Amazon Defends Its Hachette Negotiating Tactics, Suggests Hachette Customers Order Elsewhere

Amazon issued a statement on Tuesday explaining the tactics the company is using to get better ebook terms from publisher Hachette Group, and defending those tactics as normal business practices. Amazon also said that customers who need Hachette titles on a timely basis should order from one of its competitors.

Amazon and the Publishing World

Amazon, the Big Five Publishers (and Apple)

The move of issuing a statement such as this is unusual for the retailing giant. Similar to Apple, Amazon has long employed a strategy of seldom commenting on much of anything. To go so far as to both explain itself and defend its actions is even more rare, and it might be a reaction to the intense criticism for the company about its war with Hachette.

In addition to some mainstream coverage—most notably at The New York Times—Authors at both Hachette and other publishers have cried foul, in part because many have seen their sales plummet. You don't have to be Nostradamus to see that your books will be in the cross hairs next if Amazon gets what it wants from Hachette.

The New York Times first broke the story that Amazon was encouraging customers to buy books by other authors when viewing Hachette-published titles on Amazon. The retailer had also lowered the discounts it offered on Hachette books and was telling customers that books labeled as in-stock would take weeks to deliver. More recently, Amazon stopped taking pre-orders on many Hachette-published books, and removed some ordering options, as well.

All of has happened because Amazon's distribution deal with Hachette was up for renewal, and Amazon wanted better terms on Kindle ebooks. The tactics have been described as bully tactics—including by me—because Amazon owns a massive share of the book market. That share was recently ensured by the U.S. Department of Justice's witch hunt against Apple for shifting the ebook market to an agency model.

For its part, Amazon owned up to many of the charges leveled by The New York Times and complained about by authors. The company said that it was ordering less "safety stock" of Hachette titles and that it had stopped taking preorders for new titles.

The company said that, "Negotiating for acceptable terms is an essential business practice that is critical to keeping service and value high for customers in the medium and long term." The statement did not address charges that it was actively encouraging customers to buy other books or that it was artificially making Hachette titles appear more expensive by discounting them less.

On a positive, note, Amazon claimed that it offered to fund 50 percent of an "author pool - to be allocated by Hachette - to mitigate the impact of this dispute on author royalties." The company said it would do so if Hachette funded the other 50 percent, and said that it had done so with Macmillan when Amazon removed the buy button for that company's titles in a similar negotiation.

Next: The One about the Small Publisher Who Defended Amazon and Amazon's Statement

Part 2 - The One about the Small Publisher Who Defended Amazon and Amazon's Statement

 

The most interesting passage came at the end of the statement, where Amazon said:

This topic has generated a variety of coverage, presumably in part because the negotiation is with a book publisher instead of a supplier of a different type of product. Some of the coverage has expressed a relatively narrow point of view. Here is one post that offers a wider perspective.

http://www.thecockeyedpessimist.blogspot.com/2014/05/whos-afraid-of-amazoncom.html

Amazon is essentially crying foul because coverage of this topic hasn't favored Amazon. It's worded professionally and well, but...you know, cry me a river.

The piece Amazon linked to was written by Martin Shepard, co-publisher of The Permanent Press, on his personal blog, The Cockeyed Pessismist. Mr. Shepard lays out an impassioned defense of Amazon with sharp criticism of The New York Times's coverage as shoddy journalism that is not "Fit to Print," a reference to the newspaper's motto.

Mr. Shepard's zeal for Amazon seems genuine, and he makes some great points about how beneficial Amazon has been for small publishers like his company. He didn't mention how other small publishers distributed by Hachette are in danger of going out of business.

In my mind, however, what's wrong with his piece is that he fails to note Amazon's near, if not outright, monopoly power in the book industry, something that casts Amazon's actions in a different light from any other retailer. This is part of any valid discussion on what transpires between Amazon and any publisher, including the thousands of small and tiny publishers who sell books through Amazon.

Amazon characterized the piece as offering "a wider perspective," but it would be more accurate to say that it offers a different, but still very narrow perspective.

Amazon's statement in full:

We are currently buying less (print) inventory and "safety stock" on titles from the publisher, Hachette, than we ordinarily do, and are no longer taking pre-orders on titles whose publication dates are in the future. Instead, customers can order new titles when their publication date arrives. For titles with no stock on hand, customers can still place an order at which time we order the inventory from Hachette -- availability on those titles is dependent on how long it takes Hachette to fill the orders we place. Once the inventory arrives, we ship it to the customer promptly. These changes are related to the contract and terms between Hachette and Amazon.

At Amazon, we do business with more than 70,000 suppliers, including thousands of publishers. One of our important suppliers is Hachette, which is part of a $10 billion media conglomerate. Unfortunately, despite much work from both sides, we have been unable to reach mutually-acceptable agreement on terms. Hachette has operated in good faith and we admire the company and its executives. Nevertheless, the two companies have so far failed to find a solution. Even more unfortunate, though we remain hopeful and are working hard to come to a resolution as soon as possible, we are not optimistic that this will be resolved soon.

Negotiating with suppliers for equitable terms and making stocking and assortment decisions based on those terms is one of a bookseller's, or any retailer's, most important jobs. Suppliers get to decide the terms under which they are willing to sell to a retailer. It's reciprocally the right of a retailer to determine whether the terms on offer are acceptable and to stock items accordingly. A retailer can feature a supplier's items in its advertising and promotional circulars, "stack it high" in the front of the store, keep small quantities on hand in the back aisle, or not carry the item at all, and bookstores and other retailers do these every day. When we negotiate with suppliers, we are doing so on behalf of customers. Negotiating for acceptable terms is an essential business practice that is critical to keeping service and value high for customers in the medium and long term.

A word about proportion: this business interruption affects a small percentage of Amazon's demand-weighted units. If you order 1,000 items from Amazon, 989 will be unaffected by this interruption. If you do need one of the affected titles quickly, we regret the inconvenience and encourage you to purchase a new or used version from one of our third-party sellers or from one of our competitors.

We also take seriously the impact it has when, however infrequently, such a business interruption affects authors. We've offered to Hachette to fund 50% of an author pool - to be allocated by Hachette - to mitigate the impact of this dispute on author royalties, if Hachette funds the other 50%. We did this with the publisher Macmillan some years ago. We hope Hachette takes us up on it.

This topic has generated a variety of coverage, presumably in part because the negotiation is with a book publisher instead of a supplier of a different type of product. Some of the coverage has expressed a relatively narrow point of view. Here is one post that offers a wider perspective.

 

Thank you.