Hugh Howey is feeling some heat these days and you can tell from reading his blog. The tone has shifted from a righteous clarion call to battle on behalf of Amazon and its adorable King Jeff Bezos to Slay the Evil Publishers and the Minions of Agency Pricing to a sort of abashed and befuddled "Wh jus happn'd?" vibe. This is because Amazon has cut a deal with Simon and Shuster that enables the Evil Publishers to continue Evil Agency Pricing in return for more margins and MDF. IOW, it was a typical supplier/channel battle over money and control that we've seen before and will see again and again and again till our Sun goes nova.
In the meantime, as I've pointed out (and now Hugh has jumped on the bandwagon), Amazon continues to impose agency pricing on indies via its $7 roach motel pricing box and locked in margins. (Hugh calls this model "Incentivized Agency" and it's to be thought of as a sort of whip to punish evil indies who want to make more money than Hugh thinks is seemly. And yes, if you actually were one of the 8.5K or so who signed that ridiculous petition at Change.org and are feeling duped, well, you were.
As a result, Hugh needs to begin the process of walking back some of the silly things he's said to maintain credibility, but this is not an easy thing to do. As exemplified by his latest post, "Who is David?" which is littered with cracked logic, more misstatements of basic facts, and internal breakdowns of language and common sense. It's a sign of a mind that's lost track of itself.
The problem begins with the post's opening lines. Here's one example:
The negotiations between Amazon and the Big 5 publishers is often framed as a war between David and Goliath. What’s strange is that who gets to play David depends on who you’re talking to. Both sides claim him. The rare moments when people equivocate between the two parties, they state that this is really a case of Goliath vs. Goliath, which is far closer to the truth. We’re talking about multi-billion dollar corporations on either side.
Wait a second. When you equivocate between two parties, you're attempting to hide the truth. But Howey now tell us that a battle between two "Goliaths" is closer to the truth. Which isn't equivocating.
And is also true. The revenues of all five major publishers together are about $15B. Amazon's yearly revenues are currently estimated to come in at $75B+. Amazon's book business is currently estimated at between $5 to $5.5B, about 7% of Amazon's overall business.
Of course, leaving aside the issue of Amazon's house imprints, the two entities do different things. Publishers create (well, aggregate) content, Amazon is a channel for content. In the channel, Amazon is a heavyweight, though in sheer number of dollars, smaller than B&N, with 2013 revenues of $6.8B. But we all know what's happening to B&N.
The post continues, and quickly descends into the swirling, obfuscating clouds of Planet Howey as logic and reason are discarded in favor of rhetoric and dizzying departures from the truth.
In practically every way, Amazon is the clear underdog here. The upstart. The newcomer.
Amazon is not an upstart. The company was founded in 1994 to sell books. Twenty years ago. On what planet is a company that's been in business for twenty years considered an "upstart.?" A "newcomer." Only on Planet Howey.
They’ve published roughly 5,000 titles across their imprints to date, which is the number that the Big 5 might publish in a year.
Yes? Twenty years ago, Amazon went into business to sell books, not be a publisher. Now, Amazon has a right to also try to be a publisher, though this opens the company up to conflict of interest and monopsony issues. But that's really off the point. Amazon's core book business is to be a channel giant and it is.
Meanwhile, the Big 5 have banded together to establish price floors with other retailers in what the DOJ found to be illegal collusion.
Yes? And they were spanked by Uncle Sam. But the good news is that agency pricing still survives! The big publishers retain it and so does Amazon in respects to indies. Planet Howey is where the whips are stored to punish the indies.
And bookstores have refused to carry Amazon’s works, banning these titles from a large sector of the marketplace. For many of us, this is bullying far more severe than removing pre-order buttons.
Of course they are! Amazon has created a major conflict of interest by moving into the publishing business. Amazon's direct sales model wiped out Borders, all the mid-sized book chains, and thousands of independent bookstores. Only on Planet Howey would you expect anyone to hand over a gun to an entity that's already cutting your throat.
When it comes to size, the publishing divisions at Amazon represent a tiny sliver of Amazon’s overall revenue.
It’s quite possible that all of these divisions combined earn less than each of the Big 5 publishers do individually. The David from this point of view — not only in earnings but also in marketplace challenges that are either illegal or a result of book banning at retail — would seem obvious.
What does this have to do with anything? Why is Howey flacking Amazon's publishing imprints? After all, just like Evil Hachette, they don't accept unagented submissions.
Compound this with the fact that Amazon pays authors more than publishers (anywhere from double at their imprints to nearly six times as much with their self-publishing platforms).
At this point, you realize that Hugh has breathed in the noxious fumes of Planet Howey and his brain, like Halston in "Wool," is dying from the toxins being released into his system.
Amazon does not "pay" indies anything. Amazon takes a fat fee from indies in return for the use of its downloading system. It takes a ruinous fee if you attempt to escape the $7 roach motel. (Don't forget that 65% margin grab on international sales.) If you enroll in its Select program, it takes a fee via exclusivity.
Or perhaps you're the type of person who believes that after the taxman has removed X% of your salary to fund government operations, it's "paid" you? You do believe that? Really? Before that high speed power drill reamed out your frontal lobes, how did you lose your grip on the tool?
Or the fact that they charge less to the consumer, where publishers have banded together to artificially raise prices, and the David is not only clear, but so is the side who is fighting for the little people. At least, from one perspective.
Earth to Planet Howey. Amazon just signed a deal with the publishers that preserves agency pricing for publishers. Which, BTW, is perfectly legal in the US. And Amazon is attempting to price rig the market via the $7 roach motel. And who are the "little people?" Are leprechauns being under served in today's society? Time to bring in some diversity councilors!
Publishers, meanwhile, are fighting for the health of large bookstore chains and for the top 1% of writers who benefit from massive distribution. They also benefit from a system that bars 99% of applicants from even entering. Again, this is the way those who support Amazon and other digital disruptors see these parties as David and the combined might of the Big 5 as Goliath.
A new transmission has just been sent to Planet Howey. Will it be received as the EM waves traverse the toxic smog covering the place? Who knows? Message below:
Wow. So I go to Barnes & Noble, our local branch, to ask them about what process they have for local authors to be featured in their local author section. With in 10 minutes, it was 'OK, you're in our system, let's order a few copies of all your books, here's the e-mail and phone for our community rep and he can help you set up a book signing'. THAT is service.
James Garner, author, Indomitable (reviewed on this site).
But this view is just as wrong as the view that sees Amazon as Goliath and the publishing division of NewsCorp as David. Simon & Schuster proved this view to be false last month, when they agreed to a multi-year distribution deal with Amazon for both ebooks and print works. The major publishers have operated lockstep in some ways (from boilerplate contracts to digital royalties), but they aren’t the cartel we accuse them of. They enter subscription services variably. Some of them work out terms with their distributors while others don’t. Some have dabbled in print-only deals and have embraced genre publishing and lower ebook prices to a greater degree.
And at this point, we see Hugh attempting to walk back dozens of misstatements of fact, importuning indies to ride to Amazon's rescue in its battle with the publishers, and saying nothing when indies were thrown under the bus while simultaneously repeating again multiple ridiculous and just plain wrong assertions.
If you read his blog in an attempt to understand what goes on in the endless struggle between suppliers and channels, I have one piece of advice for you.
Escape from Planet Howey.
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