Is the Hachazon War over?

Is the Hachazon War over?

Update: according to Amazon, the answer is no. After I wrote this, I saw that Amazon has posted a statement on this issue in the Kindle forum:

Announcement Hachette/Amazon Business Interruption (at AmazonSmile: benefit a non-profit of your choice by shopping*)

Before I address the content, let me first say that I think it is a very good thing that they have said something.

Amazon often keeps things quite private…famously, they don’t release sales figures for Kindle devices or e-books (except sometimes), for example.

This

Reuters blog post by Jack Shafer

does not express a unique position:

“If Amazon thinks I don’t care about its silence, it’s wrong. I take it personally that the company doesn’t think it owes me even a half-baked explanation for why I can’t buy some books from it.”

Now that Amazon has ended that silence, what did they say?

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.”

It is an intriguingly “high road” post. Where Hachette’s public statements seemed to suggest they were baffled by what could be seen as Amazon’s bad behavior, Amazon defends Hachette:

Hachette has operated in good faith and we admire the company and its executives.”

I think Amazon makes a mistake in the post in explaining what a tiny part of their business this is. People extrapolate from the specific to the general, not the other way around. In other words, they will assume that a broader class has the same characteristics as an individual case they know well. You can tell someone that 99% of snakes never bite anyone, but if they’ve been bitten by one snake once, that’s going to matter more to them.

What solution does Amazon suggest?

 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.”

When I wrote what follows on Tuesday night, I suggested that it looked like maybe things were getting better in the Hachazon War. Amazon suggests in the post that they don’t see it that way:

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.”

Looking at it again this morning, I’m seeing about the same results as I did last night…so my optimistic thought that I was perhaps seeing an indicator that the dispute was ending is not being validated.

What follows is my original post:

===

Interestingly, some of the books which were previously affected by the Hachette/Amazon dispute appear to be unaffected today.

In this search for

Grand Central books (at AmazonSmile: benefit a non-profit of your choice by shopping*)

one of the big Hachette imprints, I’m seeing some which had been…made inconvenient, no longer having that issue.

For example, you can get Robin Roberts’ book right away now.

Now, I’m still seeing some which are affected…J.K. Rowling’s next book (writing as Robert Galbraith) still says you can sign up to be notified when it is available.

My guess is that they may be just updating everything after an agreement…let’s take a look at it again in the morning.

This has been a messy, messy disagreement, with a lot of bad public relations out of it (on both sides, but I would say I saw a lot more people not liking Amazon’s tactics).

I have expressed my unease with more than one outlet refusing to carry books when the disagreement is with the supplier or publisher of that book…as a former brick-and-mortar bookstore manager myself, I understand making a principled stand not to carry something, or an economic decision that it won’t sell…but trying to go after a business partner (and Hachette and Amazon do work together…that’s what I mean by partners, not anything legally organizational) by doing something that broadly inconveniences your customers doesn’t seem like good business to me.

Customers don’t generally understand the deep reasons why you don’t have something and someone else has it sooner and/or cheaper…they just know you don’t have it when they want it.

Hoping this is over!

New! Join hundreds of readers and try the free ILMK magazine at Flipboard!

* I am linking to the same thing at the regular Amazon site, and at AmazonSmile. When you shop at AmazonSmile, half a percent of your purchase price on eligible items goes to a non-profit you choose. It will feel just like shopping at Amazon: you’ll be using your same account. The one thing for you that is different is that you pick a non-profit the first time you go (which you can change whenever you want)…and the good feeling you’ll get. :) Shop ’til you help! :) 

This post by Bufo Calvin originally appeared in the I Love My Kindle blog. To support this or other blogs/organizations, buy  Amazon Gift Cards from a link on the site, then use those to buy your items. There will be no cost to you, and a benefit to them.

14 Responses to “Is the Hachazon War over?”

  1. Tom Semple Says:

    I’m not seeing any change yet (I’m mostly paying attention to ebook availability for pre-order and pricing, which seems to be set at publisher’s price and not discounted). Note Amazon sent out some sort of statement today explaining how difficult the negotiations were going and even suggesting people seek out other sources for books that were not immediately available at Amazon. At any given time, Amazon may run out of stock on a title as Hatchette is evidently not being as generous in providing inventory and/or Amazon is not requesting as much as they normally would. When we can pre-order ebooks and see a return to ebook discounting, I’ll believe they’ve worked things out.

    I have this (unsubstantiated) idea that perhaps Amazon wants permission to print the books it needs for its customers using its PrintSurge/CreateSpace POD infrastructure rather than having to rely on Hatchette to keep their shipments ahead of demand. In this hypothetical scenario, Amazon would be promoting the cost savings to Hatchette (smaller print runs, reduced shipping costs, zero returns, quicker payments, etc), but Hatchette is resisting loss of control that would entail. I’m probably just making this up, but am trying to somehow account for what is different about this negotiation than all the others in the past.

