Stratego

I’m developing a little theory on publishing. Here’s how it goes: In 2009, book publishers, fresh from watching the music industry and their newspaper brethren get hammered when digital competition struck hard and fast, decided they needed a different approach. Part of that was the collusion for Agency pricing, essentially to fix retail prices of ebooks on the high side and slow adoption to protect their brick-and-mortar print interests. Most people believe that was the extent of it.

But consider, at the same time they colluded on Agency, more restrictive contracts, 25% of net ebook royalties and ebook rights grabs on old contracts proliferated across the entire industry. Many people presume the publishers wanted to preserve brick-and-mortar for the long haul and more than a few opinion pieces were written calling them out for futility and lack of vision. After all, ebooks were a problem for physical stores but the real problem was online commerce. Every without ebooks, sales were moving away from stores to the internet. Borders died partially because of this.

But what if this isn’t about the long term future of physical bookstore sales at all? What if the publishers were playing a different game entirely? Other creative industries suffered when digital adoption grew at rates that decimated their physical business while not yet bringing in the profits to counteract that. Publishers have acted, in explicit and seeming concert, to both slow digital adoption (not stop it, mind you) and to shore up better margins on ebooks. This point, that much of those profits are coming directly out of authors’ pay, seems to be largely ignored in press reports touting publishers’ higher profits, by the way.

In this theory, the publishers knew full well ebooks were potentially far more profitable, despite their illogical protestations of that point, and they knew that the brick-and-mortar segment was inevitably going to continue to shrink in importance. The point may not be to save the physical market but to slow it’s death to a manageable pace, while locking in increased profits from the digital growth on the other side.

We’ve already reached two interesting points that may support this. One, more books are sold online now that in physical stores, a rate that keeps growing steadily in online commerce’s favor. And the report from ALCS about the UK market tells the story of writers having their incomes squeezed while their very publishers are increasing margins and improving profits. It my theory, this wouldn’t be accidental or an unintended consequence, but absolutely intentional.

In a few years, if everything goes according to plan, we’ll reach a tipping point where online sales and the higher margins that go with them will exceed any justification to slow their adoption to protect dwindling physical store sales. At that point, these protective actions (prices too high, DRM, maybe even Agency itself) will be systematically abandoned. But by then, they’ll have most all of their writers locked into low paying ebook contracts that will look even more egregious after they shed large portions of the expense of serving brick-and-mortar stores. They’ll also have effectively wiped out every possibility of reversion except the 35 year rule (and just wait till Mickey Mouse is faced with public domain in a couple years. I can almost guarantee that’ll either be eliminated or pushed back to 70 years or so). Many of their writers will have non-competes that encumber their ability to fully leave them behind, if at all. And they’ll have locked down ebook rights on their entire backlist of titles, even in contracts signed decades before this market was even someone’s random fever dream.

In this model, they’re not protecting print or defending the culture of print, they’re transitioning away from it, and in the process grabbing a much larger slice of the pie from authors than the already too damn large one they take.

Am I right? Who knows? But if we’re going to sit around tossing doomsday scenarios for writers under Amazon’s bootheels, there’s one hanging right there in plain view, possibly being perpetuated by the very entities many of their supporters think are nurturing them. And, given that ALCS report, looks like may actually be happening right now.

Choose your friends wisely, but choose your enemies even more so.

Dan Meadows is a writer living on the banks of the Chesapeake Bay. Follow him on Twitter @watershedchron

Pissing Contests Can Be Fun, Just Not Into The Wind

Here’s something I’ve been wondering lately. Amazon’s a monopoly, right, so we’re told? They had a 90% market share in ebooks 5 years ago. Today, estimates of their market share in ebooks range from 55-65% or so. Do monopolies typically lose 25-35% of their market share over 5 year periods? Yet we talk about Amazon today as if they’re more dominant than ever. Maybe they are, but something about that doesn’t seem quite right. It looks to me like that 90% was, as the sports analytics guys like to say, the result of a small sample size (very young market and they were the only player going all out after it). But that would mean they’re not actually a monopoly but a highly competitive company who grabbed a commanding lead in the market. And a commanding lead is a far cry from a dominant monopoly. Just ask Barnes & Noble.

What I find interesting is this assumption that Amazon will become abhorrent, they’ll destroy publishing, tear the fabric of time and space, and we’ll all suffer with no recourse forever. Anybody actually watching the lifespans of these tech companies? The pace of everything has sped up. We’re in a world where an unknown startup can become a beast in a few short years. But it’s also one where the beasts can fall on their faces just as fast. Nobody is afraid of Microsoft’s market power anymore. I hear Yahoo is getting into TV shows these days. In fact, that’s the first thing I’ve heard about Yahoo in months. AOL still exists, apparently. At least they pop up now and then to piss away money on some new acquisition they’ll proceed to run into the ground. When was the last time Google did something truly innovative that didn’t turn out to be all hype? Even Apple just dropped billions on a questionably-profitable headphone maker to get their hands on a flailing music store and seems more interested in protecting what they have rather than continuing the innovation they earned it with in the first place.

I think this reflects a bit of the problematic thinking that’s infecting the industry. Self published writers aren’t real writers or they’re disgruntled trad rejects or they’re a substandard slush pile gumming things up with bargain basement prices. They don’t truly believe any sizable numbers of indies can produce work as professionally or more so than they can. It’s unthinkable to them. They have the same problem with Amazon. They don’t understand where Amazon came from and they have no idea how to deal with them. I feel extremely safe in saying that when real competition comes to Amazon, and it inevitably will, it’ll be another publishing outsider that brings it, someone who can and will find weaknesses in Amazon to exploit when they appear. I’m also certain that publishers won’t like them any more than Amazon, either. Publishers would clearly rather force all retailers into the party line that’s escorting B&N on a slow walk to the bankruptcy judge. They don’t really want genuine competition with Amazon to emerge because what that requires isn’t going to bring back the good old days for them, either.

I watched (most) of that Amazon hate panel at the New York Public Library the other day. The most telling comment of all, I think, was when one of the panelists said that tech companies needed to learn manners. By that, I took it to mean why aren’t they acting like everyone else? Don’t they know they’re supposed to be making as much as they can squeeze out of readers, not us? And it’s just rude of them to undermine our leverage with writers by giving them real options and a sizable cut. Where are your manners? Get with the program, already!

Which brings me to the dueling petitions circulating, one from traditionally published writers “not taking sides” by bashing the hell outta Amazon and a response to that by independent writers. The former was ridiculous and embarassing, I thought, and it showcases either the ignorance of these authors to actual business dealings above their station or is simply a disingenuous attack designed to protect their personal paychecks. Either way, I thought it was unseemly. How can you claim to not be involved in the dispute in a document specifically designed to inject yourself into the matter and pressure one side over the other? It’s dishonest.

The latter petition, while I agree with much of what it said, did come off a bit preachy to me. I totally understand the desire to counter what you (and I) see as the slanted misinformation and fear-mongering going on out there. It’s hard to understate the freedom writers have now. We can literally do anything we can think up, produce it and distribute it to a wider audience than ever before and not have to sell our souls, rights and most of the proceeds to a middleman. It’s so obviously beneficial that I often wonder how there are writers who don’t see this or worse yet, seem to actually be afraid of it. We now live in a world where it’s possible to make money directly on our copyrights without being forced to give them up in perpetuity. That’s a huge development, and something that was very nearly impossible to consider a decade ago.

It probably shouldn’t be surprising that some writers haven’t grasped the full implications of this yet. It’s a major change in conditions that had been static for decades, if not longer. How much longer they can continue to ignore it is the question. I suspect many of these writers have the unfaithful girlfriend or boyfriend problem, with their publisher playing the roll of significant other. They suspect he or she is cheating on them, have bits and pieces of circumstantial evidence that something isn’t right but they don’t want to admit it to themselves because admitting it means a necessary major upheaval in their lives. So they rationalize away the concerns staring them right in the face. Given the sometimes irrational and conflicting nature of that petition, and other similar sentiments I’ve seen recently, I suspect many are at the point where they’re going to come home from work early one day soon to find him/her in bed with someone else and not be able to avoid that particular elephant in the room any longer.

As far as the indie petition goes, while I like and appreciate the sentiment behind it, I just don’t think it needed to be done. I’m all for calling out bullshit, but to do it in a similar format with a bit of a rah rah attitude, even if it’s totally justified, gives the people who ought to be paying attention a ready excuse to dismiss it. To rationalize away finding a pair of panties that don’t belong to you under the passenger seat of your boyfriend’s car, as it were. “They must be his sister’s.” Uh huh. The original letter was a back patting exercise, preaching to a choir that’s not currently going to be convinced of anything other than what they already believe. Unfortunately, I think the indie petition is the same sort of thing. My opinion is who gives a damn what those other authors think? Let ‘em look foolish, let ‘em slap their names on something that’s fairly easily refuted and, frankly, not particularly well written. When the entity you’re yelling at is more responsible for making you money than the one you’re giving most of the proceeds, you’re in for a sizable wake up call in short order. I’m not convinced slapping them in the face with their own format will do anything but make them more entrenched in their beliefs, no matter how well intentioned or how clearly we see they’re setting themselves up to be burned.

