Amazon v. Hachette

Update 5:12 PM (CST): Global edit, Hatchette->Hachette. Because apparently I thought the publisher was actually named after an axe.

Updated 5:18 PM (CST), 11 August: Someone popular linked to this and site traffic is crazy. Load times are slow. Apologies. Also, see the addendum at the end.

I hoped I’d be able to stay out of this whole Hachette/Amazon mess. It should be easy: I’m not a recognized authority on publishing, after all, and my soapbox isn’t really pointed in that direction. But as it happens, no one in this argument is saying what I want them to say, so I’m going to have to say it myself, and leaving comments on other people’s blogs just isn’t going to cut it for me.

The Short Version

This is a horrible fight. No matter who wins we’re probably screwed. Hachette isn’t the hero, and Amazon isn’t the hero either.

The Long Version

Looking at this fight all by itself, without any context at all, Amazon probably deserves to win–and honestly, I think it probably will win whether it deserves to or not. There’s no legitimate reason an ebook should cost the same as a paperback. “Well we really want to” is not a legitimate reason. “Because we can get away with it” is only legitimate from a business perspective if you can actually get away with it, and the current fight between Amazon and Hachette suggests that they can’t.

As reader of books I want ebooks to be cheaper than paperbacks because a) they’re obviously cheaper to make and b) when I “buy” an ebook I have fewer rights to do what I want with it than I do when I buy a paperback, so please don’t try to pretend it’s the same thing. If the first sale doctrine doesn’t apply to an ebook purchase, or doesn’t apply as completely, then it better be cheaper. So strictly within the boundaries of the current argument between a publisher that wants to charge stupid prices for their product and a retailer that wants to sell a product at less-stupid prices, regardless of their actual motives, as someone who buys ebooks I gotta hand Amazon the win.

That said: an Amazon win is probably not in anyone’s long-term interests.

Here is the secret to understanding my take on Amazon: they’re not part of the publishing industry, although the things they do certainly affect it. They’re not a service and retail company, though that is the way they make all their money. At its core, Amazon is and always has been part of the computer industry, and if you view them from that perspective their business practices should scare the shit out of you.

Amazon: The Good

I’m not going to describe my opinion of Amazon as “nuanced,” because it really isn’t. At the end of the day I’m a fan.

I remember using them back when all they sold were books. I loved them, because I could find any book I wanted and I didn’t have to drive anywhere to get it. I guess that makes me a horrible person as far as local book stores go, and honestly I can see their point, but I could go to a book store and not find what I wanted, and wait for them to order it for me, which would take a few weeks, or I could go to Amazon and buy the book and even if they didn’t have it in their warehouse they’d get it to me in less time than the book store could.

Then they started selling everything else under the sun, and that made it better. Honestly, the only thing I don’t buy from them is food, because buying food over the internet strikes me as a Really Bad Idea For Various Reasons Which Probably Belong In A Separate Post.

As far as customer experience goes, Amazon has the complete package. Even their customer support is outstanding: I once accidentally shipped a gift to the wrong address and the Amazon representative was able to change the shipping address in mid-route to make sure it got to the right place. That’s incredible. Any time I’ve ever had a problem with Amazon, even as a self-published author (when CreateSpace kept insisting I wasn’t naming the titles of my books correctly) as soon as I was able to communicate with an actual human being the matter was resolved promptly and professionally. While I know that not everyone has had this experience (customer support outcomes depend as much on whether or not the CS Rep is good at their job, or is having a good day overall, as much as it does on the system put in place by the company) this experience has been consistent enough to convince me that Amazon puts a lot of effort into making sure Customer Support is actually focused on supporting the customer.

This is fantastic, and this is one of the reasons so many people are so happy to use them. And this is in direct contrast to my experiences with customer support at Barnes and Noble, which once resulted in me shouting obscenities at the top of my lungs (much to the amusement of my co-workers) after being transferred to yet another subdivision of B&N customer support for the eighth time.

