May 12, 2014

The Everything-But-Hachette Store: Amazon stops shipping books to leverage more money out of Hachette


hachetteLate Thursday night, the New York TimesDavid Streitfeld reported that Amazon had been raising prices and delaying shipments of books published by Hachette, which controls over a third of the U.S. book market. According to Streitfeld’s sources at Hachette, Amazon is “determined to squeeze as much margin out of its suppliers as possible.” Amazon has been notoriously unprofitable throughout its history. And, while the company’s astounding growth—the result of exceptional customer service, loss-leader pricing, and a pathological aversion to paying taxes—has long comforted onlookers, investors are beginning to get antsy. In the first quarter of this year, for instance, the company brought in $19.74 billion in revenue, but posted a mere $108 million profit.

As Streitfeld notes in his report, Amazon has frequently resorted to similar tactics to secure adventatious deals with publishers throughout its history:

For at least a decade, Amazon has not been shy about throwing its weight around with publishers, demanding bigger discounts and more time to pay its bills. When a publisher balked, it would withdraw the house’s titles from its recommendation algorithms.

“Typically, it was about 30 days before they’d come back and say, ‘Ouch, how do we make this work?’ ” an Amazon buyer told the journalist Brad Stone in his book about the company, The Everything Store.

Sometimes, though, more action was needed. The bookseller pulled all the “buy” buttons for Macmillan books in 2010 in a dispute over e-book pricing. Two years later, Amazon was negotiating for a higher discount with the distributor Independent Publishers Group. “They decided they wanted me to change my terms,” the IPG president, Mark Suchomel, said at the time. “It wasn’t reasonable. There’s only so far we can go.”

Of course, Amazon isn’t alone in trying to squeeze publishers for better deals—Barnes & Noble did something similar to Simon & Schuster last spring when it drastically cut orders from the publisher during a contractual dispute. But, even with falling stock prices and anxious investors, Amazon doesn’t appear to be terribly insecure: according to Streitfeld, this dispute has dragged on for over two months already and the retailer appears to be in it for the long haul. This is, after all, a company that will stop at nothing to ensure it gets the best deal possible for itself—at the expense of its partners. 

Amazon may have hoped that cutting orders and raising prices would sow disaffection among Hachette’s authors—that authors would see falling sales numbers and push their publisher to cut a deal, any deal, with the retailer that sells far more books than any other. But, while some authors have blamed both parties and expressed frustration with Hachette and Amazon, it appears that many are sticking with their publisher.

In a follow-up report posted on Saturday, Streitfeld quotes a number of notable Hachette authors, including Sherman Alexie, lashing out at Amazon on Twitter.

Meanwhile, Authors Guild Vice President Richard Russo told Streitfeld, “If you’re a monopolist, you get to be a bully… Maybe you feel immune.”

But not everyone is as cut-and-dry as Alexie, Stross, and Russo. Hachette author Michael Sullivan felt caught in the crossfire:

When the science fiction writer saw in March that his books were suddenly unavailable, he called Amazon, which said Hachette was not shipping the books. Hachette told Mr. Sullivan it was. He does not know whom to believe but knows this: “It’s the little guys who pay the price.”

Sullivan’s confusion and disappointment are both entirely understandable—after all, there are few things worse than being told two completely different things, especially if your livelihood is at stake. But there’s something also something truly exceptional going on here. Amazon has not spoken to the press about its dispute with Hachette. This is not entirely surprising—Amazon rarely, if ever, talks to the press. (In fact, a Google search for the phrase Streitfeld uses in his dispatch, “An Amazon spokesman declined to comment.” yields an astounding 84, 500 results.) But Amazon is not as shy when it comes to Hachette authors, apparently—the company is not willing to say anything to reporters like Streitfeld, but it’s more than happy to lie to Hachette authors.

But Sullivan’s definitely right about one thing: “It’s the little guys who pay the price.” Every Hachette author is getting hurt her. I, for one, am not going to shed too many tears for millionaires like Malcolm Gladwell and Stephen Colbert. But debut authors and midlist authors—even fairly established here—are getting crushed because Amazon wants to squeeze a few more dollars out of a publisher.

But what, if anything, can Hachette do? They have little leverage to speak of. This is, after all, a post-U.S. v. Apple world. If other publishers were to step up in defense of Hachette—a reasonable thing to do, considering that the other four “Big Four” publishers could be next up on the firing line—they’d have to fear another antitrust suit. The major publishers made that mistake once and the U.S. government stepped in at Amazon’s behest. They won’t make it again.

There’s another interesting wrinkle in this story. Last summer, Jeff Bezos bought The Washington Post and promised he wouldn’t interfere with the paper—Post publisher Katherine Weymouth has said that Bezos “understands that the paper is going to write articles about Amazon and him and his friends that he may not like, and he understands that.” The New York Times has published two stories about Amazon’s spat with Hachette. As of midnight on Sunday, The Post has posted zero.


Alex Shephard is the director of digital media for Melville House, and a former bookseller.