You can’t stop people from making their own mistakes. Our copyrights have direct benefits to us now, something they essentially never had before, and that alone makes them more valuable than ever. Yet royalty rates are anywhere from “meh” to outright terrible. All reports also indicate advances are shrinking as well. At what point does it become obvious that what you’re giving up far exceeds what you’re getting in return? The man who hired me at my very first job in publishing used to talk about the law of diminishing returns all the time. He was usually talking about circulation, the point where the costs of increasing it would outweigh the return you got from it. That’s where we’re heading with publishers, I think. The cost of doing business with them is outweighing the return. A much larger cut of the proceeds should be the very least we should expect from publishers but we’re getting the opposite with threats of even harsher cuts in the future. And by much larger, I’m talking double or triple what they pay now, at least. And none of this lifetime copyright, or non compete, or discount clause nonsense anymore. It’s not my or any writers’ job to leave money and control of my career on the table to lifeline your business infrastructure because you can’t afford to pay the freight. Writers’ offer more value than ever, Amazon’s retail platform offers more value than ever. Publishers’ problem is that they’re one of the few in the loop who’s bringing less value today than a decade ago. Basic rules of business would dictate that when you become less valuable, you can no longer command as big a paycheck. What’s at issue here is that publishers and some of the writers still being paid by them as they always have, don’t truly understand their value has fallen off and continues to do so. Look no further than the fact that ebook profits (built on low standard royalties to authors, btw) are the only thing keeping many of these publishers out of the red. If the traditional business model is so valuable, then why are your profits basically gone without the contributions of the non-traditional?

Writers on the whole were never really compensated for giving up our rights anyway. For most, they had no value at all without a publisher, and you giving them up was a required condition. Writers were paid based on sales. The rights were a necessary toll basically sacrificed for access to the market. The value of those rights to us have increased while the rewards of signing them over have gotten smaller. Yelling at Amazon isn’t going to change that. Do you think if Hatchette gets higher prices, you’ll see any more of that money? Will they up standard royalties? Chances are you’re on a contract where the more successful your book is, the more money you’ve left on the table. Go back and do the math. If Hatchette gets what it wants and mitigates the competitive impact of Amazon, do you think that makes them more or less likely to improve writer compensation? And given the nature of these publishers, generally working in lockstep, what one settles into, they all likely will shortly thereafter.

The question in my mind isn’t why aren’t indies rooting for Hatchette, it’s why aren’t trad writers rooting for Amazon? (Well, the question after “why should we be rooting for either?” anyway. What we should be doing is advocating for the best possible treatment from all sides.) I’ll tell you why, because Hatchette owns your rights. If they run themselves into the ground, you’re contractually obligated to eat a face full of dirt with them. If Amazon (or any other retailer) destroys themselves, I just move on to another one. Amazon doesn’t own me. Hatchette (and other publishers) do own you. If you can’t see the inherent long-term danger in that, and you obviously can or else you wouldn’t be bitching at Amazon rather than your own publisher, then no petition, no logic, no facts, no amount of fisking is going to help you.

By the way, your letter basically demands Amazon cut a deal immediately and go back to discounting your books. Do you realize it’s highly likely Hatchette wants the ability to restrict Amazon’s discounting as part of any kind of agreement? How’s do you expect that’ll work out for you? “You should settle so you can go back to doing what a settlement with my own publisher will prevent you from doing.” Good luck with that.

One part of the indie petition I liked very much was the thank you to readers. We should all do that far more loudly and often than we do. But readers don’t care about this conflict. Most don’t know Hatchette from Heineken. They do know Amazon and seem to like them in overwhelming numbers. No petition from a handful of best selling and/or famous authors is going to change that, especially when the argument behind it is higher prices for them. Supporting culture and literature against cold corporate business sounds great until you say, “Oh, and all our ebooks are going to be $12.99 from now on.” Good luck with that, too.

I believe very much in the “look where your bread is buttered” school of thought. Amazon offers a fair retail platform at a fair rate. Publishers may offer you the butter but you have to lease the bread from them. And the knife you need to spread it, well, that’ll cost extra, too. Maybe Amazon ends up like them someday, but that day is not today. And it also discounts the idea that, hey, maybe they won’t because, as a tech company, they know better than most the second they do, someone else is going to pounce. “We want competition by preventing the circumstances where competition can actually develop” is not a viable plan.

Everyone is ultimately going to make the choices they’re going to make, and they’re going to face the consequences of those choices; good, bad or some of both. I’m not sure dragging readers into the middle of a pissing contest between two groups who really should be in agreement on most things furthers anyone’s ends, regardless of who started it. And that’s what I think about that.

Dan Meadows is a writer living on the banks of the Chesapeake Bay. Follow him on Twitter @watershedchron

A Wolf in Agency Clothing Is Still Vertical Price Fixing

First off, I’m not a lawyer but with all the talk about monopolies, abuse of market power and antitrust violations going on in publishing these past few years, I thought I’d dig a little into the laws themselves and see if I can make sense of what’s what. Again, not a lawyer. This is an enormously complicated and often contradictory issue that’s bounced back and forth between various stages of legality and illegality, the enforcement of such dictated by a convoluted mess of legislation and court precedent. So here goes, down the rabbit hole as I best understand it.

Agency Pricing is basically a Resale Price Maintenance agreement where, in this case, the producers (publishers) want to take control of the pricing of their products at retail (Amazon, etc). It’s vertical price fixing because it occurs between layers of the chain, suppliers controlling prices at the retail level. It was banned in a Supreme Court decision in 1911, as the ruling stated, because these types of agreements are “economically indistinguishable from horizontal price fixing by a cartel.” Horizontal price fixing being sellers fixing prices amongst themselves to their collective benefit.

A series of laws and exemptions to The Sherman Antitrust Act were passed in the ’30s that allowed resale price maintenance agreements to again be legal, but that ended poorly as the results were so unpopular, they were later repealed. These agreements were then per se illegal (inherently illegal) from about 1980 until 2007 when another Supreme Court decision found that they could be allowed under the Rule of Reason and the circumstances surrounding their use are considered. Basically, the business justification and resulting economic consequences play a role in determining if they’re allowed, not simply outright banned automatically in all cases. As such, Agency agreements can happen. The DOJ settlement with the publishers in the ebook case openly admitted as much. But as SCOTUS ruled, only if the Rule of Reason is applied.

A big component in imposing the Rule of Reason standard was the notion that the absence of Resale Price Maintenance agreements could allow free riders, or some sellers to piggyback unfairly on the benefits of promotion done by larger sellers. I think this point is a particularly important one to make. Keep it in mind.

The above is just a summary, somewhat simplified, of what I think are the pertinent points in the background of Resale Price Maintenance agreements as it relates to the current state of things in the publishing industry as I understand it and am about to speculate on. It didn’t happen in giant leaps, but fits and starts; laws passed and repealed, court rulings made, overturned and overruled again. SCOTUS has weighed in on these matters more than a few times, and likely will again, maybe even in the Apple case. So before I do a little extrapolating, here are some links to some relevant readings. Look for the various links to the actual court rulings and texts of the laws involved if you really want to dive in deep.

Resale Price Maintenance
Sherman Antitrust Act
Price Fixing
Rule of Reason

First two disclaimers: Everything that follows is strictly my opinion as a suspicious, cynical guy who’s read too many Agatha Christie novels. And we have no idea if Hatchette or anyone else is pushing for another Agency-type deal. Everybody and their brother seems to be assuming it is, on both sides of the issue, including me to a point, but I think it’s important to remember that we just don’t know. Amazon’s statement a few days ago referenced a lot of things that implied the dispute was, at least in part, about co-op fees and such. And Hatchette’s kept repeating the matter as “Amazon’s demands for better terms.” It could just simply be a fight over co-op, much like the S&S/B&N dispute a while back.

I couldn’t find any direct info anywhere on who actually won that battle, but I’d be willing to bet Amazon knows, or at least thinks it does. Going after co-op might mean B&N got a bump there or at least Amazon thinks they could succeed where the bookstore chain may have failed. The question really seems to be is Amazon abusing it’s market position to push for that by doing things like stopping discounting, cutting back on stock and taking away preorders? Barnes & Noble took some of the same actions, so it’s not exactly unprecedented.

