Up Against Amazon

August 14, 2014


AmazonBy Karen Christensen —

[This piece appeared first in the Berkshire Publishing website/newsletter and was reprinted with permission in the August 2014 issue of IBPA’s Independent magazine. Click here for more from IBPA’s Independent.]

Amazon doesn’t just take orders. It is used to barking orders at publishers and getting us to salute. But bullying only goes so far, and I’m thankful that a single large publisher, Hachette, stood up to it and that The New York Times ran an editorial about its strong-arm tactics.

I’ve been sitting on my own Amazon story for a while, after having received a threatening phone call from its legal department when I refused to agree to a unilateral change of terms. But with all the publicity and debate about Hachette, I thought other publishers, as well as Berkshire Publishing’s friends, colleagues, and customers, might like to know about our experience and why I believe that Amazon is destroying healthy competition in the publishing world.

I am an academic publisher as well as an environmental author (with one book published by Hachette, in fact). My company is very small. Amazon.com has a market cap of $US141 billion. “They have infinite resources,” said a friend when I told him that I had received an angry phone call from Amazon.com’s legal department. The telephone call wasn’t to discuss terms, but to threaten me for “telling lies about Amazon.” What I had written was that if we had to stop supplying Amazon I would have to write to all my customers, authors, and colleagues to tell them why.

Discount Demands

My fight with Amazon began when it decided to go after traditional “short discount” publishers (academic presses as well as presses like Berkshire Publishing) with a unilaterally imposed change in business terms announced only in a “case note” within their order-processing platform. This platform is normally used to inquire about the availability of certain books and is used by customer service staff.

A colleague of mine whose staff was puzzled enough to pass the “case note” along to him asked Amazon to contact him directly by telephone or email, saying that business terms were a matter for our company’s executive team. Amazon refused to talk—communication would take place only through the “case.”

Berkshire Publishing had sold print through Amazon.com since 2006. Although it originally demanded a 40% discount—four times our standard—I decided that we should make books available through any major platform that individual readers and libraries use. Our authors like knowing that their books are readily available worldwide. And we reach some people who would never otherwise know about our titles. In fact, I was recently at a meeting in Beijing and showed a copy of our book This Is China: The First 5,000 Years. Two of the people there started whispering and giggling, and finally one spoke up, “I have that book. I ordered it from Amazon!”

Amazon’s demand in 2012 was for an additional 5%, bringing the discount to 45% (some academic presses had been at 25%, so the change to 45% meant a reduction of 80% in their net income from Amazon sales). Bookstores generally get a discount of 30-40%. Amazon has been getting 50-55% from the big trade presses, and the current battles are in part over further discounts that Amazon is demanding to increase its marginal profit.

It is not only publishers who are affected (who, after all, really feels sorry for publishers?); independent bookstores cannot compete with this kind of pricing. Amazon discounting also affects authors, because many book contracts specify a lower royalty percentage if the discount is 50% or higher. The more Amazon demands, the more authors will be hurt.

In the end it is readers—students, professionals, and those who read for pleasure—who will suffer because innovative writers won’t get the chance they deserve and hard-working midlist authors won’t be able to afford the time they need to write.

And who says cut-rate pricing will continue once Amazon’s market dominance is assured? Publishers, including self-publishers, love the 70% Amazon pays them on e-books now, but the split was 70% for Amazon until after agency pricing, and the contract allows Amazon to change it any time. There’s no reason to think the company won’t impose changes on any group of suppliers (which is all we authors and publishers are).

Amazon, by the way, does not necessarily pass those discounts on to the customer. Most Berkshire books are academic reference works that sell for hundreds of dollars; Amazon has generally sold them at full price, keeping that substantial “discount” as its profit, which is far greater than our profit on our own books.

Current Consequences

Amazon is destroying competition and innovation because it is not letting the market determine winners and losers, but is instead making the selection itself, deciding arbitrarily where to take its pound of flesh and shore up its feeble margins. Publishers (and authors) would be fine if they were actually competing with one other for sales without Amazon sucking the life out of every transaction.

