Monday, February 01, 2010

Amazon Macmillan Kerfuffle

STATUS: Well, the above is all I’ve been dealing with this morning.

What’s playing on the iPod right now? SMOOTH by Rob Thomas

Normally Saturdays and Sundays in Publishing are a little quiet. Not so for this weekend. My goodness. I had emails coming at me from left and right on Saturday. I was actually in the office working so I heard the news almost immediately as it was hitting the wires.

To make a long story short, John Sargent, CEO of Macmillan, met with Amazon last Thursday to discuss moving to the agency model/commission split structure for Macmillan eBooks starting in March 2010. Amazon was in disagreement in terms of that being the only structure.

In response, Amazon pulled the buttons for all Macmillan titles on Amazon.com. Buyers could still purchase the books from third parties but not directly from Amazon. The buttons were pulled for ALL books—not just the eBooks. To make matters worse, all Macmillan Kindle books disappeared from customer wish lists. Oh shades of last summer when Amazon pulled the illegal eBook from customers’ kindles. As one Macmillan editor said to me, "what a sh*tstorm."

Yes, Amazon is flexing a muscle but whether it’s going to impress the general populace remains to be seen. For my part, I’m trying to fathom their thinking in terms of the PR for this. Perhaps they think their customers are completely wed to the $9.99 price point and will salute their action. Rumor has it that Amazon has been inundated with chatter and emails complaining about the action and thus their step back late on Sunday.

Bottom line, it’s authors who get hurt the most here. I’m really feeling for authors who have on-sale dates for today and maybe tomorrow. I have an author releasing in two weeks in hardcover from St. Martin’s Press (HESTER by Paula Reed) so I’m particularly anxious to see a resolution.

Talking with Macmillan editors, I hear that John Sargent has a meeting this afternoon with Amazon and that the company is “optimistic” that links will be back up by tonight or tomorrow morning. I’ve been assured that the conversation is continuing.

Below is the string of communications from the weekend. Also, Nathan Bransford, Ashley Grayson, and Richard Curtis have excellent detailed entries about this showdown if you want more understanding.

I’ll update if I hear more news.

It begins with New York Times breaking the story late on Friday, Jan. 29 at 11:19 p.m.

Publishers Lunch did an email blast Saturday afternoon:

The Battle Over the Agency Model Begins, As Amazon Pulls Macmillan Buy Buttons
As originally reported last night and many readers know by now, sometime yesterday evening the buy buttons for apparently all of Macmillan's books--including bestsellers and top releases, and Kindle editions--were removed from Amazon's site. Macmillan books remain listed but can be bought only through third-party Marketplace sellers, while Macmillan Kindle titles all lead to pages that read, "We're sorry. The Web address you entered is not a functioning page on our site." It is the first shot across the purchasing bow in big publishers' efforts to reset ebook pricing above the loss-leader $9.99 price point and retake control over that pricing by moving from the wholesale selling model to an agency selling model (first reported exclusively in Lunch Deluxe on January 19), at least for ebooks published simultaneously with new hardcover releases. Kindle customers further reported on Amazon forums that any Macmillan books that were on their "wish lists" disappeared from those lists with no explanation, as apparently did Macmillan sample chapters that had been downloaded previously.


More story here.

John Sargent issued this statement Saturday afternoon:

To: All Macmillan authors/illustrators and the literary agent community
From: John Sargent


This past Thursday I met with Amazon in Seattle. I gave them our proposal for new terms of sale for e books under the agency model which will become effective in early March. In addition, I told them they could stay with their old terms of sale, but that this would involve extensive and deep windowing of titles. By the time I arrived back in New York late yesterday afternoon they informed me that they were taking all our books off the Kindle site, and off Amazon. The books will continue to be available on Amazon.com through third parties.

I regret that we have reached this impasse. Amazon has been a valuable customer for a long time, and it is my great hope that they will continue to be in the very near future. They have been a great innovator in our industry, and I suspect they will continue to be for decades to come.