I would say that’s it quite possible that they are, with some heavy qualifiers. At the very least, they’re walking an extremely fine line in the actions they’re taking. Amazon, given the size of their market share, is in a position where, as they continue to grow, that line is going to squeeze in tighter and tighter on them. The more power they accumulate, the worse these actions will look. Some would say they’ve already crossed it. And they may well be right.

However, Amazon is extremely smart. They know the general judicial trend is to allow more latitude to larger entities wielding power so long as they can show some kind of valid business reason that isn’t simply “we will crush them!” I suspect that’s why a sizable portion of their statement was an explanation of their business reasons for what they’re doing. Even if they did cross the line, you need evidence. Amazon isn’t going to leave any lying around. I’d argue that if it hadn’t been for the bungling publishers, Apple never would have gotten caught either. For Amazon to get nabbed for this kind of conduct, provided the conduct is even illegal or aggressively monopolistic, neither of which we know without knowing the terms they’re fighting over, they’re either going to have to be a lot bigger and these acts much less legally defensible or escalate up into more openly egregious actions.

Now, my attitude on this changes completely if, in fact, Agency or some kind of Resale Price Maintenance agreement is in play. If you’re going to give the producers leeway in trying to fix prices vertically, I think you also have to give some leeway to retailers in using their power in dealing with it. You can’t just say, “We’re going to let your suppliers fix prices and we’re going to stop you from doing anything about it.” That would ultimately end up with exactly what the original 1911 SCOTUS ruling said, economcally indistinguishable from horizontal price fixing. So, when faced with an opponent seeking to limit their pricing ability, they have a strong business reason to act as they have, I think. Remember, Barnes & Noble just did some of the same things and nobody’s suggesting the DOJ ring them up, so the argument against isn’t the act itself but the market strength behind it, a variation on the Rule of Reason and consideration of the circumstances that would allow Hatchette or any publisher to seek a vertical price fixing arrangement in the first place.

Some may suggest this is same argument publishers made in their defense only in reverse; “Amazon is behaving monopolistically so we had to do what we did to deal with it.” But there are limits. Amazon is a single entity, wielding only the power it’s managed to gather for itself, albeit a sizable amount. The publishers weren’t prohibited from pushing for price fixing to combat Amazon, which in and of itself is granting them leeway in their actions. Where they went off the rails is when they colluded together to do so. Price fixing situationally under justifiable conditions is ok, colluding to impose price fixing is another matter entirely. Nobody’s getting any antitrust latitude in the face of that.

The original seeds that ultimately became the reasoning behind shifting Resale Price Maintenance from per se illegal to overseen by the Rule of Reason was the notion that the absence of these agreements could create an environment where free riders benefit from larger sellers promotional activity. In the present environment, relatively free of Resale Price Maintenance agreements, there’s really nothing that, say, Barnes & Noble can do to free ride on Amazon. Install a vertical price fixing regime, however, and not only does it become possible, it seems to be what they intend to happen. Eliminate price competition among retailers, and with it, what they perceive as Amazon’s principle competitive advantage, and competitors like B&N can benefit from Amazon’s past and existing efforts to build and promote the ebook market without having actually contributed to them. They’re using a Resale Price Maintenance agreement to create the very conduct the court ruled we needed Resale Price Maintenance agreements to prevent.

Giving consideration to these circumstances, and the fact that, during the brief time Agency was imposed prior to DOJ action, one clear economic consequence we saw was higher ebook prices to consumers and considering this publisher and most of the others likely to push for these deals were just caught and punished for colluding to institute a vertical price fixing system in an attempt to attack one specific retailer, I don’t see how Agency deals should be allowed for any of these publishers, even under the Rule of Reason. I would go one step farther and say SCOTUS was mistaken to change them from per se illegal to begin with, especially since we’re possibly seeing their root reasoning for doing so directly contradicted in practice. There’s probably a damn good reason that vertical price fixing never stays outright acceptable for extended periods of time. It is price fixing, after all.

Which leads me to what I think might be the ticking time bomb in all of this, the 25% of net ebook agreements that very suddenly became almost inescapable industry standard. Check the dates on these two quotes:

“We’re confident that the current practice of paying 25% of net on ebooks will not, in the long run, prevail.”
From the Authors Guild, Dec. 15, 2009

“In a strongly worded message on its Web site on Sunday, Amazon said that while it disagreed with Macmillan’s stance, it would bow to the publisher’s plan.”
From NY Times, Jan. 31, 2010

We know now that the fight that Macmillan picked was the first strike in the collusion to install Agency that got them smacked down for antitrust violations. We also know the Authors Guild turned out, per usual, to be dead wrong. Do you think it’s a coincidence that this 25% of net rate became almost unilaterally imposed across most of the industry at the exact same time that most of the publisher’s pushing it hardest were colluding to fix prices at the retail level? That it was just a happy little accident for them that they managed to both fix retail ebook prices higher and impose ebook royalties to authors at a low level near simultaneously? This is a lawsuit and quite possibly another antitrust action waiting to happen. I can’t believe authors that got pushed into these aren’t looking at the breakdown of how bad a deal it’s turned out to be for them and how their publishers were colluding with one another to the point of attracting legal consequences at the same time and not putting their lawyers on speed dial. Look at the amounts they paid out in damages in the ebook case. If it were to be discovered that this was the result of similar collusion, that number would be much, much higher.

Ultimately though, I think these publishers would be insane to go anywhere near any kind of vertical price fixing deals right now. And if the strategy includes them having to do anything that even slightly appears like it’s being done in unison, they could be unleashing hell on themselves. If you get popped for drunk driving and as soon as you get off probation, go right out and get another one, the judge is going to throw the book at you. And, oh, if there’s this other DUI charge they were unaware of at the time they punished you for first one, too? I’m not totally sure how liability works in situations like this, but what’s the point, if there is one, where these things can go from being a civil matter involving corporate penalties and fines to somebody’s going to jail? Collusive vertical price fixing that extends to both retailers and possibly their own suppliers and then maybe a fresh collusive action at the first possible opportunity to top it off probably ought to be that point, in my opinion. Why even risk the appearance of such a thing, especially to pursue a strategy that is historically back and forth between legal and illegal that just happens to be mostly legal at this moment? How desperate are they, exactly, and how much is that desperation feeding Amazon’s negotiating position? You don’t walk out into the ocean with a big, bleeding wound and then complain when something tries to take a bite out of you.

Like I said, we have no idea if Hatchette is pursuing an Agency-type deal. And the ebook royalty looks suspicious as hell to me but it could be all above board. Amazon could be simply throwing its market weight around in ways that run afoul of antitrust law themselves. I hope they’re not. And I hope the publishers steer clear of vertical price fixing as a strategy. But even if they do, that ebook royalty is going to be a problem, I suspect. Upping that pretty quickly might be a good idea. Raving about the ebook profits you’re making while refusing to budge much, if at all, is going to piss someone off enough to start poking around. And who knows what they might find or what other bodies might be dug up in the effort?

Dan Meadows is a writer living on the banks of the Chesapeake Bay. Follow him on Twitter @watershedchron

Hatchette accidentally reveals concern for authors is bulls*&t

Hatchette released a statement today in response to an Amazon statement about their protracted and increasingly ugly contract negotiation. Here it is, with inappropriate commentary added by yours truly. And, yes, I’ve been so inspired by all the anti-Amazon hit pieces lately that I chose an intentionally inflammatory headline. Hyperbole for fun and profit!

“It is good to see Amazon acknowledge that its business decisions significantly affect authors’ lives.”

Yes it is. Now let’s continue on to see how Hatchette acknowledges its business decisions significantly affect authors’ lives. (Hint: you’ll be disappointed.)

“For reasons of their own, Amazon has limited its customers’ ability to buy more than 5,000 Hachette titles.”

From Amazon’s own statement: “These changes are related to the contract and terms between Hachette and Amazon.” Reasons of their own in a contract you signed. Reasons that you know damn good and well. Is Hatchette in the habit of not enforcing provisions in its contracts when it’s in their interest to do so? I didn’t think so.

“Authors, with whom we at Hachette have been partners for nearly two centuries, engage in a complex and difficult mission to communicate with readers.”

A complex and difficult mission to communicate with readers made so by publishers because it served their interests at the time. Or do you have some other explanation for why you’d create a system that essentially locked writers out of distribution unless they paid a toll of lifetime copyrights to a publisher to even reach the marketplace? If there’s a barrier between readers and writers, it’s because publishers put it there to better collect their pound of flesh.

“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.”

Oh, Jesus, more special snowflake nonsense. Weren’t you listening when the judge who reamed your ass for price fixing told you, precisely and in no uncertain terms, that publishers are not special snowflakes? Of course books are commodities like any other. You know who made them commodities? You did, and publishers like you when you priced them according to the format instead of the content inside. You seemed perfectly cool with that for the past 200 years. What’s changed now? Oh, that’s right, you’ve lost control of this particular commodity market.