Finally, what happened? Are Berkshire Publishing titles available through Amazon? Dear reader, I capitulated after four months. It wasn’t fair; it wasn’t good for anyone but Amazon, but I was losing sales that I needed and I gave in. Amazon made one change, too: it hired its first small-press liaison and I met her at BookExpo last year. I didn’t hear from her this year and have no idea if that department of one still exists, but I hope that in future we will be able to discuss and agree on terms that make sense. “Hurrah” for Hachette and for everyone else who is now standing up to Amazon.

SEE ALSO: Some Thoughts from IBPA on the Ongoing Amazon/Hachette Situation

Karen Christensen is a publisher, author, journalist, and blogger. She worked for Blackwell Science and Faber & Faber in London and founded Berkshire Publishing Group, which specializes in academic resources for global audiences, after returning to the United States. She consults on library services including book and e-book distribution, and writes and speaks about online and offline community building. For more information: karen@berkshirepublishing.com.

3 responses to “Up Against Amazon”

  1. You make such good points, especially about authors being penalized if the discount increases. I am exasperated with Amazon’s claim in the Hachette fight that Amazon’s goal is to save readers money and protect authors. (Ha!) One strategy, although it creates a disadvantage for storefront retailers, is to increase list prices to compensate for Amazon’s demands. One possible way around that for storefronts is to offer co-op funding for bookstore coupons that then reduce the price for buyers and give booksellers a reason to display and publicize titles.

  2. Eric says:

    We were in a similar situation, but the lesson I learned was polar opposite. We had a nano-publishing company for many years and yes, the bite Amazon took was substantial. On the other hand, as you hinted in your summary, a small publisher can’t really do without Amazon. The reception to our books from independent bookstores was a refusal to carry our books because we couldn’t afford to offer the discounts they insisted on (45%) which were unsupportable with their returns policies. Amazon, even with their insistence on a 55% discount, could always be counted on to keep our books in stock, we never had to worry about returns, paid much more promptly without the necessity for a billion invoices (we still have some bookstores who haven’t paid after several years of billing) and generally made our lives a lot simpler all while offering an enormous market that any traditional bookstore couldn’t match. I had countless examples of potential customers who would go to the local bookstore only to be told they couldn’t supply the book. We were thrilled that Amazon provided a reliable alternative. The book would be in the customer’s hands within 2 days, often just one day, better service than we, as the publisher, could ever offer. So yes, I don’t like their desire to increase the discounts we must pay, but the benefits are overwhelmingly worth it. Selling books is far referable to having them rot in the warehouse.

  3. The previous commenter offers several erroneous experiences which I will attempt to explain here. 1) No one “needs” to work with Amazon. It is a conscious choice based on the fear of failure. 2) The standard wholesale discount on books is 55%. It is what I use. I have to price my books to be affordable and in many cases I end up earning about $1.00 to $1.50 for printing a book on demand. I do not warehouse books because my aim early on was to print less and save a few trees, but I digress. 3) There are easily 6 or 7 extant ebook aggregators and sellers who do a better job of distribution and have better and fairer contracts with sellers who do not discount beyond 60%. I use Ingram and Smashwords. The retail competitors with Amazon at present are Apple, Barnes & Noble, Books a Million, independent booksellers and a whole host of libraries and educational institutions, which do not rely on Amazon for anything. 4) I learned after my experience with Amazon is that playing in its sandbox means a long harrowing experience with sudden changes in the contract which gives the 2nd party no chance to enjoy the same fairness that other retailers must give. Even then, Amazon reserves to itself the right to accept or reject titles, offer them at ridiculously and dangerously low prices, suspend sales or refuse to report altogether, and in other ways make it hard for one’s books to be read. I chose not to publish on Amazon’s KDP platform after a year of wrangling to sell my ebooks there, then found that they were not being sold at all because of Amazon’s capricious and willful tactics against smaller publishers. So I speak from experience by saying that capitulation will only come back and bite you in the end.

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