Amazon-Hachette Book Group battle is no war between equals
Books on Monday: each Monday TNM looks at books and book publishing – either a new book on the publishing industry, a new digital book release, or industry news
The battle between Hachette Book Group (HBG) and Amazon has been getting more press than is normal for a business contract dispute in the publishing business. In most cases, the only way the media pays attention to these kinds of disputes is when it is between a TV network and a cable TV company and channels are temporarily pulled.
But the battle between Hachette and Amazon is interesting because there are so many points of view as to who is in the right and who is in the wrong, all without much real detail on the dispute available.
The commonly held view is that the battle revolves over co-op dollars, those marketing funds publishers give a retailer to help promote their products through advertising. Others believe it involves discounting, with Amazon demanding deeper discounts in order to boost its own profit margins – at time, it might be noted, when the profit margins of publishers is shrinking.
The media really started to pay attention to the dispute when books that would normally be available to ship within a day or two were suddenly out of stock, or delayed for several weeks. Hachette said that they were fulfilling book orders as usual, while Amazon has said… nothing.
An example given by The Washington Post, now owned by Amazon’s CEO Jeff Bezos, is that of T.D. Jake’s Instinct: The Power to Unleash Your Inborn Drive, a NYT bestseller. When the Post wrote about the book was no longer instantly available but “usually ships within 3 to 5 weeks.” Today, the same book say it will ship in 1 to 2 months. Amazon is clearly playing hardball and doubly down in its dispute with Hachette Book Group.
But Amazon doesn’t just own Amazon.com, of course – it has international sites and it is interesting to see that the same book may not be as delayed on other Amazon sites. In fact, on the Amazon.fr site, the book, while is short supply, will ship immediately. Why is that?
The answer may be in the fact that Hachette Book Group is owned by Hachette Livre, the largest book publishing company in France, and a wholly-owned subsidiary of Lagardère Group. The last thing Amazon wants is trouble with the French government, which would be far more likely to clamp down on Amazon that the U.S. government would. (Why is Amazon getting such preferential treatment from the U.S.? Think servers.)
While shipping delays may have gotten the attention of the press, it was the loss of discounts that got the attention of authors initially. Books that were being discounted suddenly weren’t, with the result being a slowing of sales.
But discounting did not, apparently do the trick. After all, publishers have complained for years about Amazon’s discounting, so eliminating the discounts, while effecting sales, did not effect them enough to make Hachette give in. Delays, which absolutely stop sales, so at least delay them, directly effects a publisher.
The problem publishers have is that they have few options when it comes to print editions – Apple and Google certainly can not help them. The decline of book retailers is shifting the balance of power even more in Amazon’s direction. Online book sales, which accounted for 44 percent of sales in 2012, probably reached 50 percent last year.
The growth of eBook sales, ironically, is where Amazon could face its stiffest competition. Where as Apple and Google have no interest in shipping physical books, digital media is another story.
But neither Apple nor Google see eBooks as a major profit center. But the real bad news for publishers is that neither does Amazon. This is what gives Amazon such power. While it may dominates book sales, its ambitions lie elsewhere: it wants to sell everything.
It also doesn’t help that Amazon’s attitude towards the industry is well known: it doesn’t respect it. In Amazonia, James Marcus’s profile on the company, the author describes Amazon’s distain for the NYC book publishing industry, calling publishers “antediluvian losers with rotary phones and inventory systems designed in 1968 and warehouses full of crap.” Though this is a description that dates a decade or so, it may well still be relevant and help explain the company’s willingness to go to the mattresses over discounts and marketing dollars.
What gives Amazon more power in this battle is its relationships with both consumers and authors. Amazon’s ability to offer discounted books, large catalogs and instant shipping is why consumers may shop elsewhere, but they buy on Amazon.com.
Self-publishers, too, prefer Amazon to other print book sellers for its ease of production and sales. Amazon may not offer the wizardry of the Apple iBooks Store, but it offers a better sale environment, many believe.
Just about every industry has, at some point, had its conflicts between distributors and producers. But things get complicated when the distributor is also a producer, which is the case with much of the book publishing industry today. Authors and small publishers can produce their print and eBooks directly though Amazon, and authors get a far larger piece of sales when self-publishing.
This is why, in some industries, producers have attempted to be retailers themselves – movie studios once owned theaters, and automakers owned dealerships (and Tesla wants to do this where possible).
Amazon’s purchase of BookSurge in 2005 was not the big news that buying a print company would be today. But since that purchase, Amazon has found that many retail book stores will not carry its products. This has not exactly helped the way the company sees the book industry. Amazon still sees itself as the bright, young, start-up against the dinosaurs – even when it is acting like at an old trust.