NSFW: Hey, 1997 ? Macmillan called, they want the Net Book Agreement back

Paul Carr
Sunday, February 7, 2010; 3:30 AM

This time last week I rattled off the world's laziest column. I was struggling against my book deadline which expired 24 hours later and I simply didn't have time to write anything else. This week should have been different; I should have finished the book days ago and now be sitting on a beach in the Caribbean, sipping a Diet Coke martini and lazily writing a long, well-thought-out column about some vital issue of the day. Why it's inadvisable to write a mea culpa in the passive voice (otherwise it's just a 'culpa'). Something like that.

And yet, and yet ¿ the fact that, seven days later, I'm still sitting at my desk and I still haven't delivered the manuscript to my publisher, should give a hint to how perilous things are right now. I'm Wile E. Coyote about five seconds after he looks down and realises he's overshot the cliff. And yet despite my urge to sack off this week's column and focus on lessening the size of crater I'm about to leave in the desert floor, there's something on which I can't remain silent on any longer. Four words which I've been seeing again and again all week, and which threaten to drive me mad¿

"A victory for authors."

That's how some people are describing Amazon's capitulation to Macmillan over the pricing of ebooks. They say it in the same tone as people describe more expensive milk as "a victory for farmers" or subsidies for domestic cars as "a victory for American auto workers", which is to say the same tone as you might use to pity a cat with three legs.

Poor authors, after all, need all the help they can get. They work for years on their Great Novel, probably subsisting on stale cheese and rats' milk as they do so, and what thanks do they get? A measly royalty, chipped away at by heavy discounting in book stores. Thank God then for Macmillan taking a stand against Amazon and its aggressive discounting. And thank Jesus for all of the other publishers bravely following them.

Oh please.

First a few facts, in the form of a disclosure statement. I am an author. Before that I was a publisher. Although my publisher is now Hachette, I've been published in the past by Macmillan, both in the UK and the US. Macmillan were a partner of the publishing house I co-founded, and were responsible for distributing all of our titles. Richard Charkin, the former CEO of Macmillan, was an advisor. I like Macmillan. I feel, then, somewhat qualified to call bullshit on the claim that this deal is good for anyone ¿ including Macmillan and especially including authors.

Much like the monarchy, Macmillan started life in Britain even though it's now controlled by Germans. Its British roots go to the very heart of their negotiations with Amazon. In America, books have always been available at a discount ¿ with book stores relatively free to set prices as they wished. Of course, publishers still choose their wholesale price, but there's nothing to stop, say, Borders from heavily discounting bestsellers to get people through the door. Publishers didn't necessarily like this as it led to booksellers demanding more aggressive discounting (sometimes more than 60% off the cover price), but they didn't have much of a choice but to accept. The fact is that publishers couldn't justify opening up their own stores, so if they wanted readers to be able to actually read their books, they had to keep bookstores happy.

But that's not how things used to work in the UK.

In the UK, way back in 1900, publishers corralled retailers into the Net Book Agreement (NBA); an agreement between British publishers and booksellers that books would be sold at the price specified on the cover. If a bookseller offered so much as a penny discount, then the publisher would simply withdraw all of their books from that bookseller and encourage other publishers to do the same. The arrangement suited everyone; book shops were the only place to buy new books and the NBA meant they didn't have to worry about rivals undercutting them; this particularly benefited independent bookshops. For their part, publishers knew exactly how much they'd be getting for each title and authors knew how much of that would form their royalty.

It took until the late 90s for the Restrictive Practices Court to declare that the Net Book Agreement was anti-competitive and should be scrapped. Shortly afterwards, Borders entered the UK market, hundreds of UK independent bookshops went bankrupt and publishers decided to change their contracts with authors. Now, instead of being based on the cover price of a book, the author's royalty would be based on 'net receipts', which is to say the price that publishers actually received from bookshops.

Since 1997, that's how things have stayed. Authors learned to adjust pretty quickly, especially as fewer than 20% of titles actually ever earn back their advance and start paying royalties. But publishers have remained annoyed. Deep discounting cuts directly into their profits. There was one area, though, where publishers could still make a killing on every sale: hardback books. The fact is that printing a hardback book, as opposed to a paperback, costs a matter of pennies more. But there is a perception amongst book buyers that they are far more expensive, a perception that it has been in no one's interest to correct as it allows them to be sold for twice the price of paperbacks. Even with booksellers demanding deep discounts, the publishers still make a ton of profit on each hardback sale. By releasing the hardback book months before the paperback, publishers can subsidise a huge amount of their business from hardback sales, while booksellers can still discount highly to get people through the door.

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