So yeah, as a customer, Amazon is fantastic. And as a customer I’m pretty loyal to them, not because I think Jeff Bezos is my bestest personal friend forever but because I’ve yet to use another service that works as well as they do.

But stepping away from being a customer… let’s talk about self-publishing. I started self-publishing in 2011 when I published Pay Me, Bug!, which may or may not continue to be published under that name, and I continued self-publishing when I started serializing Curveball. Of course, self-publishing existed before Amazon supported it, but I think it’s fair to say it wouldn’t be where it is now without Amazon jumping in the way it did. I tend to believe that self-publishing would still, over time, have become increasingly viable, but Amazon forced the issue, and I for one am grateful for that.

Most of my sales are on Amazon. I sell on other stores, too, but Amazon is by far the most profitable: Amazon, distantly followed by Kobo (most months), followed by Google Play (which may wind up taking the #2 spot soon), followed by B&N, distantly followed by Smashwords, and finally the one guy in Norway who buys my books on iTunes (thanks dude). If you combined all the profits form all the other storefronts together, Amazon would still come out ahead most months.1

Amazon makes it as easy as it can possibly be to get your book up there, and the level of support it provides, while it tends to be restricted to email, is still prompt, responsive, and professional.

CreateSpace, which I also use, is also good. It’s improved dramatically since I first started using it. It’s not quite at the level of Ingram in terms of book quality (and it doesn’t do hardback) but it’s cheaper and easier to use, and the quality is high enough to make it come out ahead.2

It is good enough and aggressive enough that there are self-published authors who have been able to quit their day jobs and self-publish full time, focusing only on the Amazon market. Think about that for a second. They don’t need to sell anywhere else, and they’re supporting themselves.

That’s a success story, and Amazon deserves credit for it. What they did was pretty bold and it changed the market. Kudos.

Amazon: The Bad

So after saying all those glowing things about Amazon I should be firmly in their camp, basking in the reflected glow of my adoration as it bounces off Jeff Bezos’ shining, chrome-silvered armor, right? Well, no. This is where my fellow self-publishers accuse me of having “Amazon Derangement Sydrome,” because despite my enthusiasm for their company, I’m pretty sure they’re going to turn on us all the minute they get their lock on the market.

Which is what they’re trying to do: make no mistake: Amazon wants to be the next monopoly. They want it all. They’re convinced they can do it the best (and so far they can) and the prize of doing it the best is to Get All The Money. If you think monopolies are OK then this entire argument will mean nothing to you. My bias is that monopolies only work when they are heavily regulated, and even then it’s debatable.

This is an argument that is frequently used by companies who are directly competing with Amazon, and many people who defend Amazon’s business practices like to point out that the motives of those companies are suspect. This is a fair observation. My counter-observation is that the argument is still true.

This goes back to my declaration that Amazon is best observed within the context of the computer industry. I make this argument because because Amazon acts like a company in the computer industry. I will go so far as to say that Amazon acts a lot like a scrappy little company called Microsoft, back in its early days.

I don’t make this comparison lightly. When Microsoft first really got momentum under its belt, when it started to become a power in its own right in the market place, what it was doing was, in some ways, heroic. The industry leader at the time was IBM, and it was a very bad IBM. It ruled the market with an iron and fairly uninspiring fist. It could wreck companies. It could destroy emerging ideas it didn’t like. It had so much control that the Department of Justice had to step in and severely restrict the way it did business.

Microsoft represented a refreshing alternative. It recognized a new business line that allowed a lot more people to get involved, start businesses, make money. It decentralized computing to the point that people could start businesses and sell computers and software and services and things without having to play by IBM’s rules.

They also—and I want to be absolutely clear that I am freely and cheerfully giving Microsoft credit for this—recognized that the way to make their business successful was to help make computers look more accessible. If you compared Apple to Microsoft back in the days of DOS, and even the days of Windows 3.0 and 3.1, Apple would win on reliability and usability. But Microsoft did a lot more work on selling the idea that computers were useful for everyone, and people responded to that. And in the very beginning, Microsoft’s technical and customer support was unparalleled. Not to mention they produced some of the finest technical documentation I’ve ever read.