    • Bufo Calvin Says:

      Thanks for writing, Tom!

      I see that the Bourne Ascendancy isn’t available as a Kindle pre-order, but most of the titles are. Can you give me a couple where you can’t do it?

      • Tom Semple Says:

        “The Silkworm” (Galbraith/Rowling) for one. Pre-order only for Audible edition.

  2. rogerknights Says:

    Not likely. Wall Street J. says, “Amazon Expects Lengthy Hachette Dispute”.

    http://goo.gl/pceh08

    • Bufo Calvin Says:

      Thanks for writing, Roger!

      I’ve updated the post reflecting that…I hadn’t seen it when I wrote it.🙂

  3. rogerknights Says:

    PS: Or maybe this press release is just a bargaining ploy by Amazon–let’s hope so.

    • Bufo Calvin Says:

      Thanks for writing, Roger!

      Yes, it could be spin…and a tactic they’ve held in reserve. They did it in a way that many will see as gracious, which doesn’t help Hachette. I was amused that they pointed out how big Hachette’s parent was…I think most people think Amazon is humongous, and they aren’t going to be sympathetic for them going up against a “big guy”.

  4. Lady Galaxy Says:

    “The Night Searchers (A Sharon McCone Mystery)
    by Marcia Muller (Kindle Edition)
    Unavailable
    This item cannot be purchased as a gift at this time. (Why not?)
    Currently unavailable. We don’t know when or if this item will be back in stock.”

    I checked the Hachette book in my wish list, which was pre order status before the “war.” It’s still listed as unavailable in my wish list. When I search by book title, I find that it’s available as an audio CD but not hardback or Kindle version. At the top of the book page is a stripe of “Similar Items with Better Ratings.” But further down the page it says, “This item has not been released yet and is not eligible to be reviewed.” So they are recommending better rated books for a book that cannot be rated. Perhaps they should suggest “Catch 22” among the “better rated” books. Included in that stripe are other books by Marcia Muller but published by other publishers.

  5. Edward Boyhan Says:

    As one of your commenters noted above, Amazon has posted a response in their community forums about the Hachette dispute. In addition to the WSJ article, this has been reported on elsewhere (IMO in a somewhat less balanced fashion than on the WSJ). One interesting quote in another article was the statement that if the Hachette dispute is causing customers distress, they can always get what they want from an Amazon competitor like Barnes & Noble! I don’t know if Amazon actually said that, but the NYT article implied that they did.

    I was going to comment on the larger issue raised here anyway — so here goes (:grin). Much of the earlier reporting on this implies that Amazon is doing this in order to improve profitability in response to investor unhappiness with their recent quarterly results. While I have no inside knowledge, I would like to present a different take on what is going on.

    But first let’s put some facts out there to portray the backdrop against which this is all taking place. Amazon is usually characterized as the big bully gorilla of the retail space. In fact Walmart is eight times as big as Amazon. Amazon is about the same size as Target, Home Depot, Microsoft, and Google (and a bit less than half the size of Apple; they are about 3 times as large as Macy’s — the largest bricks & mortar department store holding company). Less than 40% of Amazon’s revenues come from “media” (books, music, video) — they don’t report books revenue separately, but it is probably less than 25% of total revenues. They are not the overpowering behemoth that the mainstream media would have you believe.

    However, in the market segments where the big 6 publishers (I guess I should start calling them the big 5 :grin) play — and given the declining fortunes of Barnes & Noble, Amazon probably does represent the lion’s share of Big 5 book distribution (probably by a large margin). Consequently, the big 5 may be looking at declining “muscle” vis a vis Amazon — particularly in the mass market segment.

    Another part of the backdrop: ebooks now are a more important part of the mass market distribution picture than paperbacks for the big 5. Also keep in mind that the non mass market segment (educational, professional, technical, religious, etc) is just as large as the mass market segment. eBooks have not made as much of an inroad here (especially not in the text book segment). These books are much more costly to produce, sell at much lower volumes and much higher prices than mass market books, and depend to some extent on cross subsidization from mass market revenues for their very existence (not all that different from the economics of the movie industry — blockbusters subsidize low volume “worthy” projects).

    While most reports characterize the Hachette negotiation as an attempt by Amazon to wrest more favorable terms out of poor little Hachette (Hachette is the smallest of the big 5 publishers), I could probably make a compelling argument — given the above — that it is Hachette pressuring Amazon for new terms to better reflect changed big 5 publishing business dynamics.