“We will spare no effort to resume normal business relations with Amazon—which has been a great partner for years”

Of course they have been, they’ve made you a metric ton of money. Particularly on those 25% of net ebook deals that make writers a little bit and you a shitload more that you all totally didn’t collude to make industry standard almost simultaneously.

“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.”

Herein lies the rub. What, exactly, is the appropriate value of the publisher’s role now? Even Hatchette’s own phrasing admits the writer’s role is unique. We’ve all got a pretty good idea how valuable Amazon’s role as an innovator is. Who’s the weak link here? Nothing unique or innovative about the editing, marketing and distribution most publishers provide. Anybody can do that or find someone who can to affordably contract out. I suspect the root problem here is they don’t yet realize that the appropriate value of the publisher’s role has declined, perhaps dramatically. You know what happens in a negotiation when you come to the table with declining leverage? You don’t get as good of terms. Ask your writers about that, I’m sure some would have a few pertinent things to say on the subject.

“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.”

“It’s ideas” because we sure as hell know it wasn’t Hatchette’s idea to compensate authors during this fight. If you didn’t know, Amazon, in its statement, offered to form a fund to help authors hurt by this situation and volunteered to kick in 50% if Hatchette kicked in the other half. This was their response, a big ol’ “fuck you” to their own authors who they just claimed to care so much about. Not only did they refuse, they attached any assistance to Hatchette getting what it wants first, making author assistance a negotiating tactic, and guaranteeing they will continue to suffer for as long as this lasts with no help forthcoming. Also guaranteeing that they’ll readily trot out and use that suffering to engender support and more Amazon hatred. More than that, “we’ll discuss it later” and “we’ll pass on any payments it considers appropriate” is just, “you can pay them if you want, but only after we finish our business, and we won’t be kicking in” just with different words.

Being that this is a near-explicit refusal to establish such a fund or contribute anything to it, the line about “the damage Amazon’s demands may have done them” looks like a total false denial of responsibility as they’re doing them damage right now. Seems to me like the discussion that needs to happen is between Hatchette and it’s authors about what the appropriate value of the author’s unique role is. Here’s an instance where they could have backed up their earlier glowing praise and concern for authors by putting their money where their mouth is but instead they pissed all over them trying some half-assed attempt at a clever quip at Amazon’s expense. They should leave the half-assed quipping to bored writers looking for big corporate hypocrites to bitch about. Just sayin’…

“In the meantime, we are extremely grateful for the spontaneous outpouring of support we have received both privately and publicly from authors and agents.”

Spontaneous, sure. Nothing at all to do with the coordinated astroturfing effort you all were talking about not too long ago.

“We will continue to communicate with them promptly as this situation develops.”

Yup, just like you communicated promptly with them the seven months this bullshit’s already been going on, right?

So, Hatchette accepts no responsibility for this at all, refuses to lift a finger to help their own authors this is hurting, and seems to be under some impression that their negotiating power hasn’t atrophied some over the past few years. So, for emphasis:

“It is good to see Amazon acknowledge that its business decisions significantly affect authors’ lives.”

When can we expect to see the same acknowledgement from Hatchette, because this sure as hell ain’t it. This is you intentionally putting authors in the middle of your fight and purposely extending and exploiting their suffering to suit your ends first and foremost, right there in your own words. Strange that Amazon’s statement was far more subtle in its implications than Hatchette’s. Maybe you should of hired a better writer.

Look, nobody wants to see Amazon get to be a dominant beast that lords over everyone. But these folks are not the right horse to back. They’re deluded, have an over-developed notion of their own value and readily blow smoke up writers’ asses while profiting in different ways from both their success and struggles. Even some of their own writers fully expect they’ll use the decline in sales against them in their next book deal. Amazon may be big and powerful, but these folks are just opportunistic scumbags.

Amazon broke the hold these publishers had on the industry, and it’s created more opportunities for more writers to make more money than publishers like Hatchette have in, well, pretty much ever. We need to move forward on the gains writers have made of late, and publishers like Hatchette are firmly entrenched in the past. Yesterday’s exploiters aren’t going to be tomorrow’s liberators no matter how many New York Times anti-Amazon hit pieces they encite.

We do need to have a very serious conversation about competition and diversification and what direction things need to go in the future, but Hatchette and those like them have repeatedly shown that they have absolutely nothing to add to that conversation. Or are you one of the three people who don’t think every other major publisher is going to follow lock step down the path Hatchette’s setting right now? What I really want to know, though, is after they’re all done cutting their noses off to spite their faces, which body parts are next?

Dan Meadows is a writer living on the banks of the Chesapeake Bay. Follow him on Twitter @watershedchron

Amazon the Great and Terrible

So I’m sitting here this fine Sunday morning patiently waiting for David Gaughran’s promised blog piece on the PR campaign Hatchette may be running in its now six-month contract dispute with Amazon. (Warning: profanity ahead because some of this shit just pisses me off.) I, for one, am not buying the “poor helpless little Hatchette being bullied by big, bad Amazon” meme that’s so popular these days. It’s making the rounds everywhere, which I find fascinating due largely to the fact that nobody outside the negotiating wing of those two companies has any knowledge whatsoever about the dispute, and they’re not talking. Well, Amazon, per usual, isn’t talking. Hatchette isn’t talking about any of the issues at hand either, but they are going through great pains to play the wounded party, and igniting the entrenched Amazon hatred out there to do the rest of the heavy lifting.

I’d think people would be more suspicious of things like that. In my experience, when someone in a position like Hatchette is playing the victim card, without clearly backing it up, odds are, they’re conveniently leaving out the parts where they are anything but victimized. So my opinion, knowing nothing about the specifics of their negotiation but strictly looking at the outward actions of the participants, Amazon is going about its business and Hatchette is playing a totally different game. Are they justified? Possibly but I get a strong sense of Hatchette trying to control the narrative and I don’t much care for being manipulated.

“Scott Turow said that Amazon recently raised the price of his most recent book, “Identical,” a move that he said would depress sales.”
–From Washington Post, May 16

Ok, what? First off, that quote’s from the Washington Post, you know, the newspaper Jeff Bezos owns. So much for slanted coverage huh? The difference I see between the Post’s coverage and most other coverage is that the Post consistently uses phrases like “could be”, “might be”, “industry insiders suspect” and things like that when discussing the negotiation. They’ve presented the argument without validating it, which is exactly what all these papers should be doing, unless they actually have hard evidence to support it, then they should print that. But they don’t. It’s rumor and conjecture presented as fact when the people writing can’t possibly know if it’s true.

Secondly, WTF Scott Turow!?! You’re actually bitching that Amazon isn’t discounting your book? Didn’t you just spend two years telling us Amazon was destroying the industry by discounting books? Is there any coherence in your argument at all? Are you just going to complain no matter what Amazon does? Or are you, as is the case with many political pundits, just going to spout the party line regardless of whether it contradicts what you just said. “Amazon’s discounting is killing us” is so last month, I guess.

So here’s my assumption about you based on your own comments. You’re a writer and a lawyer, for God’s sake, so it defies credulity to me that you don’t see the obvious contradiction in your own statements. So I must conclude that you do see it, and just don’t care. You likely never gave a shit about other writers, the industry at large or Amazon’s discounting. You were playing a mouthpiece for your publisher because you thought it was in your best interest at the time. And you did it in defense of a criminal conspiracy by your own publisher and others to violate antitrust law. But now, Amazon’s not discounting and that may hit you in the wallet, so discounting suddenly is no longer destroying the industry but necessary, and you’re statements have shifted accordingly. Credibility all day long, I tell ya. My conclusion is that you’re full of shit, and acting out of your and only your own self interest. Let me ask you, what’s your statement going to be if we find out Hatchette’s trying to reinstitute Agency in some form, limiting or eliminating Amazon’s ability to discount? Actually, I don’t even need to ask, I already know. Assumptions are a bitch, aren’t they?

“Amazon has begun discouraging customers from buying books by Malcolm Gladwell, Stephen Colbert, J. D. Salinger and other popular writers, a flexing of its muscle as a battle with a publisher spills into the open.”
–From the New York Times

“Hachette has continually assured us all orders were shipping “in a timely manner” and Amazon was to blame for placing small orders. We’ve asked for copies of the purchase orders and confirmation of the shipment dates from my publisher but have been told, ‘It is not information we would like to be shared with any third party at the current time.'”
–From Digital Book World

The first quote, from the New York Times, contains no “could be”, “reportedly”, or “may be”. It’s “Amazon is”. They don’t know that, only that Hatchette is telling them that. Mightn’t they have an agenda? So does the Times, of course, but that’s a different article. The second quote is from an actual Hatchette author trying to get his publisher to prove what they’re saying. Look at the response again: “It is not information we would like to be shared with any third party at the current time.” No shit. Wonder why?

