November 10, 2014

My super cynical Simon & Schuster/Amazon contract theory


Simon & Schuster is talking to Amazon. Amazon is talking to Simon & Schuster.

Simon & Schuster is talking to Amazon. Amazon is talking to Simon & Schuster.

This piece originally appeared on Josh Cook’s blog, In Order Of Of Importance.

Apparently, the world of publishing doesn’t go on vacation whenever I do. Things, with a flagrant disregard for my opinion, happen without me. The biggest news in my time away was the shockingly swift signing of a new contract between Amazon and Simon & Schuster. Given Amazon’s notorious secrecy, I doubt we will ever know anything about the negotiation process, though, once we see how prices and discounts on S&S’s books on Amazon work out, we’ll be able to extrapolate much of the terms of the deal. Most likely, the course of the negotiation and the reason for Amazon’s swift acceptance of the contract, follows one of the trajectories Melville House co-publisher Dennis Johnson outlined in a post for MobyLives . I suppose it also could be possible that S&S discovered and eliminated the legendary “inefficiency” in publishing and so will be able to continue producing books while meeting Amazon’s price requirements. (They didn’t, because that’s not possible. But even if they did, they couldn’t share it with other publishers. More on that below.) And, because Amazon is sustained by share-prices rather than profits, whatever happened, must have something to do with Wall Street perception. But I have a more cynical theory.

Trigger Warning: This theory is really cynical.

Here are the two facts on which I base my theory. (The cynicism I earned through years of reading the news.) First, the DOJ lawsuit and the bizarrely aggressive letter the DOJ sent to the publishers involved in that suit before the latest round of negotiations began, mean that publishers are going to be terrified of doing anything that could remotely be considered collusion. This means that even if there is an obvious best course of action to take, a course they would individually choose based on its own merits, they will be nervous to take it, because if they all take it, they will get sued. Which could mean, that each publisher will be limited by what the preceding publisher does. Which is a difficult place to negotiate from. For example, there is a good chance that Simon & Schuster was nervous about holding out as Hachette has done for no other reason than holding out for any reason, even completely different reasons than Hachette, could trigger an investigation. Second, Amazon’s “Gazelle Project” is based on exploiting weaker publishers for better terms.

You ready? This is seriously cynical. OK.

Amazon is turning Hachette into a gazelle. Every time Amazon quickly comes to terms with another publisher, Hachette looks more and more like the obstinate party in the negotiation. People will wonder why the other publishers were able to reach an agreement but Hachette was not. The low price at any cost crowd will begin to crow about just how much Hachette is trying to squeeze from the unsuspecting public. In the eyes of the public, as opposed to industry members, Hachette will look less and less like a defender of culture and more and more like a profit hungry “$10 billion company.”

Furthermore, Amazon can live without Hachette forever and Hachette can only live without Amazon for some amount of time. As part of an informal industry-wide effort to protect the sustainability of the publishing, that amount of time could be years, but eventually, someone is going to have to pay Hachette’s utility bills. Furthermore, agents, who, yes, are human beings who, like authors, need to eat, will eventually avoid signing with Hachette (and its imprints) because of how limited the sales are going to be. Meaning that, if my super cynical theory holds, along with the sales drain directly caused by Amazon, Hachette will also suffer from a talent drain, meaning that, there is a chance Hachette could suffer losses long after any contract is signed with Amazon. And then Hachette is a gazelle. And then, through one process or another, the world will have four major publishers and Amazon will only need four contracts. Told you it was cynical.

I don’t know if there’s a “ray of hope” in this piece, but I will say it could all change when it is Penguin Random House‘s turn to negotiate. Given the disaster that was its “phone,” and the more general slow shaking of investor confidence, I don’t think even Amazon could go without roughly 25% of all English language publishing for very long. I mean, wasn’t that the point of the merger? Penguin Random House could potentially force Amazon’s hand, and if that happens after another quarter of ridiculous losses, we might actually hit some kind of turning point in publishing.

Or the Justice Department could sue. (Cynical, remember.)

(What should we do about this? Same thing we should do every day, Pinky, buy books from independent bookstores.)


Josh Cook is a bookseller at Porter Square Books. His first novel, An Exaggerated Murder, was published by Melville House in March 2015.