The Amazon Hachette Dispute Comes to a Pyrrhic End

Amazon and Hachette announced a settlement last week in their long festering contractual dispute. The publishing industry breathed a collective sigh of relief. But is it really over? The dispute signals a new chapter in Amazon's strategy to favor suppliers that bow to its desires.

At the heart of the Amazon/Hachette dispute was the Agency pricing model for ebooks, which meant it was a battle was over pricing and margin. According to most press accounts, Hachette wanted the freedom to set consumer prices and earn 70% list for its ebooks, and Amazon wanted to pay Hachette lower margins so it could fund deeper discounting.

In carefully worded statements last week issued by Amazon and Hachette - neither of which boasted of victory - we learned Hachette will retain Agency pricing control yet conceded to certain unspecified Amazon contract stipulations intended to encourage Hachette to offer lower ebook pricing.

It's not easy to pick winners and losers. As with most wars, even winners can be losers.

Here's my score card of winners and losers, along with speculation on long term implications.

  • Hachette *mostly* won, but is now boxed into a position where faithful authors will expect higher net royalty rates for ebooks as well as other perceived reforms from publishers. The Author's Guild has already hinted as much. In a blog post last week commemorating the agreement, Authors Guild president Roxana Robinson took the opportunity to urge Hachette to raise ebook royalty rates for authors.

  • Amazon mostly lost, because it appears Agency wasn't dismantled or critically injured. Amazon will likely seek revenge through other means (see below).
  • Agency mostly won. It dodged a bullet to the benefit of publishers and indie authors alike, and to the benefit of Amazon's retail competitors.
  • Amazon mostly lost on the PR front. Amazon's heavy handed tactics confirmed the industry's worst fears about Amazon. Word of Amazon's heavy-handedness leaked out into the mainstream media where it probably tarnished Amazon's otherwise pristine image in the minds of consumers who were paying attention. Amazon dare not replay the same overt tactics again unless it wants to rip the scar off of the bloody mess and remind people to connect dots back to the Amazon/Hachette dispute or other overt examples of predatory practices such as Jeff Bezos' infamous Gazelle Project.
  • Amazon boxed in. Just as Hachette is boxed in with expectations of payback from their defenders, so too is Amazon. If Amazon puts the squeeze on indie authors and their 70% list, their supporters will cry foul ("Hey, I defended you like a loyal pit bull in your dispute with Hachette!")
  • Author affinity for publishers damaged. Amazon partisans orchestrated a rage-fest against traditional publishers, further eroding the once divine reputation of traditional publishers. Amazon partisans used this dispute as an opportunity to paint all publishers with the broad brush that publishers don't care about authors, want to exploit authors, collude on pricing, want to overcharge customers for ebooks to protect their print businesses and protect brick and mortar bookstores, and who knows what else, strangle kittens? All good conspiracies are grounded in a small amount of truth. Yes, no doubt, publishers have much opportunity to bring reforms that benefit authors, though the vitriol was excessive and toxic. I also believe that indie authors are well-served by a thriving and profitable traditional publishing industry because it creates more publishing options for all authors. When indies go too far to tear down publishing houses, they risk tearing down their own house as well.
  • Authors attacking authors. Successful traditionally published authors - in the form of Douglas Preston's Authors United initiative - who stood by publishers were attacked by the Amazon partisans. This, to me, was one of the most unfortunate outcomes. When authors are attacking authors, you know the world has gone mad. It was all the sadder that most of these attacks came from the indie author community. Indies should be better than this.
  • Any perceived victory for publishers may prove Pyrrhic. The Hachette agreement, which was itself preceded by Simon & Schuster reaching new terms with Amazon, will likely be followed by other publishers striking similar deals now that the goal posts are planted in the ground. To the extent Amazon feels it was forced to settle, this settlement will dredge up their bitter memories of the time publishers forced Amazon swallow Agency pricing in 2010, which stripped Amazon of the ability to discount ebooks. Amazon doesn't like it when others exert power over it. Can you blame Amazon? No one appreciates feeling powerless, especially Amazon when their business model is entirely dependent upon deep discounting. Amazon prefers its supplier frenemies divided, conquered and dependent. If it can't crush Agency, it will try to neuter the publishers who use it. It views publishers as fat middlemen to be disintermediated, their fat to be rendered away and conveyed to the bellies of customers. Although Amazon's ability to replay their heavy-handed Hachette playbook is limited, I expect they'll exact passive-aggressive revenge in the form of reduced discoverability and merchandising for Agency publishers. Let's call it the cloak of invisibility that no author or publisher wants to wear. Amazon will redouble efforts to undermine the power of publishers by diverting more reader eyeballs to indie books in KDP Select and Kindle Unlimited, and to Amazon imprints that are exclusive to Amazon. Amazon has every right to arrange their own shelves according to this caste system.
  • As with most battles, all combatants lost a little something in end. Here's wishing the industry greater peace and prosperity in the future.