Here comes some assumptions again. Say I’m in a business arrangement with someone and they get involved in a dispute that negatively affects me, and they’re telling me “It’s not our fault. Those bastards over there are doing it to you.” My reaction is going to be exactly like this guy, “then you’ll have no problem proving to me you’re doing what you say?” If they come back with a response like he got, I can only conclude that they’re lying to me about something.

And are you telling me the writer is a third party in the distribution of his own fucking book? He’s not entitled to see proof that you’re not lying right to his face and actively harming what he contracted you for in the service of your interests elsewhere? Sales that, in the traditional world, operate in a very short time window and can have disastrous consequences on any future career? Fuck off with that noise. Whatever the negotiating battle is being fought over, this little tidbit of information may be the most important of all for writers. Hatchette doesn’t respect this guy, and they certainly aren’t treating him like a business equal. And their refusal to back up their attempt to escape responsibility for something that’s hurting their own authors even to those authors themselves, should be unacceptable. But writers, please remember, you all signed the contracts that made it this way. This Hatchette writer certainly does and is factoring that in to his future choices. So should we all.

What saddens me about this is that there are all these writers out there who see Amazon as a rival of sorts but don’t see the publishers that way. The Hatchette/Amazon dispute, and the ones like it certain to come, is a fight between billion dollar enterprises over staggering sums of money and that’s all it is. The Amazon haters are right about one thing, Amazon is not your friend. But neither are publishers. And if you’re looking for friends in a contract, anyway, you’ve got bigger problems. The best you can hope for in a business arrangement is that your interests and the interests of the other party align and flow in the same direction. You get into one where your interests diverge at some point, you may well find yourself screwed by your own signature.

I can cut off all business dealings with Amazon in the half hour it takes me pull my stuff offline. If I was signed with Hatchette or some other publisher, that type of action is simply unthinkable. I’m stuck with that contract maybe for the rest of my life, or 35 years at the least. And I don’t even have the right to verify they’re living up to their end of it. If the New York Times or Salon or the Wall Street Journal or Scott Turow want to talk about power imbalances, how about we address that one first? Who, exactly, is that man behind the curtain we shouldn’t be paying attention to?

Dan Meadows is a writer living on the banks of the Chesapeake Bay. Follow him on Twitter @watershedchron

Snowflakes Need Not Apply: Publishing is a commodity business and Amazon built a better mousetrap. Get over it, already.

I’ve been anxiously awaiting the judgement in the Apple antitrust case because I knew the tech giant was going to lose (they deserve it) and I knew that, when that happened, there’d be some woe-is-publishing stuff popping up on the web that I could have a little fun eviscerating. Well, imagine my glee as I read this piece by Michael (no relation to Jason, I hope) Bourne on The Millions website. At first, I thought it would be a run of mill twitter link with a handful of argumentative tweets in analysis, but low and behold, this thing got so confoundingly ridiculous that I had little choice but to go all-in blog post on it.

In fact, I started writing this a few hours ago and that morphed into a totally separate blog post bemoaning the stunning lack of logic in believing Amazon’s potential monopoly is so scary we all should run straight back into the arms of the publishers’ old cartel. This one’s juicy enough I got two blog posts out if it. Here we go:

“…it is altogether possible that the government is right that Apple and publishers conspired to set prices higher than Amazon would charge, which would have forced consumers to pay more for e-books in the short term. But to see this case in this narrowly legalistic light is to completely misunderstand how the book business actually works.”

This is a pretty common theme in publisher-defending circles, either outright admit or strongly imply that the charges are accurate and they broke the goddamn law but then claim it’s not important. The simple fact is there’s no legal exception for breaking antitrust law, even if done in response to illegal activity. Amazon’s shipping boxes coulda been made out of corrugated baby skin and it still wouldn’t have given Apple and the publishers license to collude against them. They broke the law and have to be held accountable, regardless of their reasons. To do otherwise sets a dangerous prcedent that would definitely find its way into other industries and that would be extraordinarily bad for consumers of all kinds of stuff, not just books. I don’t know how many times or how many judges have to say there is no such thing as a special snowflake and you don’t get to pick and choose what laws you care to follow that best suit your business purposes. Don’t do the crime if you can’t do the time.

“…books are not bars of soap. When you go online to buy a book, you are not merely paying for a file full of random ones and zeros. You’re buying the original ideas and stories contained
within that book, and frankly nobody has any idea how much those ideas are worth until people start reading them.”

That doesn’t even make sense. I’m pretty sure somebody’s gotta buy the book before they start reading it. And I have a pretty good notion of what that book’s worth without ever seeing it: $27.99 hardcover, $17.99 trade paperback, $12.99 ebook and maybe an $8.99 mass market paperback, give ot take a couple dollars on any of the above. These big publishers collectively crank out tens of thousands of titles each year and they virtually all fall within the neighborhood of these prices. Books have never been priced by the material inside but by the cost structure of the format.

They most certainly are commodities in the purest sense. The newly merged Random Penguin is set to put out 15,000 books alone next year. To them, any one book is meaningless, even the high advance books. The totality of their 15,000 title catalog is their business model. Big name authors get considerably better terms than average writers, meaning the publisher’s margins are slimmer per book. They also get the benefit of marketing and ad dollars, slicing that margin a little more. Yet we’re also told that these big name books are what bank rolls the lesser selling titles, further gobbling up the publisher’s margins, in theory. More likely, the big name books aren’t really the lone profit centers but simply the lure that gets people into the stores where, hopefully, they’ll also pick up a few other books in their catalog on which the publisher is making very sweet margins. It’s a volume game at this level. The cost or success of one lone book isn’t the point, but the collective success of the full catalog taken as one, nearly all resting within a few dollar range of identical pricing regardless of the author. 15,000 similarly priced, interchangeable pieces…sounds a lot like commodities to me.

The part about not knowing what a book is worth until people start reading could be a reference to advances paid by publishers, but let’s glance at how that system works. There are certainly a handful of high advance books, but for each one of those, there are thousands more which get advances that are more like rounding errors on executives’ expense reports than sizable investments. The threshhold to profit for these books is very low and, once met, publishers bank considerably more money per sale than for superstar books that earn out. This advance system isn’t nearly as risky or speculative as it appears. Even if we take the commonly held belief that 80% of books fail to earn out as fact, Random Penguin, for instance, would be left with about 3,000 books next year alone that do, the vast majority of which on publisher-friendly contracts that earn them more per sale.

Books have been commoditized by publishers because they can’t consistently tell which specific books are going to hit ahead of time. So they built up a bulk catalog made up of mostly low risk, low out-of-pocket books as a hedge against those larger risks. They may not be able to tell which books will be the winners but they certainly have confidence that enough of the totality of their catalog will hit to provide profitability. Saying publishers can’t tell what a book is worth until it’s on the market is both true and misleading. It doesn’t matter how any individual book does, only that enough of them do well in totality.

“…like pharmaceutical companies, publishing houses have to charge above-market rates for their successful products to amortize all those failures. If you limit their ability to do this, books will indeed be cheaper, but they also will be lower in quality and variety because publishers will have less ability to finance experimentation.”

You really wanna compare publishers to pharmaceutical companies? What, you couldn’t think of a metaphor for publishers with war-profiteering arms dealers? Or the Indonesian child sex slave industry? I could buy the above-market price argument if not for the fact that essentially all these books are selling for the same damn prices, successes and failures alike. A book’s price doesn’t increase as it sells more copies. I’m also pretty sure books are indeed cheaper and exist in a greater variety than ever before right now. And publishers certainly aren’t the place to look for experimentation. The bulk of the really unique and creative stuff is being done on the independent writer side these days. Publishers may take risks but they’re generally minimal ones within a narrowly established range. They may occasionally venture out of the plastic wrap but rarely do they get all the way outside of the box it’s in.

“…what Amazon really wants to sell is not so much e-books as the delivery system of those e-books, called a Kindle.”

And what Apple really wants to sell is not so much ebooks as the delivery system of those ebooks called an iPad. You got a point here?

“Apple was offering to once again give the publishing industry the freedom to overcharge for all those e-versions of E.L. James’s Fifty Shades of Grey flying out the virtual doors to make up for the risks it is taking on thousands of other titles…”

Yup, because customers enjoy nothing more than happily giving billion dollar corporations the right to over-charge them. That always works out well.

“…at heart, the case asks a fundamental societal question: what, legally speaking, is art?”

No, the fundamental question in the case is did five of the six largest publishers and the largest tech company in the world hatch an illegally collusive conspiracy to fix prices at considerably higher levels and squash competition? The legal definition of art has no bearing here, only the legal definition of collusion.

“…in Article 1, Section 8 of the Constitution, the framers noted how important it is “to promote the Progress of Science and useful Arts” and thus created copyright protection for authors and inventors.”

