BOB GARFIELD: Amazon, the largest bookseller in the world, is locked in a struggle with Hachette, one of the biggest publishers. And Amazon has, shall we say, maximized its leverage. It’s prolonged shipping times, taken away the option to preorder new releases and eliminated the one-click option for purchasing Hachette books. Such Hachette authors as Scott Turow and James Patterson are furious, and some readers, too, are disgruntled.
Amid the uproar, Amazon released a statement on Tuesday which said it has the right to seek the most favorable terms from vendors, and it invited frustrated customers, in the meantime, to, quote, “purchase a new or used version from one of our third-party sellers or from one of our competitors.”
Brad Stone is the author of author of The Everything Store: Jeff Bezos and the Age of Amazon. Brad, welcome back to OTM.
BRAD STONE: Thank you, Bob.
BOB GARFIELD: Let’s begin by declaring our various conflicts of interest. [LAUGHS]
Amazon’s imprint, Thomas & Mercer, is publisher of my novel, Hachette is publisher of your book about Amazon. [LAUGHS] So we're, neither of us, exactly disinterested parties.
BRAD STONE: That’s right, and it’s a great irony. A book that is at least in part about Amazon’s touch negotiating tactics is now, in some way, affected by those tactics.
BOB GARFIELD: The other salient fact is that while Amazon is extremely beloved by consumers, for price and convenience and world-class customer service, it’s pretty widely behated by authors, publishers [LAUGHS] and other vendors who have to do business with it. Why is that?
BRAD STONE: Why do publishers dislike Amazon? It’s because [LAUGHS] for the last 10 years they’ve been beaten with increasingly large sticks, as Amazon seeks to change the terms of business that tilt the playing field in favor of e-books. You know, they want to stock less physical books, that Amazon doesn’t want old copies of books sittin’ in its warehouses, taking up space. And every time the contracts between the big publishers and Amazon come due - and one came due this spring between Hachette and Amazon – Amazon seeks to change the terms. They say that they’re trying to create a more kind of future- forward arrangement to push the industry in the direction of digital, to create a better arrangement for its customers over the long term.
But the publishers don’t see it that way. They see, you know, Amazon taking more margin, changing the playing field and putting more pressure on their other partners.
So, you know, when a Hachette looks at this deal, it's trying to protect, you know, Barnes & Noble, which, as we all know, is kind of teetering, and independent bookstores which have been under assault for 20 years. So we’ve seen a kind of steady increasing of hostilities between Hachette and Amazon over the last three months.
BOB GARFIELD: This particular dispute, what are the issues? What are Amazon’s demands that Hachette is not interested in surrendering to?
BRAD STONE: That’s the question and, actually, we kind of don't know. You know, both parties are playing this very close to the vest. You know, I feel like I should be in a pretty good position to know, being a Hachette author, dealing with Amazon quite a bit over the last few years. I can’t really say that I do, and I haven’t seen it reported authoritatively elsewhere. It probably most likely centers around e-books and the royalty arrangement.
Hachette, like a lot of the other big publishers, is kind of done compromising. I think they feel like they’ve given up a lot to Amazon, and Amazon is now 30 percent of their business, in some cases, and they’re worried about their other channels and, if Barnes & Noble does go down, you know, what it looks like when Amazon controls 50 percent, or even more, of the book business.
BOB GARFIELD: Does this negotiation have anything to do with that 2012 Justice Department case against three of the big six publishers, including Hachette, alleging that they conspired with Apple to jack up the prices of e-books on the, what was then new, iPad device?
BRAD STONE: There certainly is a connection. In the resolution of that litigation, it essentially allowed Amazon to price e-books wherever they want. They want to price a book at six or seven dollars, so they want to change the royalty redistribution to make sure that it represents the new lower price. That's where a publisher like Hachette is resisting, because they [LAUGHS] see all the overhead that they have, the arrangements that they have with their authors, the big warehouses, that they still have to preserve to support the old channels, the bookstores. The new royalty arrangement doesn’t work for them. That’s why they’re at loggerheads, and it’s why a lot of people in the book business kind of blame the Justice Department for kind of goin’ after the wrong monopolist.
And the perverse irony, you know, was that they were trying to create an alternative e-book ecosystem, a counterweight to Amazon. You know, unfortunately, they went about it in kind of the wrong way, and Amazon, which does have a commanding position in books, you know, what they’re doing is well within the laws. The problem is it seems to abandon a core value, which is their customer obsession. [LAUGHS]
BOB GARFIELD: Is there a backlash, do you think, that will damage that sterling customer service reputation that Amazon has earned?
BRAD STONE: That’s the key question. I, I think Amazon has shown in the past it is very sensitive to bad press, particularly as it’s seeking to extend its brand in new ways, selling phones or rolling our grocery service. They did release a statement recently, and they released it on an Amazon user forum. They were speaking to the business people that were following it. And the language was technical and somewhat convoluted. It kind of said to me that they don’t really see this playing out in the public, that insiders care about this. You know, they may be a little bit delusional. I mean, they’re making it harder for their customers to get books, to have a good experience on the Kindle, to have quick delivery. These are values that they’ve trumpeted for the past 20 years and here, in this dispute, they’re - they seem to have abandoned them.
BOB GARFIELD: All right, I’ll leave you with a very simple last question. Brad, what’s gonna happen here? [LAUGHS]
BRAD STONE: [LAUGHS] I think these companies will kiss and make up, sooner rather than later. You know, Hachette has a huge motivation to get this behind them. I mean, their upcoming books, you know, like JK Rowling’s new novel, The Silkworm, it’s unavailable on Amazon. You know, you can’t preorder it. And that’s terrible for the publisher. It’s also right now bad for Amazon; they’re getting a lot of bad press. Both parties are saying this could take a long while to resolve. I think they’re kind of posturing.
You know, my sense is that cooler heads will prevail sooner rather than later, and it’ll be back to business as usual.
BOB GARFIELD: All right, Brad, many thanks.
BRAD STONE: Thank you, Bob.
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BOB GARFIELD: Brad Stone is a senior writer for Bloomberg Business Week and author of, The Everything Store: Jeff Bazos and the Age of Amazon. His book comes out in paperback this fall, and you may see a special promo page on it on Amazon.com, or you may not.