Amazon said to play hardball in book contract talks with publishing house Hachette
By Steven Mufson,
On Thursday, the new bestseller list arrived at the offices of Hachette Book Group with good news: One of the publisher’s books, T.D. Jakes’s “Instinct,” had vaulted to the No. 1 spot.
But the bad news was that anyone trying to order the book on Amazon.com on Friday got a message saying that it “usually ships within 3 to 5 weeks,” far slower than the fast delivery on which Amazon prides itself.
Hachette, which owns Little, Brown; Hyperion; and Grand Central, says that Amazon is deliberately slowing sales of Hachette’s books in an effort to pressure the French publisher into agreeing to new contract terms on book pricing. Hachette says there is no shortage of the books.
“We are satisfying all Amazon’s orders promptly,” Hachette said in a statement last week. “Amazon is holding minimal stock and restocking some of HBG’s books slowly, causing ‘available 2-4 weeks’ messages, for reasons of their own.”
Amazon, whose chief executive, Jeffrey P. Bezos, owns The Washington Post, would not comment for this article.
The dispute takes place amid a long-running battle between ever more dominant book retailers and big publishing houses over control of the future shape of the $15 billion book industry.
Agents, writers and publishing executives say that Amazon, which by some estimates accounts for half of all book sales, is playing hardball in a contract dispute about how big a discount Hachette will give the giant online retailer and how to set prices for e-books.
Book industry leaders say that publishers ordinarily give bookstores discounts of 47 percent to 53 percent on wholesale prices to bolster booksellers’ profit margins and leave room for discounts to attract more consumers. But while neither Amazon nor Hachette would comment publicly on their talks, industry officials suspect that Amazon is demanding deeper discounts.
When it comes to e-books, publishers have long tried to assert control over prices while Amazon has insisted on a cheaper, more uniform price of $9.99 a book, which book agents say has been lucrative for the publishing houses.
It’s not the first time Amazon and big publishing houses have fought over terms. The most notable instance was in 2010, when Macmillan resisted Amazon’s effort to set all Kindle e-book prices at $9.99. Macmillan wanted some to be priced higher. So Amazon removed the “buy” buttons from all active Macmillan titles on its site.
“This one goes along with the pulling of the buy buttons as the most daunting exercise of brute market power,” said Scott Turow, a Hachette author and former president of the Authors Guild. “I regard the tactics as incomprehensible, and they are extremely unfair to readers and to authors.”
Turow, a lawyer who has written 11 books, including legal thrillers such as “Presumed Innocent,” said that Amazon recently raised the price of his most recent book, “Identical,” a move that he said would depress sales. While Turow said the hardback version of his book is near the end of its sales cycle anyway and that a paperback version will be published in July, he said the Amazon sales tactics could hurt other Hachette authors with new releases.
Gail Hochman, president of the Association of Authors’ Representatives, said the group “deplores any attempt by any party that would seek to injure and punish innocent authors — and their innocent readers — in order to pursue its position in a business dispute. We believe that such actions are analogous to hostage-taking to extort concessions, and are just as indefensible.”
She added, “This is a brutal and manipulative tactic, ironically from a company that proclaims its goal to fully satisfy the reading needs and desires of its customers and to be a champion of authors.”
Robert Gottlieb, chairman of Trident Media Group, said that he believed negotiations between Amazon and Hachette had intensified in light of the widespread publicity about the dispute, which the New York Times reported on last week.
The flap has also revived debates over whether Amazon has too much market power and whether it is violating antitrust laws when it uses its service to pressure publishers into agreeing to its terms.
In the past, the Justice Department has been sympathetic to Amazon, whose low prices work to the advantage of consumers. In 2012, Hachette, HarperCollins and Simon & Schuster signed a consent decree with the Justice Department, which had sued publishers and Apple for conspiring to raise prices of e-books during a series of meals attended by their chief executives at upscale Manhattan restaurants.
Under the decree, Hachette, HarperCollins and Simon & Schuster agreed that they would be prohibited for two years from entering into new agreements that might constrain retailers’ ability to offer discounts or other promotions to consumers to encourage the sale of the publishers’ e-books. That period expires this fall.
Other major publishers, including Macmillan, settled later and have not yet begun negotiating new agreements, industry officials said.
Moreover, other book retailers have battled publishers. Barnes & Noble, for example, has pressed publishers for payments in return for prominent shelf space.
What makes the dispute between Amazon and Hachette different is that Amazon’s tactics have no obvious consumer benefit, a key antitrust consideration.
“What kind of entity in a competitive market would willfully drive customers into the arms of its competitors unless it believes it doesn’t really have any competitors?” Turow said. “Can you imagine Best Buy refusing to deliver for a period of weeks what’s available from its competitors? But Amazon behaves as though they’re the only game in town. And increasingly they are. It’s a head-scratcher why anyone with regulatory authority would tolerate it. If this is not an example of untoward power, I don’t know what is.”
Lawyers say, however, that the key antitrust questions are whether Amazon’s actions are hurting consumers and whether Hachette has other outlets. The Jakes book’s climb to the top of the bestseller list shows that people have found it elsewhere — physical bookstores or Barnes & Noble’s online site.
Moreover, if Amazon were to use deeper discounts to provide low book prices to consumers, then arguably it has helped, not harmed, those consumers. That, Gottlieb noted, would be no different than Wal-Mart pressuring suppliers for lower prices. Health insurers have also used their market power to extract lower prices from drug companies.
But Gottlieb said that Amazon’s pressure contacts were a “double-edged sword. Amazon is not just a retailer; they’re also a publisher. And the kind of goodwill you create in the industry has an impact on people doing business with you.”
Writers, however, feel caught in the middle.
The blockbuster suspense author James Patterson posted his thoughts online: “Right now, bookstores, libraries, authors, and books themselves are caught in the cross fire of an economic war. If this is the new American way, then maybe it has to be changed — by law, if necessary — immediately, if not sooner.”