That copyright protection is the reason there’s any market for artistic works at all. It was granted to give creators limited exclusivity to access to the market. Copyright wasn’t put in place to spare books from market forces, but so the specific creators could take advantage of those market forces. It’s since been perverted, largely by media lobbyists, into an effectively unlimited time frame of control. They didn’t push for life + 70 years to avoid market forces. Just the opposite, in fact, so they could reap the rewards of a century or more worth of access to those market forces. Copyright offers no guarantee that the creators profit from the work, only that they have the access to potentially profit. Publishers themselves have stood for years as a roadblock to that access, demanding those copyrights be turned over as a toll to the marketplace. By usurping the market access for creators provided in copyright law, publishers have undermined the very point of its existence.

“Books and other works of art aren’t widgets, and art does not now nor has it ever flourished in a truly efficient market.”

Bullshit. The publishing industry, at its base, is a multi-billion-dollar enterprise whose main product is creative output, just like any number of other industries. Questions of art are far too subjective to have any meaning in the actual business realities here. If it hasn’t flourished in a truly efficient market in the past, that’s because it hadn’t really had one in a long time, if ever. Publishers gradually monopolized both the supply of books and the distribution. Any inefficiencies in the market exist because publishers’ iron grip lasted basically uncontested for too long and they got complacent. Those inefficiencies shouldn’t be celebrated or vindicated in any way. They are precisely how Amazon managed to earn its position, by appealing to and improving the conditions of the people most squeezed by those inefficiencies, readers and writers. Oh, the irony of a company doing great things for readers and writers yet being pilloried for it by the existing industry who, all the while, claim to be supporters and nurturers of both those groups. And if you don’t like irony, hypocrisy is another term that will work.

If that’s not enough of a sign for you that the industry has lost its way, I’m not sure what would convince you. The interests of the industry and big publishers diverged over time from the interests of the two most important players in it. That foundation has grown so solid that many just presume what’s good for them is good for everybody. But that’s an extreme oversimplification that ignores the reality that publishers are but middlemen of the longstanding type that eventually shift from providing efficiency by connecting suppliers and buyers to squeezing both sides to the advantage of their own bottom line. That is not an atmosphere that screams for propping up the middlemen when the two parties it supposedly connects find ways to be more efficient without them.

This entire article was an odd combination of musings about the supposedly unique nature of publishing, how the standard rules of business–even the law–shouldn’t apply and some indefinable role of art within it juxtaposed by support for legacy businesses who have shown a history of anticompetitive behavior, cartel-like dominance and a decided lack of concern for the interests of readers and writers. Even the widget point he made multiple times is disingenuous. It’s easy to say books aren’t widgets but you lose a little credibility when you then defend publishers who produce large numbers of similarly priced titles in high volume as part of a business model that treats books suspiciously like widgets.

Publishing is not a special snowflake. It’s a business like any other. Publishers aren’t defenders of art but defenders of profit margins, usually at the expense of readers and writers. The law isn’t something you can willfully ignore just because you don’t care for your competition. It’s also not something that can arbitrarily be waived for the sake of art. The industry is bigger than publishers. It may be hard to see it that way since they’ve been in a position to make it look like they are for longer than most of us have been alive.

Arguing in favor of giant profit-driven conglomerates as the path to art for art’s sake just doesn’t make a lick of coherent sense. Modern publishers were a market response to conditions at the time. Even the most virulent Amazon hater has to admit that the conditions under which publishers thrived have changed. Change is hard, especially when your role is the one being mitigated, but it’s the way life, and the publishing industry at large, works. Putting a veneer of art and culture in defense of price fixing and collusive behavior is naive at best, willfully deceptive at worst.

Whether publishers live or die is immaterial to the matter of whether, and how, the industry on the whole reloads. It will carry on regardless, headlined by readers and writers which to my thinking is a far better development than one dominated by middlemen demanding onerous concessions in rights, control and money if you ever want your work to see the marketplace.

So enough with the high-minded talk about art, literature and culture. Those are great and valuable things, but the old system did little more than pay lip service to those elements while behaving as corporate profit-driven enterprises often do, the bottom line rules all. Amazon may one day become that, as well, but you’ll have to excuse me if I don’t buy in to the argument that we need to prop up the old publisher cartel in the hopes of preventing Amazon from becoming just like them.

If You’re Not Moving Forward, You’re Falling Behind

So, maybe you heard, Apple lost? I wasn’t the least bit surprised given the case was so obviously apparent that it makes Michael Bay movies seem like masterpieces of unpredictability. Hell, even their most vocal supporters would often near or outright concede they colluded, justified, of course, because Amazon, conspiracy, evil, apocalypse, Bezos is a vampire, whatever. I stopped listening once it became apparent these folks wanted the mutually exclusive ends of some fondly mused about artistic utopia of literacy and culture, and wanted it achieved under the colors of the profit-seeking billion-dollar publisher conglomerate gatekeepers. Say what you want about Amazon, but if I’m truly not interested in the commercilized publishing industry, their system and the digital and print on demand publishing environment that’s grown with it, will allow me to carve out a place where I can do whatever I like to my artistic heart’s content and still reach the marketplace. The old publisher system would brook no such quarter. Arguing for artistic merit in literature and backing those who’ve largely been an impediment to it is a logical inconsistency I can’t get past.

From the time the Dept. of Justice first announced the investigation, then the charges, followed by the publisher settlements, the trial and now the decision, I read more than a few opinions in defense of the Agency Pricing scheme at the root of the matter. They all basically boiled down to the same thing: the DOJ doesn’t get how the industry works, books are not widgets and Amazon is a monster that, if we do nothing, will burn the Earth to ashes. The Amazon monopoly concern is founded in some truth. I share it myself, to an extent, mostly of the point when Bezos moves on. The next regime that takes over is my concern.

The difference between their opinions and mine is that I recognize how Amazon achieved their position in the market. They did it by breaking the monopoly publishers had established over several decades. The testimony in the Apple case painted a picture of publishing CEOs not at all unfamiliar with routinely meeting with their fellow executives and exchanging notes on competitive circumstances. The control they had may not have been a traditional monopoly, but it sure as hell looks an awful lot like a cartel. And that says nothing of the virtual monopsony they collectively held, due to their gatekeeper role, over their suppliers (writers). Amazon broke their hold by addressing those most disaffected by the cartel’s established structure, using technology to do it. The same disruptive conditions they used still exist and I am confident can and will be directed at Amazon in the event they change course into genuinely predatory waters. But please don’t ask me to back the old, more restrictive cartel as the better choice.

Often, there’s a “won’t somebody please think about the bookstores!” moment tossed in there, too, to pull on the heartstrings of nostalgia. But, again, there’s that same dichotomy of logic in what they claim to want and what they’re actually advocating for. The health of independent book stores is clearly a concern for many, but when you present the Borders and Barnes & Nobles of the world as victims in the same mold, you’ve lost the path to rationality. Barnes & Noble in its prime was a profit consuming monster that left a wake of boarded up independent stores behind its publisher-enabled bulk-level discounting. What’s good for B&N and what’s good for independent stores are completely divergent. B&N is no ally of the corner book shop.

This argument openly backs extraordinary leeway and support for entities with an established history of actually doing what they fear Amazon might do in the future. The intellectually honest argument would be to advocate for a third path that keeps the publishers’ cartel broken and restrains Amazon’s ability to have an out-sized influence on the market. The relative absence of that third path in the anti-Amazon rhetoric makes me wonder if it’s these people, so vigorously defending both the greatness of a diverse literary culture and the corporate bohemoths who have perverted that to the greatness of their profits, who are the one’s who don’t understand how the publishing industry really works.

Amazon is a corporate bohemoth, too, of course, one that presents some very real risks for the future. But, right now, they provide a ton of benefits to a ton of people who aren’t those guys, namely readers and writers. You can say an Amazon-led industry will turn out badly for those groups in the long run all you want, but that’s not the case today, or in the forseeable future which, admittedly, might be short.

You don’t like Amazon? Fine. Let’s talk about how we move forward from the progress and advantages Amazon’s made. But if you want to talk me into moving backwards into a situation that restrains me as a writer both creatively and financially, and as a reader, both in choice and higher prices, you can take that worn out nag of an argument elsewhere.

Amazon and The Mystery of the Great Used eBooks

I am finding the notion of first sale rights and used ebooks pretty fascinating these days. I wrote a bit yesterday about how I suspect that taking away first sale rights from consumers has damaged the book business. Today, I read this piece by Marcus Wohlsen for Wired, completely wrapped in consternation over Amazon’s patent filing for a digital goods resale scheme. There’s a few points in the article I’d like to discuss. I’m not a lawyer, so these are simply my opinions on how copyright law, particularly first sale, might affect Amazon’s actions with regards to used digital stuff.

“Digital content is infinitely reproducible. No technological limit exists to how many times a single digital original can be copied and resold.”

