May 28, 2014 Last Updated 11:24 am

Behind the Amazon-Hachette kerfuffle lies two sides positioning for future profits

While eBook sales continue to grow in the UK, sales appear to have hit a plateau in the U.S., putting pressure on publishers

When cable TV providers withdraw a channel from their offerings due to contract negotiations with a network or producer that goes array, the cable provider usually acts proactively and immediately points a finger at the other side: they want more money, and if we give it to them we will have to raise the price of your TV service is usually the line they put out.

Cable TV providers are not very popular with the public – they don’t provide choices and they are expensive – but the public generally buys into their narrative, at least until the day of the big game, when the public starts getting nervous that they will miss the broadcast due due to the contract battle. Then the balance of power shifts to the other side. When it comes to television, content is king.

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Caught in the middle: Rowling’s new novel

But the Amazon-Hachette situation is far different. Amazon is very popular with the public, who like the choices and discounts offered. Each day, when comparing Amazon to, let’s say, Barnes & Noble, consumers see the difference in prices and service.

But where as a cable provider pulls a network completely off its system, Amazon chose a different tactic: slowing down deliveries, making it harder to buy something, while keeping it visible to consumers. This probably was a mistake.

The idea was probably to simply pressure Hachette to give in to its position – and let’s face it, it is hard to tell who is right here as neither side has presented its position to the public in anything other than vague terms. As a result, the media has gone after Amazon far more often than Hachette. Media companies probably see themselves as naturally on the side of a fellow publisher, and Amazon’s position as a growing power and near monopoly has many fellow publishers worried.

If Amazon feels they are being treated unfairly they have only themselves to blame: like other tech companies, they are hardly forthcoming with information (take Kindle sales, for instance).

This is one reason Amazon chose to finally write something about the Hachette affair on its website last night. The post feels like it was written by the lawyers, which is hardly surprising. The post features sentences like “this business interruption affects a small percentage of Amazon’s demand-weighted units” and tries to dismiss the effect it is having on consumers by insisting that only a small portion of its inventory is caught in the middle of the contract battle.

Hachette, on the other hand, is depending on other media outlets to come to its defense and have been willing to speak directly media outlets to get its side of the story out. As a result, both the NYT and LA Times wrote pieces that were clearly pointing to Amazon as the bad guy in this affair.

Meanwhile, eBook sales appear to be slowing a bit. One needs to be careful not to read too much into recent numbers, or over interpret sales numbers**, but several major publishers are seeing a slowing. Lagardère, which owns Hachette, reported that while eBook sales grew over 10 percent overall in its last quarter, the U.S, saw ” e-book sales are now stabilizing” at 34 percent of net sales.

Overall, net sales last quarter were down 6.3 percent for Lagardère Publishing, some of which can be attributed to last year’s Fifty Shades blockbuster that it now must replace.

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One element of the discussion that is often missing is the thought that we have just gone through a period of time where distributors held less power. In the past, although there was competition between distributors of print products, their hold of the industry was firm. With the rise of digital media, and the creation of digital newsstands, there was a short period of time when it felt like power had shifted to content creators – every distributor wants your content and suddenly there were new sales outlets appearing regularly.

But that moment in time was brief, and now we face a situation where print distributors are failing and digital distributors hold more power. When it comes to books Amazon is the undisputed king of retailing, a situation that only grows and has publishers seriously concerned about the fate of B&N. (One discussion on LinkedIn basically is about the what to do “now” that B&N is out of business – the thread certainly got my attention).

It is impossible to know the particulars of the negotiations between Amazon and Hachette and therefore coming to a conclusion is malpractice for any journalist. But that is not stopping reporters from weighing in and push a narrative that suits them. That is too bad as it tends to mask the real issues involved in modern book distribution: can a major publisher succeed without Amazon.com distribution, are authors getting a fair deal from publishers for eBook sales, is Amazon a partner or a competitor in book publishing, and can both sides find a happy resolution that provides producer and distributor a financial result that does not end up hurting consumers and authors?

** Like digital magazine sales, eBook sales reported often leave out sales from small, independent publishers and self-published titles – a segment that continues to grow.

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