It is those decades that concern me now, as I am sure they concern you. In the ink-on-paper world we sell books to retailers far and wide on a business model that provides a level playing field, and allows all retailers the possibility of selling books profitably. Looking to the future and to a growing digital business, we need to establish the same sort of business model, one that encourages new devices and new stores. One that encourages healthy competition. One that is stable and rational. It also needs to insure that intellectual property can be widely available digitally at a price that is both fair to the consumer and allows those who create it and publish it to be fairly compensated.

Under the agency model, we will sell the digital editions of our books to consumers through our retailers. Our retailers will act as our agents and will take a 30% commission (the standard split today for many digital media businesses). The price will be set for each book individually. Our plan is to price the digital edition of most adult trade books in a price range from $14.99 to $5.99. At first release, concurrent with a hardcover, most titles will be priced between $14.99 and $12.99. E books will almost always appear day on date with the physical edition. Pricing will be dynamic over time.

The agency model would allow Amazon to make more money selling our books, not less. We would make less money in our dealings with Amazon under the new model. Our disagreement is not about short-term profitability but rather about the long-term viability and stability of the digital book market.

Amazon and Macmillan both want a healthy and vibrant future for books. We clearly do not agree on how to get there. Meanwhile, the action they chose to take last night clearly defines the importance they attribute to their view. We hold our view equally strongly. I hope you agree with us.

You are a vast and wonderful crew. It is impossible to reach you all in the very limited timeframe we are working under, so I have sent this message in unorthodox form. I hope it reaches you all, and quickly. Monday morning I will fully brief all of our editors, and they will be able to answer your questions. I hope to speak to many of you over the coming days.

Thanks for all the support you have shown in the last few hours; it is much appreciated.

All best,
John



Amazon retorted with this:

Dear Customers:

Macmillan, one of the "big six" publishers, has clearly communicated to us that, regardless of our viewpoint, they are committed to switching to an agency model and charging $12.99 to $14.99 for e-book versions of bestsellers and most hardcover releases.

We have expressed our strong disagreement and the seriousness of our disagreement by temporarily ceasing the sale of all Macmillan titles. We want you to know that ultimately, however, we will have to capitulate and accept Macmillan's terms because Macmillan has a monopoly over their own titles, and we will want to offer them to you even at prices we believe are needlessly high for e-books. Amazon customers will at that point decide for themselves whether they believe it's reasonable to pay $14.99 for a bestselling e-book. We don't believe that all of the major publishers will take the same route as Macmillan. And we know for sure that many independent presses and self-published authors will see this as an opportunity to provide attractively priced e-books as an alternative.

Kindle is a business for Amazon, and it is also a mission. We never expected it to be easy!

Thank you for being a customer.

Late Sunday night, it looks like Amazon is going to step back from their stance via The Consumerist.

And the Association of Authors' Representatives just issued this statement about 10 minutes ago.

A message from the AAR Board of Directors concerning the sale of e-books:

The AAR strongly believes that the future of the digital book market requires a business model that is sustainable over the long term, and is fair to retailers, publishers and our authors. To be in the best interests of our clients, such a model must respect the high value of book-length work, and adhere to the long-held practice in all media (and most retailing) that new and exciting work bears the highest prices. We have never believed that a model that incurs a per unit loss on every sale, and sets an unrealistically low price on the most popular bestselling books, can possibly be in the best long term interests of our clients or the publishing industry. Therefore we applaud Macmillan's stance on e-book terms; and Amazon's stated intention to work within Macmillan's model. We hope and assume other publishers will soon follow suit.

It is unclear at the moment the extent to which the 'agency model' sales terms will work to the advantage of our clients. But it is clear that having access to our authors' work used as a weapon in negotiation is an unacceptable turn of events that we roundly condemn. Regardless of the content of the negotiations between Amazon and Macmillan, about which we have no information beyond what has been reported publicly, we believe that Amazon's punitive choice to stop selling print editions of work by all Macmillan authors was a blow to the industry and to authors. We certainly hope to see Amazon rectifying this situation with regard to our Macmillan authors immediately. We and our clients have been hugely supportive of Amazon's innovative, indeed groundbreaking efforts since its inception, and we hope that going forward the spirit of partnership between Amazon and our authors can be once again something we can depend upon.


Gail Hochman, President
For the AAR Board of Directors