Of course, Microsoft was also ruthless when it came to business, and that ruthlessness was adopted by the computer industry at large as Standard Operating Procedure. I won’t get into that side of it—those of you who read Help Desk already know my opinions on those tactics. Those of you who aren’t familiar with my comic, well, the archives are over there.

For those of you unwilling to go through 18 years of comic archives,3 here’s the short version: every company in the computer industry behaves like a sociopath. They will do good things for you for as long as there’s profit in it, but as soon as it reaches the point where they don’t have to, they immediately flip to abusing you, relentlessly, all the while telling you there’s nothing they can do about it, and it’s probably all your fault.4

Keep in mind that this description applies to every for-profit company in the computer industry. This includes companies I like, like Google. There’s a reason I changed their company motto.

That’s where Amazon comes from. It has adopted all the nasty little tricks every computer company uses to try to lock in its customer base to its chosen platform. Let’s look at those tricks below:

EULAs

An End User License Agreement is that thing that pops up any time you try to install a piece of software or activate a proprietary piece of hardware. It’s something you probably don’t read, because they put a lot of words in it and use lawyer-speak to describe what you’re agreeing to… so even if you did read it you probably didn’t understand what you’re reading. It is, essentially, a contract without a signature. Clicking “Accept” takes the place of your signature. It is a lot more legally binding than it probably should be.

Amazon is full of EULAs. They don’t call them that specifically, but you “sign” one when you create an account as a customer, and you “sign” another when you create a KDP account as a self-publisher, and you “sign” a third when you create a CreateSpace account, and a fourth when you decide to try to sell things on Audible, and now that they own ComiXology there’s a fifth for using that, and that’s just off the top of my head. And in every single one of these agreements, you will find at least two things that potentially spell trouble:

  • Arbitration Clauses. If you ever decide that Amazon is playing dirty pool and you want to pursue legal action against them, well, you probably can’t, because you’ve agreed that any dissatisfaction will be resolved not through the legal system, but through arbitration. Amazon has already chosen who the arbitrator will be. The deck is stacked against you, and even if you win, that doesn’t mean Amazon has to change their practices: arbitration doesn’t set legal precedent.
  • Terms are not set in stone. Every EULA contains language that says something to the effect of “company reserves the right to update these terms at any time, for any reason, without consulting you first, and it’s up to you to keep up with these changes.” Many (though not all) EULAs also contain language that says “we will assume you agree to these changes unless you uninstall the program/cancel your account/do something drastic to remove yourself from the market and/or community.” In other words, even if you read the entire EULA and decide you’re willing to live with it, there’s nothing, absolutely nothing, that prevents Amazon (or any other company that uses this) from changing it later, and keeping up with those changes is entirely your responsibility. I’d like to note that in this respect, Hachette actually has a much better bargaining position than self-publishers do. They can actually negotiate agreements. And Amazon is trying to weaken that position and put them in a position where Hachette has to play like everyone else.

So there’s that.

Use of patents against competition

This one is a little murky, and lawyers versed in intellectual property and patent law will be able to argue more convincingly in either direction than I will. Amazon gets sued a lot by other companies over patent issues, and Bezos has spoken out over the need for patent reform, but they aren’t innocent of using patents to stop competition. In 2009 (correction: 1999) Amazon sued Barnes and Noble because B&N had set up a feature they called the “Express Lane.” If you were on their website and you only wanted to buy one thing, you clicked on the Express Lane button and you bought it automatically (assuming your purchasing information was already entered into your account.) Amazon claimed this violated their “One-click” patent, and they fought like hell to keep B&N from using a similar technology to provide an equivalent user experience.

In other words: B&N studied something Amazon did that its customers liked, it tried to compete, and Amazon sued them for doing it.