No technological limit exists because nobody’s bothered to implement an effective one. And maybe I’m wrong, but isn’t all that fancy DRM we’ve had shoved down our throats a technological limitation to copying? Pretty sure that exists. It may not work very well, or might be crazy-easy to circumvent, but it exists. The entire ebook market has grown under the assumption that consumers had no right of resale, therefore no screaming need to invent one. But look, ReDigi is getting sued for its used digital business and they have a method to limit copying. Amazon’s patent here is another. If second hand digital goods becomes a reality, you can bet there’ll be numerous technical methods to deal with this post haste.

As for copying infinitely for resale, that doesn’t even apply in this case. What Amazon’s talking about here seems to be totally in-house. They already know who bought what and how many times. They’re suggesting a scheme to resell the licenses not so much the actual ebooks. There’s no way somebody copying an ebook bought from Amazon is going to be selling it over and over again without Amazon being willfully complicit. They have zero motivation to engage in something so risky and outright stupid. There is no chance anyone will be selling multiple copies of the same ebook in the system Amazon’s trying to patent.

“Just as with physical books, publishers would only have a say — or get a cut — the first time a customer buys a copy of an e-book. The second, third and fourth sales of that “same” e-book would be purely under Amazon’s control.”

That would totally depend on how this was executed. If a first sale use is exerted to allow the resale, then it’s actually the customer who has control of the resale. Amazon would, theoretically, either expedite a sale between two customers and take a small cut, or create a system where they buy the ebooks from the customers, then they would gain those resale rights. The alternative is if the resale was a product of a licensing agreement with the publisher, in which case, no first sale rights were exerted and Amazon would have as much control as the licensing agreement allows and no more. Publishers would have to be nigh-on-braindead to license resale rights to Amazon, though. They’d be better off just releasing first sale rights to everybody altogether and letting the chips fall where they may than giving Amazon more power to lock customers into their world. In fact, I think they’d be better off doing that than what they’re doing now, even if they maintain the good sense not to license away the second hand market.

Wohlsen then quotes Bill Rosenblatt, who he describes as “a consultant and expert witness in digital content patent cases”:

“If Amazon is allowed to get away with doing resale transactions without compensating publishers, then what they can do is say, ‘hey authors, sign with us and we’ll give you a piece of the resale.'”

If Amazon is allowed to resell without compensating publishers, then that means buyers would have regained first sale rights. That would mean Amazon, or anybody else for that matter, wouldn’t be able to control the resale of these goods. You can’t just say “Kindle owners have first sale rights but Nook owners don’t.” Amazon could certainly cut writers in on the resale of their books on their site, but in this hypothetical, they’d be far from the only place selling second hand digital goods. As a,writer, if would definitely be something I’d listen to, though.

There is no circumstance where Amazon totally controls the resale market and doesn’t pay publishers. Either they license the content for resale, in which case publishers get paid, or they invoke first sale, publishers don’t get paid, but the real control and resale rights would belong to consumers. (Unless, of course, a court somewhere warps copyright law to create such a circumstance. Not exactly an unheard of occurrence.) Amazon might build a nice little business with used ebooks, but it would largely have to do so by offering buyers enough incentive to exert their first sale rights with Amazon. Hardly a dominating position.

“Buried in the patent is language spelling out that the technology Amazon intends to use will have the ability to limit the number of times a digital good could be resold or loaned out. Amazon could use that constraint to strike bargains with publishers and authors to cut them in on used digital sales, which doesn’t happen with used physical media.”

And would only happen here if it were a product of a licensing deal. If they invoke first sale, Amazon couldn’t uninvoke it later. They wouldn’t have the right to put any limits on resale. They could buy the license, then willingly retire it, but they couldn’t prohibit a buyer from selling it. If it were licensed for resale, however, Amazon could do just that, per terms of the licensing agreement. But again, publishers…resale licensing with Amazon…braindead stupid.

I do believe we need to return first sale rights of digital goods to consumers. I believe there will be a technological means developed that is simple enough to make this happen without unduly encouraging piracy. Even so, no matter what you do, somebody somewhere is gonna rip you off. Publishers are just gonna have to accept that reality. Taking away first sale rights devalues the product in a very real monetary sense to the buyer. That is simply bad business.

What Amazon’s patenting here sounds to me like an attempt to strengthen its walled garden. I’m not sure this method would hold up or work in an atmosphere where first sale rights are truly implemented by consumers. So it seems as though licensing resale from publishers is the point of this. But what publisher in their right mind would give Amazon this ability? On second thought, don’t answer that. Like with most things, some idiot(s) will.

Second Hand Blues: First Sale Rights and Used eBooks

That sound you just heard was the collective heads of everyone in the traditional mass media industry exploding as news of Amazon filing a patent for a process to resell digital goods spread. Many of them are having enough trouble keeping their heads above water in the current digital marketplace as it is. Now, suddenly, they might have to deal with competition from an area they thought was locked down, resale rights of customers. Oh shit.

Personally, I’m all for this development, although I would much rather someone other than Amazon be the one to push this possibly emerging market. However, the fact that they’re taking steps to be prepared for it again shows why they have essentially made fools of the traditional industry. They think ahead, they pay attention, they prepare and, most of all, their business model adds value for their customers instead of taking it away.

I’ve long been a proponent of an aftermarket for digital goods. I believe it’s lack is the one key flaw in the ebook market. In fact, I’ve started to develop a little theory about this. Far from being just simply a loss of value for consumers, I’m starting to get behind the notion that the lack of an aftermarket is a primary cause of three of the most troublesome issues with ebooks and other digital media; piracy, discoverability and the downward pressure on prices.

1. Piracy

I usually take issue with even defining the activity of file sharing, even obviously infringing file sharing, as piracy. I just don’t think it is. I also think it clouds the issue by broadening the scope of conduct corporations would like to monetize into a individual crime, which hurts efforts to combat actual, destructive commercial-scale piracy. But for the sake of brevity, I’m just going to use the term piracy here. It’s easier to type than “possibly infringing and much maligned but potentially fair use protected file sharing,” which would be a far more accurate description of the conduct to which the industry objects.

The biggest joke of all from the anti-piracy brigade is the assumption that every download is a full price lost sale, complete with lost royalties for the creator. That’s obviously a skyscraper-high pile of horseshit I’m not going to waste time refuting. But let’s say, for the sake of argument, that it’s somewhat true, who’s to say that lost sale would have even been one that affected the industry or artists at all? It’s easy to suggest that someone downloading an ebook wasn’t going to buy it anyway. But what if they were going to buy it, only a cheaper second hand version? Even if it was a lost sale, it wasn’t one that would have earned the industry a dime anyway. Or any royalties for the artists. Amazon routinely lists used alternatives to new versions right on the product page, always significantly cheaper. Is it really a stretch to think that people who choose downloading for free over buying full price wouldn’t also choose to buy cheaper used than new? Even if every download were a lost sale, if those sales were going to be of the cheaper, used variety, the industry and artists lose nothing. And it’s perfectly legal under the first sale part of copyright.

Ebooks circumvent first sale by being sold as a license for use. When that happens, customers lose the ability to resell those goods (among other things). It’s why I can’t just sell the ebook I bought last week from Amazon to somebody else on eBay. But the book publishing industry has long existed side by side with its used counterpart. There has always been a place to buy books at a significantly discounted price. When eBooks took off, however, there was a vacuum left where that discounted market used to be. Isn’t it possible that piracy grew to fill this very gap that the loss of first sale left in the digitized side of the market? We went from a system where you could get books full price new, heavily discounted used, or free from libraries to a system where it was full price new, extremely limited and inconvenient from libraries or free through piracy. The industry, through the means it chose to sell ebooks, removed the discounted option completely, hamstrung the legal free option and then loudly wondered why people pirated.

I think a lot about rights, I am a writer, after all, and I spend a fair amount of time complaining about rights grabs from publishers. But it just dawned on me that I’ve essentially missed the biggest rights grab of all. The way ebooks are sold protects publishers under copyright law, protects authors under copyright law (although I would argue in too ancillary of a way through publishers but that’s for another day) and takes away almost all the rights of consumers under copyright law. It is pretty egregious when you look at it. The first theft was committed when publishers agreed to the licensing scheme and took away customer rights. Then they turned right around, started pointing fingers and yelling, “Thief!”

Removing first sale rights created a vacuum in the ebook market and piracy was what grew in its place. Nature does, indeed, abhor a vacuum.