    As I said above, many see this as an attempt by Amazon to improve it’s profitability. Given the declining proportions of revenue represented by book sales over the last 9-10 quarters, might there not be better ways to increase profitability than muscling Hachette?

    In fact I think Amazon has been pretty clear that profits are not a priority for them. My take is that their focus is on double digit revenue growth while keeping free cash flow stable or increasing slightly. They can do this by either increasing sales/customer, or by increasing their customer base. To do the former things like Prime can help, but the biggest factor (IMO) is increasing product selection. It may seem that Amazon already sells just about everything, but my experience is that they have significant coverage holes. For example, I recently tried to put together a “pantry box” order, but the product selections were so thin that I could only fill half a box. In areas like groceries, and household staples they have a long way to go.

    The other way to increase revenues is to get more customers. It is here that I think the book market comes into play. Book unit sales are tremendously sensitive to price. The cost to produce an eBook can be quite low (as Amazon’s indie publishing offerings have shown). There is a lot of margin headroom that Amazon can potentially squeeze out of publishers. So if Amazon can bring book prices down substantially, unit sales will rise substantially, and more customers will turn to Amazon for book purchases. Here the priority goal is to get you as a customer (capture your credit card info, etc) once they have you as a customer however small, they can entice you with Prime, special offers, emails, etc — they can do none of this until you are an “official” customer — so selling you a few low priced books may not be a lot of revenue, but it gets you as a customer.

    One other thing that has to be weighing on publisher’s minds: if you look at the increased unit sales that reduced prices bring, an author selling through Amazon for $3.99 and a 70% royalty may actually make more than selling at $10-13 for a 15-20% royalty. I know of at least one author for whom this has proved to be the case. If this turns out to be generally true, publishers are going to face big challenges attracting talent down the road.

    • Bufo Calvin Says:

      Short reply. ..I’m at a commitment. I’ve updated the post with more comments and a link to Amazon’s statement. The whole statement is in my Flipboard magazine. Yes, they suggested going to a competitor. ..

  6. John Aga Says:

    I guess I am having a hard time getting all riled up over this dispute. As long as there have been retailers and vendors there have been disputes, with both side trying to get the best deal they can. It is not surprising that a retailer who has reached an agreement with a vendor will give that vendor better treatment than a vendor they are in conflict with. Yes for a period of time I may not get my favorite juice, cheese or book from a retailer during the dispute but that is life, not the end of life. Yes I am missing out of something important to me the consumer. However, depending on the issues I may be missing out even more if I my retailer just gives into a vendor and gives them whatever they want for the sake of avoiding any conflict or disruption to my customers. I suspect the dispute with Hatchette is more about Hatchette wanting to bring back the glory days (in their mind) of the agency model. I believe this is a fight worth having! Go Team Bezos! 🙂

    • Edward Boyhan Says:

      Yes there is an oped piece in today’s WSJ alluding to the fact that the two year moratorium imposed by the DOJ is expiring, and that Hachette wants to return to the agency model terms — not anything at all having to do with Amazon looking to improve their profitability.

      The oped is mostly a pro-Apple screed about how the DOJ was wrong to pursue them, and that the Hachette controversy (and presumably with the other big 5 tradpubs as well) is the result of the DOJ’s ill-considered lawsuit (:grin)

    • Bufo Calvin Says:

      Thanks for writing, John!

      As a former retailer myself, it’s more the way this is being done.

      Putting a banner ad on the product page to direct people to a different product? I find that one particularly galling.

      There is a simple answer: if Hachette demands on upping their cut, they are presumably doing so from everybody. You carry the books, but do so at a price that makes it reasonable…and which will likely be higher than the other Big 5 publishers, probably resulting in lower sales.

      Let the market determine it. If customers are willing to pay $20 for a Grand Central book when they can get a Random Penguin one for $9.99, so be it. If they aren’t, Hachette will want to adjust the deal.

      Let’s put a few hypothetical numbers into this.

      Random Penguin and Hachette both put a list price (the manufacturer’s suggested retail price) of $14.99 on a new novel (for e-book).

      Random Penguin (by the way, I just like calling them that…they don’t use that name) wants 50%.

      Hachette wants 70%.

      Amazon pays Random Penguin their $7.50, and sells the book for $9.99 making (minus costs of sale) $2.49.

      Amazon pays Hachette their $10.50, and adds on the same $2.49 to price it at $12.99.

      If as many units sell at $12.49 for the Hachette book as they do at $9.99 for the Random Penguin book, fine.

      This is, of course, much more complicated if other retailers are getting other deals. I think we can safely say that no other retailer would be willing to lose more money per sale than Amazon is, so they won’t be significantly undercut on consumer price.

  7. capnlouie Says:

    I was wondering if you saw the piece in Bloomberg news yesterday? Again it was more on the business than emotional.

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