Pursuit of lock-in on all levels

“Lock-in” is where a company introduces proprietary and strictly-controlled tools and environments that give them absolute control over their market. Anything Amazon does in the digital market is done with lock-in in mind. Let’s look at some examples:

  • Use of proprietary file formats—the file formats that Amazon uses to sell ebooks are proprietary. Only Amazon controls them. If you buy an ebook on Amazon.com you are locked into that ecosystem. If you want to build a reader or file converter that can use those file formats independently of Amazon products, the only legal way to do so is recreate it from scratch without actually looking at any of the original code or libraries. This is a slow, agonizing process and can be immediately negated… all Amazon has to do is change the file format, and all your previous work is broken.
  • Use of proprietary hardware—their Kindle e-ink reader is great as long as you only buy Amazon. Their Kindle tablet would be a great general-use tablet, except that it’s not possible to install any other e-readers from any other company (B&N, Kobo, etc.) on it, unless you figure out how to jailbreak it and even then results are mixed. If you buy an Amazon device, you are committing to the Amazon environment, and that environment only.
  • Encouraging exclusivity—Amazon wants to be the only company that sells your ebook. The only one. It doesn’t force you to do it, but if you decide to use KDP Select you get more powerful promotional tools at your disposal, you get a higher percentage of the sales in more Amazon markets, and you get access to some genuinely interesting new tools like Kindle Serials or Kindle Unlimited (“The Netflix for Books.”) The trade off is you can’t make it available anywhere else, even on your own website. In other words, if I were to publish Pay Me, Bug! or Curveball on KDP Select, I would have to remove them from Eviscerati.Org. I would also have to stop distributing them with a Creative Commons License, since the CC license grants you, the reader, distribution rights that KDP Select doesn’t even grant me, the author and publisher.

File format, hardware, and content providers—all three areas that Amazon tries to make exclusive, so that they and only they control it. They aren’t the only company that has ever tried to do this. Apple works this way, in almost exactly the same way, though they aren’t as aggressive about pushing into other markets. Microsoft invented this approach, and they had the same aggressive marketing strategies. The proprietary .doc format is one of the reasons it has been almost impossible for me to use anything other than Microsoft Word for most of my professional career… for the longest time it just wasn’t practical for other companies to try to figure out a way to correctly import and export .doc files—whenever they got something right, Microsoft was tweak the file a little to break whatever they’d figured out. That’s what lock-in allows you to do. If you signed on to be a “Microsoft Preferred Partner” you got access to all kinds of goodies and perks that made it easier for you to create software that ran in the Microsoft environment.

… and then, when they decided they could make more money doing it themselves, they’d create a competing version of your product, change a few APIs, stop talking to you, and within a year you were out of business.

“Lock-in” only benefits monopolists, and companies that want to be monopolists. The only reason you pursue it is to make it harder to lose customers. If you have 500 Amazon ebooks and you stumble across an ereader or tablet that is functionally superior your current one in every way, with the sole exception of not having a Kindle Reader app—you’re probably not going to buy it, because doing so would throw away your current investment of ebooks.

“Lock-in” ultimately screws other people trying to do business because once it’s achieved, there is no way to negotiate terms. Once it hits that point, you need to invent a new market first. All the other markets are gone.

Hachette: The Ugly

OK, so now that I’ve exposed my wild-eyed crazy to the world and accused Amazon of trying to enslave all of humanity with its dastardly, monopolistic schemes, it’s reasonable to assume that ultimately I’ll take Hachette’s side because Monopolies Are Bad. It’s reasonable, but it’s wrong. I do not take Hachette’s side in this. My official position is that neither of these companies deserve to win this fight. But one of them will, because I can’t think of a way to resolve this as a draw, and since one of them will it’s probably going to be Amazon, and as I said above, taking only this fight in context, Amazon probably has the stronger claim.

Here’s why:

Amazon can articulate a solution to a problem, and Hachette can’t articulate anything other than “Amazon is bad.”