2. Discoverability

Here’s another thought that’s been kicking around in my head: what if, instead of causing the drop in sales, piracy actually prevented that drop from being significantly worse? Think about it. When digital music hit the scene, that industry panicked, fought the rudimentary early age file sharing spots like Napster and Limewire tooth and nail, right down to suing their own damn customers. At that point, broadband was slower, not nearly as widespread, and most people didn’t know how or have the capacity to download sometimes large music files. As first sale rights fell away, the secondary markets thinned, discovery was hampered and sales dropped precipitously. When ebooks hit publishing, there were well-established file sharing networks in place, broadband was much faster and more ubiquitous. The discovery hit from loss of first sale was mitigated somewhat by piracy and the drop in sales was much lower. Book publishing, quite possibly, was somewhat protected from itself by the very pirates it so loves to demonize.

Look at it this way, when I buy a print book, I can go sell it to someone else. They in turn, can sell it again, the next owner can sell it, then that owner could donate it to the library where it can be checked out over and over again. That one book could pass through numerous hands, all legal and all based on one sale, the first sale, from which publishers and creators reap their proceeds. The rest of that book’s lifespan constitutes exposure, or discovery, if you prefer. Now, if I buy an ebook, other than a limited ability to share with a few people under specific conditions, the life span of that ebook essentially dies immediately after the first sale. All of that exposure and discovery that was present with print books sold with first sale rights is washed away. And again, the industry is perplexed about why people aren’t finding new books as easily as in the past. That kind of thing happens when you destroy the primary mechanisms of discovery by swiping rights from customers.

I’ve seen numerous polls that suggest bookstores are the number one place for discovery of new works but I’ve never seen one differentiate between what kind of bookstores they’re talking about. Is it more likely you’ll try out new authors in Barnes & Noble where you’re paying $10-25 or so on average per book, or in a used bookstore where hardcovers are $2 and paperbacks can be had for 50 cents? I suspect discovery has been done far more at bookstores selling heavily discounted used books (and libraries, where it’s free) than at stores selling only higher priced new books.

Everybody seems to be wondering why online book discovery is struggling so much. Could it be because publishers have hamstrung libraries and blocked the development of discounted used ebook stores by eliminating consumer rights to resale, places where discovery is far more likely to happen than full price, brand new alternatives? Nah, couldn’t be that, must be the pirates, you know, the only place actually emulating the primary means where book discovery was done in the past.

3. Downward Price Pressure

Taking away first sale rights from consumers does one other key thing, it takes away the customer’s ownership stake in the product. If you can resell something, that has value, and when you buy a print book, it retains that value because of first sale rights. But with ebooks, the monetary value drops to zero immediately after you pay for it. Don’t think for a second people don’t understand this basic fact. The loss of an ownership stake, and the instant elimination of any monetary value necessarily degrades a product in the customer’s eyes. By swiping first sale rights, publishers have devalued their own products. It’s the reason why so many people complain so loudly about ebooks priced anywhere near what print versions cost. We’re not stupid out here, we know damn well you’re selling us a product that doesn’t have anywhere near the tangible value of a print book, and that has nothing at all to do with the quality of the book. I can’t sell it and its uses are limited. I possess significantly fewer rights with ebooks. Consequently, it makes no sense to pay print prices for way-less-than-print value.

Then, there’s this. With the aftermarket for ebooks nonexistent, wiping out a highly discounted layer of sales, it created a huge gap between the prices of trad pubbed ebooks and indie books. That, in turn, created a situation where indie books could be priced much cheaper and attract significant sales through super-low prices alone. That, then, set off a race to the bottom fight for those sales, culminating in 99 cent novels, and generally increasing the downward pressure put on all ebook prices. But consider, if there were a used layer there where trad pubbed ebooks could have been picked up for $2-3 or so, the massive gap in prices between indie and trad books never would have happened, the severe price advantage wouldn’t have sparked the uptick in sales that set off the race to the bottom. Indie authors would have been forced to compete on factors beyond simply super-low prices, and the downward pressure they’re experiencing now declines appreciably. Also, if those same customers now bitching about $15 ebooks knew that could get a few bucks back on them through resale, they wouldn’t be so likely to complain about price. They’d retain their ownership stake, and very likely, not balk at paying a few dollars more. There’s two key elements right there driving prices down that go away if customers hadn’t had their first sale rights taken from them.

First sale rights are hugely important. I’m of the mind that swiping them from consumers as ebooks have is responsible for most of the biggest problems in a growing industry segment. An aftermarket isn’t something to be afraid of, it aids discovery, maintains value in the product chain and gives your customers not just a right to resell, but an actual ownership stake in the product, albeit a small one, relatively. It now becomes in their best interest to maintain the value of ebooks because they have some skin in the game. Take them away, and it seriously damages discoverability, drives prices down as the reality of lost value sinks in, and it drives possible customers to alternatives like piracy.

Whatever the technical difficulties in creating a digital goods aftermarket, or giving consumers back the first sale rights that have been swiped by the ebook licensing scheme, the consequences will be far less severe than continuing to treat customers as naive dullards who don’t mind being gouged by higher prices for a lesser product. There’s a good reason first sale exists as part of copyright law, free markets don’t work when one party has too much control over economic activity. If we don’t change course soon, the ebook market will find out exactly how dysfunctional things can get when the playing field gets unfairly slanted. Customers have rights, too, and it’s high time publishing remembers that.

Bookish: New publisher-backed retail site is game-chan…eh, whatever

I was checking out Bookish today, the new Big Six backed trojan horse, supposed to look like some kinda Goodreads/retail store hybrid thing but really is a not-so-subtle attempt to build their own little walled garden only sans the hardware. Yeah, I’m not a fan, what can I say?

Actually, I don’t really see too much to get worked up about anyway. There’s nothing really new here, and it’s pretty clearly an attempt to regain gatekeeper control by imitating various popular book-related internet properties they could have innovated a decade or so ago if they’d have pulled their collective heads from their assess even temporarily. Late to the party doesn’t usually fly. That and this is traditional publishing trying to be forward-thinking, after all. So forward that the debut was about two years after it was supposed to be. I’m not encouraged by the vision or support behind this if things don’t go instantly great and end up even the slightest bit challenging.

The DRM insistance sucks but not at all unexpected. We’re still quite a ways from the biggest of publishers’ conglomerate masters getting the memo that they’re cutting their own throats with it. The part of the terms of service saying they own all rights to any user generated content is troubling, but again, publishers are behind this. Never met a right they didn’t try to grab. There appears to be a pretty stark “no refunds” policy on ebooks, too, enforceable after download, which, I guess, means store-credit-only if something’s messed up? Of course, shit-out-of-luck is a distinct customer service possibility here, too. Wouldn’t surprise me. By comparison, Amazon gives you seven days to “return” an ebook for a no-questions-asked refund. Not exactly a compelling reason to buy through Bookish rather than Amazon.

I would typically link to their site here, but apparently I would be violating their terms of use if I did so, it containing a provision allowing them to block your link if you disparage them. Lord knows I wouldn’t want to run afoul of their terms. So, good job, guys! Here’s at least one less link to you in the world.

At the end of the day, Bookish to me loses points precisely for what it’s trying to do, be a limiting factor in book shopping, and serve in a gatekeeper type capacity. It’s not so much what’s seen or recommended on their site, it’s what’s excluded that’s the problem. It’s allowing material in from sources which meet some sort of standard of approval, apparently dependent entirely on the publisher. It’ll be interesting to see if this ends up with the big boys getting all the prime, algorithm-tweaking real estate. There doesn’t really seem to be much in the way of involvement for authors, either. But, I’m willing to give most things the benefit of the doubt, so I clicked on the “I’m an author” link in their FAQ. Here’s what I got:

How can I have my book(s) added to Bookish?

Authors should ask their publishers to confirm that their respective titles are in the data feeds provided to Bookish.

That’s it? I’m an author. I’m interested in becoming involved with this innovative new method of doing the same thing other people are doing just more self-servingly and the only acknowledgement or words of advice you have for me is “go ask your publisher”? Is it me, or is the tone of their suggestion reminiscient of when you were a kid and annoyed your mother with some question she didn’t care about to the point she’d say, “go ask your father?” Seems a bit dismissive and condescending. I also find myself wondering at what point the lawyers took out the “If you’re a self-published author, go fuck yourself!” line that I’m pretty sure was in the first draft.

It’s not a bad thing for publishers to try to get some sort of more direct retail channel. But they can’t even get all the big players to back it. Hell, Apple talked them all into breaking antitrust law together, but something that could actually be a practical benefit to the industry if done right? No way! This should have been done years ago. Now, it’s just chasing, piggy-backing on other people’s hardware, yet still trying to build that mystical walled garden through DRM. Authors are pretty obviously an afterthought, and they certainly aren’t treated as any kind of business equals, more like underlings to their publisher masters. I’ll withhold judgement on whether this is useful to readers until we actually hear from some, but I’m not optimistic given what I see so far. If I had to guess, Bookish will err too far toward crass commercialism over genuinely social interactions with readers. Basically, I’m seeing a site that’s talking at readers, not with them, and that’s going to be its biggest problem.

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