May 29, 2014

Close reading Amazon’s statement about its dispute with Hachette


Jeff Bezos is afraid of a Doomsday gap.

Jeff Bezos is afraid of a Doomsday gap.

Amazon, a company which Karl Marx famously described as the “opiate of the masses,” and the publishing conglomerate Hachette are not getting along right now. The two corporations are currently in the midst of difficult negotiations over sales terms. Earlier this month it was revealed that Amazon had been raising prices and delaying shipment of Hachette books in an attempt to beat the publisher into submission.

Amazon does not like to speak to the press about anything and it especially doesn’t like talking to the press when it’s being a bully—like, for instance, when it’s mistreating its warehouse workers or strong-arming suppliers. Yesterday, in a statement published on its Kindle forum, the company did the unexpected and responded to a growing wave of criticism from authors, journalists, and consumers. The statement is classic Amazon: it’s a highly calculated mix of aggression and passive aggression directed at consumers and affected authors.

Amazon begins by admitting that yes, they are, in fact, screwing with Hachette right now in attempt to gain leverage, without quite taking responsibility for it—they merely admit that it’s all “related to the contract and terms between Hachette and Amazon.”

We are currently buying less (print) inventory and “safety stock” on titles from the publisher, Hachette, than we ordinarily do, and are no longer taking pre-orders on titles whose publication dates are in the future. Instead, customers can order new titles when their publication date arrives. For titles with no stock on hand, customers can still place an order at which time we order the inventory from Hachette — availability on those titles is dependent on how long it takes Hachette to fill the orders we place. Once the inventory arrives, we ship it to the customer promptly. These changes are related to the contract and terms between Hachette and Amazon.

Amazon then attempts to pivot the conversation. First, they make a show of the fact that they work with thousands of publishers—conceivably to act as if everybody except Hachette is peachy keen on the monopsonistic company. This, of course, conveniently overlooks the publishing industry’s wariness with Amazon and its 2010 dispute with Macmillan. They then attempt to redraw the narrative by emphasizing the fact that Hachette is not some bold David, but rather a $10 billion media Goliath. (I guess that makes this a fight between a giant Goliath and a smaller Goliath. Or maybe a fight between 1954 Godzilla vs. 2014 Godzilla.) This is true, but it doesn’t change the fact that Amazon has all the leverage because it controls almost half of the book market in the U.S.—and if you control almost half of the book market in the U.S., you control the book market. To paraphrase Denzel Washington in Training Day, Barnes & Noble ain’t got shit on Amazon. The paragraph closes with Amazon telling consumers that Mommy and Daddy both love them very much and this has nothing to do with them.

At Amazon, we do business with more than 70,000 suppliers, including thousands of publishers. One of our important suppliers is Hachette, which is part of a $10 billion media conglomerate. Unfortunately, despite much work from both sides, we have been unable to reach mutually-acceptable agreement on terms. Hachette has operated in good faith and we admire the company and its executives. Nevertheless, the two companies have so far failed to find a solution. Even more unfortunate, though we remain hopeful and are working hard to come to a resolution as soon as possible, we are not optimistic that this will be resolved soon.

But negotiating is complicated stuff, as the next condescending paragraph reveals. Negotiating is not simply important—it involves two sides trying to get what they want. And not just that: each side can act however they want! Hachette can decide that Amazon’s crappy offer is crappy—because it’s bad for both Hachette and Hachette authors—and throw it back in their face. And when Amazon’s crappy offer gets thrown back in its face, Amazon can extort Hachette by carrying fewer books. But Amazon wants you to know that it’s doing it all for you. Hachette wants to hurt consumers by being able to make enough money to fairly pay its authors and employees (very many of these people, ironically, are probably Amazon consumers). One important thing to note here: Amazon is negotiating for Amazon. Consumers come second—especially if you accept the prevailing theory of the moment, which is that these negotiations are all about increasing Amazon’s profits. Anyways, thanks for the primer on business, Amazon. It’s great to know how negotiation works! Capitalism is great.

Negotiating with suppliers for equitable terms and making stocking and assortment decisions based on those terms is one of a bookseller’s, or any retailer’s, most important jobs. Suppliers get to decide the terms under which they are willing to sell to a retailer. It’s reciprocally the right of a retailer to determine whether the terms on offer are acceptable and to stock items accordingly. A retailer can feature a supplier’s items in its advertising and promotional circulars, “stack it high” in the front of the store, keep small quantities on hand in the back aisle, or not carry the item at all, and bookstores and other retailers do these every day. When we negotiate with suppliers, we are doing so on behalf of customers. Negotiating for acceptable terms is an essential business practice that is critical to keeping service and value high for customers in the medium and long term.

Amazon would also like you to know that you can still buy 989 bottles of Tuscan Whole Milk and that it’s no skin of their back if you buy a Hachette title from Books-A-Million:

A word about proportion: this business interruption affects a small percentage of Amazon’s demand-weighted units. If you order 1,000 items from Amazon, 989 will be unaffected by this interruption. If you do need one of the affected titles quickly, we regret the inconvenience and encourage you to purchase a new or used version from one of our third-party sellers or from one of our competitors.

Amazon then sets its sass gun to super passive-aggressive by offering Hachette a deal it will never take (or at least, that it won’t take until they resolve this dispute) in a brazen and crass attempt to curry favor with authors, even though authors are surely smart enough to see it for what it is:

We also take seriously the impact it has when, however infrequently, such a business interruption affects authors. 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.

Get it? Amazon wants Hachette to pony up royalties in prepayment for the books it won’t sell.

Amazon concludes by borrowing the Republican Party‘s favorite tactic: when all else fails, blame the media.

This topic has generated a variety of coverage, presumably in part because the negotiation is with a book publisher instead of a supplier of a different type of product. Some of the coverage has expressed a relatively narrow point of view. Here is one post that offers a wider perspective.

They then link to this article, which is hosted on a Blogspot site. First of all, if the most favorable article you can find about your business tactics is hosted by, you’re in trouble. Second, never trust anyone who has a dog in a fight when they describe an article about that fight as having a “wider perspective.” With that in mind, here are a few other pieces about the Amazon/Hachette dispute that offer a “wider perspective.”

Gawker: Amazon deserves all of its bad PR. 

The New York Times: Amazon’s tactics confirm its critics worst suspicions

FortuneAmazon has gone too far

Antipope: Amazon: malignant monopoly, or just plain evil? 

Salon: Goodbye, Amazon: we’re through

ReutersWhy I’m ditching my Amazon account

Yahoo: How heinous does Amazon have to be before you boycott?

The A.V. Club: Amazon bullies publishers as work on its informational dystopia continues

The Chicago TribuneAmazon’s muscling of publisher Hachette a sign of future

Slate: Amazon pushes yet another publisher around

Gawker: Let’s boycott Amazon! Now where do we buy stuff?

FortuneIn the standoff between Amazon and Hachette, the customer comes last

Gizmodo: Amazon admits it’s screwing with Hachette—and will until it gets its way

You can read Hachette’s statement, which throws mad shade right back at Amazon, here



Alex Shephard is the director of digital media for Melville House, and a former bookseller.