Hachette And Amazon Fire Verbal Shots Over Contract Dispute

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When we last left retail giant Amazon and publishing giant Hachette, the companies were at an impasse over contract negotiations, resulting in some of the most egregious efforts by Amazon to bury Hachette’s titles by slowing down shipment, raising prices, and even refusing to sell certain books entirely.

Yesterday, Amazon published a blog post on its position regarding the Hachette slowdown. It is unique in that Amazon never, ever explains itself, let alone this publicly, and it’s a fascinating move by the company to defend its actions. I reproduce it here in its entirely simply because it’s such an interesting artifact from the company.

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.

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

It’s important to note that that last link is a post written by Marty Shepard of small literarily publisher The Permanent Press who notes “I always have a lingering suspicion that when one of the large publishing cartels complains they are being treated unfairly by Amazon, it’s probably good for most all of the smaller, independent presses.” What’s bad for Hachette, then, is perceived as good for small publishers.

Hachette responded with a fusillade of their own. “We will spare no effort to resume normal business relations with Amazon—which has been a great partner for years—but under terms that value appropriately for the years ahead the author’s unique role in creating books, and the publisher’s role in editing, marketing, and distributing them, at the same time that it recognizes Amazon’s importance as a retailer and innovator,” the company wrote.

It is good to see Amazon acknowledge that its business decisions significantly affect authors’ lives. For reasons of their own, Amazon has limited its customers’ ability to buy more than 5,000 Hachette titles.

Authors, with whom we at Hachette have been partners for nearly two centuries, engage in a complex and difficult mission to communicate with readers. In addition to royalties, they are concerned with audience, career, culture, education, art, entertainment, and connection. By preventing its customers from connecting with these authors’ books, Amazon indicates that it considers books to be like any other consumer good. They are not.

We will spare no effort to resume normal business relations with Amazon—which has been a great partner for years—but under terms that value appropriately for the years ahead the author’s unique role in creating books, and the publisher’s role in editing, marketing, and distributing them, at the same time that it recognizes Amazon’s importance as a retailer and innovator. Once we have reached such an agreement, we will be happy to discuss with Amazon its ideas about compensating authors for the damage its demand for improved terms may have done them, and to pass along any payments it considers appropriate.

In the meantime, we are extremely grateful for the spontaneous outpouring of support we have received both privately and publicly from authors and agents. We will continue to communicate with them promptly as this situation develops.

Why is this back and forth important? It’s unique because the companies in question aren’t suing each other. While Apple got it in the proverbial chin during the DOJ price-fixing claims, Hachette doesn’t want to bring any sort of clear lawsuit against Amazon for a simple reason: Amazon is now its primary firehose for new titles. After all, as Gizmodo points out, this means most of Hachette’s upcoming and current catalog is in limbo, with some books disappearing and others simply rising in price. But all of that means fewer best-sellers, less buzz, and a truncated marketing window.

Hachette has lots to lose. Amazon has little. It’s a lopsided battle between two entrenched opponents who, in the end, mostly brought this on themselves. It’s hard to feel bad for either party except that there are actual authors involved. Hopefully Amazon and Hachette can patch things up for their sake but I doubt they even rate in the equation.