. Since independent authors and small publishers can’t afford that, it’d be better by far if Amazon, unable to get those payments, turned its attention to selling everyone’s ebooks equally and simply making money on that sale. The problem with that, from Amazon’s perspective, is that it makes it much harder for Amazon to leverage its huge market share to crush competition. All that promotion money it earns is what enables it to undercut the prices of much smaller online retailers.

This is the description of Apple’s much cleaner business model:

That’s a level playing field. As described by the WSJ, no money flows under the the table to Apple for making a Big Six title more visible on the iBookstore than those from Little Nobody. Everyone gets the same 30/70 split and Apple’s income is from that 30%.

Apple’s primary financial incentive is to steer customers to books that sell well, whatever their source. That’s almost certainly why Apple works quite well with Smashwords, while Amazon doesn’t. Smashwords business model demands a simple, clear, direct contract with retailers. Amazon’s model doesn’t work because Smashwords stands in the way, making it impossible for Amazon to squeeze that extra money out of authors or publishers.

Whether that WSJ description of Apple is 100% true or not, I don’t know. Right now, J. K. Rowlings’ (as Robert Galbrith) The Silkworm heads iBooks app list of “Coming Soon” and most of the others seem to be from well established authors. Is that list determined by some sort of payment small enough publishers don’t balk at it, by personal contact, between Apple staff and publisher sales teams, or by Apple’s editorial judgment that the books listed are simply likely to do well? That I don’t know.

What is apparently true is that there’s no aggressive game being played, where Apple is demanding a lot for special treatment and Hachette is refusing. If I were to guess, to the extent that money will buy placement on that iBookstore list, it’s money the publisher is spending in outside advertising, money that will drive readers to the iBookstore. It’s not money given to Apple.

Here is where the present trouble comes:

Note the “larger revenue share for discounted e-books and larger payments from publishers for promotions.”

  • The first will harm independent authors because, if Amazon can squeeze Hachette to accept lower royalties, those same lower royalties (or worse) will be extended to independent authors, much like Amazon affiliate Audible recently slashed royalties to audiobooks from independent authors.

  • The second hurts independent authors and small publishers by exclusion. If Amazon can extract large promotional payments from major publishers, then virtually the entire visual bandwidth and customer search results of Amazon’s ebook sales will be taken up servicing that lucrative revenue source.

Hachette will have to pay a lot, but it will get the online equivalent of a huge display at the entrance to a bookstore. Independent authors and small publishers will find themselves, without even being asked, stuck with the equivalent of a small, dimply lit row of shelves hidden behind a staircase. In fact, it’ll be to Amazon’s advantage to dim those lights and hide those shelves even more than it does now. The greater the contrast between paid promotion and unpaid, the more money Amazon can extract from large publishers such as Hachette.

That, in a nutshell is the situation we are in and why the results are so important for authors.

–Mike Perry

Can you provide the link to Teleread? I want to Tweet the hell out of this.