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Summary:

Amazon is proposing that Hachette authors receive 100 percent of the sale of each of their ebooks during the companies’ ongoing negotiations. But the letter it sent this week may largely be a PR move.

As the negotiations with Hachette drag on, Amazon says it is “thinking of proposing” a path that would alleviate pressure on Hachette authors.

David Naggar, VP of Kindle content and independent publishing, sent a letter to a few Hachette authors, literary agents and Authors Guild president Roxana Robinson over the weekend suggesting that “for as long as this dispute lasts, Hachette authors would get 100% of the sales price of every Hachette ebook we sell. Both Amazon and Hachette would forego all revenue and profit from the sale of every ebook until an agreement is reached.” The idea, seemingly, is that that loss of ebook revenue would “motivate both Hachette and Amazon to work faster to resolve the situation.”

Hachette would need to agree to the proposal, of course, and the letter made it clear that as of its writing Amazon hadn’t actually suggested the idea to Hachette yet: Rather, it’s what “we’re thinking of proposing to them,” and it wants to “get feedback” from authors and agents first. It is likely that the company suspected — or hoped — the letter would become public as a means of putting pressure on Hachette: Amazon comes across as the good guy, looking out “for midlist and debut authors,” while Hachette’s “unresponsiveness and unwillingness to talk until we took action put us in this position.”

Hachette, for its part, showed no signs of capitulating Tuesday. “We invite Amazon to withdraw the sanctions they have unilaterally imposed, and we will continue to negotiate in good faith and with the hope of a swift conclusion,” the company told me in a statement (see the full statement at the bottom of the post, after the letter). In response to that statement, Amazon said, “We call baloney. Hachette is part of a $10 billion global conglomerate. It wouldn’t be ‘suicide.’ They can afford it.” (See Amazon’s full statement also at the bottom of the post, after the letter.)

Hachette also denied Amazon’s allegation that it has refused to negotiate, in a statement to the Wall Street Journal: “We made an offer in April that was the largest we ever made to any retailer, and in May made another that was higher still. Both offers were rejected.”

The idea outlined in Naggar’s letter is somewhat similar to an idea that Amazon had earlier proposed, in its public statement on the contract dispute: “We’ve offered to Hachette to fund 50% of an author pool — to be allocated by Hachette — to mitigate the impact of this dispute on author royalties, if Hachette funds the other 50%. We did this with the publisher Macmillan some years ago. We hope Hachette takes us up on it.”

Amazon’s latest proposal, however, would apply only to ebooks but is more generous to authors. “If we sell a book at $9.99, the author would get the full $9.99, many multiples of what they would normally get. We can begin implementing this arrangement in 72 hours if Hachette agrees.” Since Amazon takes a 30 percent commission on each ebook sale (it is reportedly looking to increase that commission as a result of these negotiations) and Hachette gets 70 percent, Hachette gets a worse deal from such an arrangement than Amazon does. (In many cases, Kindle editions of Hachette books have been hard to find on Amazon’s website as a result of the dispute; it’s unclear how that would change if this proposal were actually implemented.)

The letter’s existence, and excerpts from it, were first reported by the New York Times and the Wall Street Journal on Tuesday.

The full letter

“Dear XX,

I wanted to ask your opinion about an idea we’ve had that would take authors out of the middle of the Hachette-Amazon dispute (actually it would be a big windfall for authors) and would motivate both Hachette and Amazon to work faster to resolve the situation.

Our first choice would be to resolve a dispute like this through discussion only. We tried that already. We reached out to Hachette for the first time to discuss terms at the beginning of January for our contract which terminated in March. We heard nothing from them for three full months. We extended the contract into April under existing terms. Still nothing. In fact we got no conversation at all from Hachette until we started reducing our on-hand print inventory and reducing the discounts we offer customers off their list prices. Even since then, weeks have gone by while we waited for them to get back to us. After our last proposal to them on June 5th, they waited a week to respond at all, promising a counteroffer the following week. We are still waiting a month later.

We agree that authors are caught in the middle while these negotiations drag on, and we’re particularly sensitive to the effect on debut and midlist authors. But Hachette’s unresponsiveness and unwillingness to talk until we took action put us in this position, and unless Hachette dramatically changes their negotiating tempo, this is going to take a really long time.

Here’s what we’re thinking of proposing to them:

• If Hachette agrees, for as long as this dispute lasts, Hachette authors would get 100% of the sales price of every Hachette e-book we sell. Both Amazon and Hachette would forego all revenue and profit from the sale of every e-book until an agreement is reached.

• Amazon would also return to normal levels of on-hand print inventory, return to normal pricing in all formats, and for books that haven’t gone on sale yet, reinstate pre-orders.

Here’s an example: if we sell a book at $9.99, the author would get the full $9.99, many multiples of what they would normally get. We can begin implementing this arrangement in 72 hours if Hachette agrees.

We haven’t sent this offer to Hachette yet — we’re sending this to a few authors and agents to get feedback first.

What do you think?  Would this be helpful, especially for midlist and debut authors?

Can we talk on the phone later today or tomorrow once you’ve had a chance to digest?

Thanks and look forward to talking.”

Statements from Hachette and Amazon

Hachette:

“Amazon has just sent us a brief proposal.  We invite Amazon to withdraw the sanctions they have unilaterally imposed, and we will continue to negotiate in good faith and with the hope of a swift conclusion. We believe that the best outcome for the writers we publish is a contract with Amazon that brings genuine marketing benefits and whose terms allow Hachette to continue to invest in writers, marketing, and innovation.  We look forward to resolving this dispute soon and to the benefit of the writers who have trusted their books to us.”