Amazon has pointed out that charging huge prices for ebooks—prices that, cost-wise, make them indistinguishable from paperbacks—is stupid. My apologies to all the publishers and writers who will be offended by this, but Amazon is right. They are absolutely making self-serving statements, but those self-serving statements are, from the perspective of a reader who likes buying books, and prefers buying more books with the same amount of money, 100% indisputably true. Their vision advances the market in a way that is better for customers. They have a position that has a solution.

Hachette’s position is “Amazon is trying to control the market.” Well, I actually agree with that position. But they haven’t offered a solution to that argument. They have no vision on how to create a market that effectively competes with Amazon that answers any of the claims Amazon has made about how their vision is better for consumers, or about how their vision is better for other publishers, like me. Sure, Amazon is opening the market wide only until they can sew it back up again, putting a nice little monogramed “Amazon” on the side of the duffel bag that will store the severed heads of all the publishers who dare cross them in the future, but their vision includes a description of how this change will make everything better while Hachette’s vision includes a description of how everything will remain exactly the same.

Siding with Hachette, in other words, doesn’t stop Amazon from being a monopoly. It does exactly nothing to stop Amazon’s growth or its power because Amazon is still the place everyone goes to buy everything because they still have the best game in town. Hachette’s argument in this fight is “we shouldn’t have to have a game, come on guys, I mean what do you expect us to do, things?” They want status quo, and they’re using “ARGH AMAZON IS MONOPOLY COME DEFEND US FROM THEIR EVIL WAYS” in order to justify continuing to use Amazon’s evil ways in exactly the same way they did last year.

In other words, Hachette views Amazon’s power as bad only when it gets in their way.

In Conclusion

I will not sign a letter in support of Hachette. I feel bad for the authors who are suffering financially and I hope they get paid soon, but Hachette’s accusations are manipulative plays to our paranoia, no matter how justified that paranoia might be, because they have exactly zero plans on how to correct all the things they currently think are wrong with the market.

I will not sign a letter in support of Amazon. While as a customer I think they are fabulous and while they have the best deal in town for most self-publishers out there today, that environment is becoming increasingly more dependent on using Amazon and only using Amazon. I’ve seen that market before, and my historical perspective makes me more than suspicious, it makes me alarmed. Too many arguments in support of Amazon run along the basic theme of “Yeah I know they’re not my best friend, but basically they’re my best friend.” Too many other arguments run along the lines of “they would never do that!” which in my experience generally leads to “they,” whoever they are, doing exactly that. The fact that there is a really good thing happening right now doesn’t mean it will remain a good thing, that they intend it to remain a good thing, or that there aren’t better things out there somewhere, but if Amazon continues to succeed at its lock-in strategies then we’ll never get a chance to figure out what those better things might be. Market forces are great for surfing, but man, that undertow is a bitch.

Everyone taking sides in this argument is wrong. Every single one of you. You are taking sides for the wrong reasons, supporting the wrong people, endorsing the wrong philosophies, and choosing either path is ultimately bad for everyone. You are wrong, I am right, and this is why.

…either that, or I’m a paranoid crank. This is also possible.

Addendum, 8/11/14: I wanted to take the opportunity to link to a piece by Dave Bryant who points out that there are other factors beyond the cost of printing a book that affect bottom line costs. It’s a fair point — I don’t think that the labor costs in book production would necessitate ebooks being $14 a pop, but it’s worth keeping in mind there is a minimum threshold you need to clear in order for a book to be profitable.

Footnotes

  1. Note that it’s still not a lot of money. I can’t use it to pay rent or anything. I could by a few pizzas every month, that’s about it.
  2. My opinion only. Others will differ.
  3. Which is to say “most of you, because you have things to do.”
  4. You can make a case that this is the way all companies behave. Sometimes I strongly suspect that’s true. However, the computer industry was the first to do so brazenly, somehow turning it into a virtue.

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