Amazon:

“We call baloney. Hachette is part of a $10 billion global conglomerate. It wouldn’t be ‘suicide.* They can afford it. What they’re really making clear is that they absolutely want their authors caught in the middle of this negotiation because they believe it increases their leverage. All the while, they are stalling and refusing to negotiate, despite the pain caused to their authors. Our offer is sincere. They should take us up on it.”

*Hachette previously described Amazon’s proposal as “suicidal” in a statement to the Wall Street Journal; the story has since been updated and that reference removed.

This post was updated several times Tuesday afternoon.

  1. Let the negotiations drag on!
    Leslie

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  2. Amazon is playing the deep game here. They win, and probably undermine, Hachette regardless of which way it goes.

    If Hachette agrees, suddenly their authors are receiving 100% of the ebook income instead of the 12.5% that Hachette pays them. These authors might get used to this larger payout and become intrigued by Amazon’s ~70% payout structure. Amazon wins.

    If Hachette disagrees or ignores the offer, they look petty and start losing face. Amazon wins.

    It doesn’t sound like Hachette will make a counter-offer because they haven’t made one yet over these past few months. I don’t see how they eke out a victory here or at all.

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    1. I’ll give ‘em points for creativity!

      Hachette should agree to take the offer up on the condition that Amazon ALSO pay every independent bookseller that carries the title a promotional fee.

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      1. You mean the indie booksellers that have been boycotting Amazon Publishing Titles for years now with no outcry from any of the authors now whining?

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        1. Bob, those indies have struggled to stay in business because of Amazon’s brutal tactics. When a corporation that makes over 100 billion dollars a year is willing to sell books at a loss in order to drive the competition out of business, why should those competitors help it succeed?

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          1. Yet you tweeted about two books on sale today at Amazon. Why not mention B&N instead?

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            1. LOL! Nice, Anne.

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    2. Note Hachette author Douglas Preston to the WSJ on the morality of taking 100% of the ebook sales: “My publisher gave me a very large advance for the book they are about to publish. Morally, I would have to turn over that [Amazon] money to them.” http://online.wsj.com/articles/amazon-offers-e-book-authors-100-of-sales-amid-publisher-dispute-1404840227

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    3. 12.5%? That’s it? Independent authors receive up to 70%…and I don’t want to hear how Hachette has done all of the marketing and such. They haven’t. They simply put out a file, Amazon takes 30% and the publisher makes the rest. You do the math and tell mw who is getting rich here.

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      1. Amazon gives self-published authors an empty stall at a flea market. Amazon invests nothing, takes no risks, provides no insurance, and charges a minimum of 30 percent commission for the service. Most authors lose money on that deal.

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        1. Any source for your numbers?

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          1. She won’t respond, Oletros.

            Deborah Smith wanders the internet trolling, making hit-and-run anti-Amazon comments and running away when asked to back them up.

            A little research will show you why she’s so bitter about Amazon. She runs a small publishing business whose authors are abandoning her to self-publish.

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  3. Balthazar B Tuesday, July 8, 2014

    Clever move by Amazon to take the high ground in the PR battle. As well as an invitation to authors to eliminate one of the middlemen.

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    1. There’s no high ground here.

      This sham is only designed to pump Amazon for a news cycle. Hachette should immediately release a statement rejecting this ploy to take this BS out of the news as quickly as possible. And perhaps chide Amazon in the press to negotiate in good faith in the future — like that’s ever going to happen …

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  4. Amazon is playing very smart. Hachette isn’t coming out on top here no matter what. However, after all the wrangling is done between Amazon and Hachette, Hachette still owns the author contract. Contracts tie the author to the publisher according to whatever terms originally agreed upon. In some cases, this may even mean that Hachette holds all rights to the author’s books. So, even if they do like Amazon better, authors are stuck with whatever deal they made with Hachette in the first place and can’t change until that contract runs out.

    The heavier impact is with authors Hachette may be pursing for future contracts. Whenauthors see the games being played, they may decide Hachette isn’t a company that has their best interests at heart. Amazon’s play here is pretty transparent, but it works on so many levels that it may not matter.

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  5. Doesn’t Amazon sell ebooks at a loss any way? How can they give up their share of revenue if they don’t have any revenue from ebooks?

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    1. Robotech_Master Tuesday, July 8, 2014

      Not all of them. Not even very many of them. Amazon only sold a relatively few new titles as near- or below-cost loss-leaders. All their backlist titles have always been priced well above wholesale. Amazon makes money when someone who buys one of those cheap new titles likes it enough to go buy some regularly-priced old titles by the same author.

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  6. I thought Amazon paid the publishers $12.99-14.99, and the ones Amazon sells for $9.99 are sold at a loss.

    I think the Author mixed up the commissions on eBooks. The 30% cut is for Indy writers who publish through Amazon.

    The big publishers charge Amazon more than $9.99 for their eBooks.

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    1. Hey Sam, thanks for the comment. The story is correct: The publisher sets the price for the ebooks, Amazon can generally discount them as much as it wants to (with a couple exceptions), Amazon takes 30% of the consumer list price of the book, or less if it discounts it.

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  7. Patricia L McGuire Tuesday, July 8, 2014

    I am very concerned about the impact that Amazon is having on the publishing industry…the word monopoly comes to mind….

    Patricia

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  8. This is a man in a van offering the kids some candy.

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  9. Thorvington Finglethorpe Wednesday, July 9, 2014

    Is anybody yet unconvinced that we need an open ebook format and device that is not under the thumb of one monopolist?

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  10. We do have an open format, EPUB, used by Barnes & Noble, Kobobooks and others. Unfortunately, it’s crippled by proprietary copy protection and not as “open” and multi-platform as it should be.

    Nook (B&N) and Kobo are both struggling, too. People by-ahd-large prefer the Amazon shopping experience, don’t give a fig about format, and are happy to buy Kindles and support the retailer that makes them happiest.

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