February 23, 2012

Return of the thug: Amazon removes buy buttons for thousands of ebooks from indie distributor that won’t play ball

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MobyLives has previously noted rumors (see this earlier report) that Amazon has been making “astronomical” demands on publishers trying to negotiate their annual contract with the company. It’s the talk of the industry behind the scenes, with senior executives at the big houses rumored to be taking part, and negotiations for 2012 contracts supposedly still unsigned for several if not all of the big houses.

Still, there’s been little coverage of the story, even in the trades, since the December Publishers Weekly report we noted earlier. That report set the scene: “… some say the demands the retailer is making are impossible to meet,” especially as they exceed the legal limits on discounting, and that Amazon’s negotiating tactics have been “less of a dialogue than a dictation of terms.” Actually, they’ve been more thuggish than that — PW reported that a number of publishers told them Amazon was “threatening to stop selling titles from companies who won’t pay up.”

PW had it right: Yesterday the country’s second largest independent distributor of independent publishers, the Independent Publishers Group (IPG) announced that Amazon had pulled the buy buttons for its ebooks because IPG could not accept Amazon’s new demands.

As David Streitfeld reports in a New York Times story, “Until this week, I.P.G. had 4,443 titles available on Kindle.”

A Publishers Lunch report by Michael Cader cites an email from IPG president Mark Suchomel explaining what happened:

 “Amazon.com is putting pressure on publishers and distributors to change their terms for electronic and print books to be more favorable toward Amazon. Our electronic book agreement recently came up for renewal, and Amazon took the opportunity to propose new terms for electronic and print purchases that would have substantially changed your revenue from the sale of both. It’s obvious that publishers can’t continue to agree to terms that increasingly reduce already narrow margins. I have spoken directly with many of our clients and every one of them agrees that we need to hold firm with the terms we now offer. I’m not sure what has changed at Amazon over the last few months that they now find it unacceptable to buy from IPG at terms that are acceptable to our other customers.” Suchomel reiterated to us that the company’s terms of sale for ebooks have not changed.

It is, of course, the same tactic Amazon used against Macmillan two years ago when that company didn’t do what it was told and negotiated terms with a rival e-retailer named Apple. It is also, interestingly enough, the same tactic taken against Melville House when we went public in 2004 about what we thought — and our attorney confirmed — were illegally high discounts. We refused to pay, and our buy buttons disappeared overnight.

At the time, we were distributed by IPG, who left us to fight that fight on our own. (Shocker: Melville House lost.) We were disappointed that they didn’t stand up better for their clients then, but we are glad to see them doing it now. (Melville House is no longer distributed by IPG.)

As to what happens next, it depends on what this signifies beyond Amazon’s normal thuggishness. Is it a message to the big houses? Amazon received the world of bad press when it pulled the buy buttons from Macmillan’s books. Perhaps this time it’s simply sacrificing a smaller fish first, trusting there will be little media coverage for a lesser-known indie than a big, household-name publisher … As Streitfeld puts it in the Times, “This time, Amazon is setting its sights a little lower. Among I.P.G.’s 500 clients are the American Cancer Society, Aptly Spoken Press, Bees Knees Books and Change the Universe Press.” Of course, many of IPG’s publishers are no less important to our culture than the big houses, and it’s important to note: These are the kind of companies that don’t have the resources to absorb something like this so easily. They will be more damaged, more deeply endangered, than a Big Sixer could have imagined. There’s every likelihood that some of those little publishers sell most of their books on Amazon. This could put them out of business. For others, we could be talking about 20 or 30 percent or more of their business. It’s hard to recover from losses like that.

As a message to the big houses, then, if that’s what this is, it’s even more brutish than going after one of them. But this could be exactly the reason it backfires. Indeed, the extremity of Amazon’s tactics of late — think: price check app — seem to have actually stiffened the backs of its opponents. There is, in the book industry, at least, a feeling that something’s finally got to give. And this Surrender, Dorothy message may only increase that.

And call me crazy, but there may be greater risk here than the ever-cocky Amazon realizes — that is, what if someone at the Federal Trade Commission, or for that matter the Department of Justice, reacts to this, yet another in a long series of public displays of blatant predatory behavior, and finally says, Hmm, let’s take a look at these extreme negotiating terms everyone is complaining about. Do the contracts between the big publishers and Amazon amount to an illegal discount, which in turn supports predatory pricing — both violations of the Robinson-Patman Antitrust Act?

As I say, there’s the feeling that things may be coming to a head. There is in any event no question that this is a critical moment between the big houses and the monopolistic retailer. Let’s just hope the indies now caught in the middle survive the battle.

Good luck to IPG and its publishers.

 

 

Dennis Johnson is the founder of MobyLives, and the co-founder and co-publisher of Melville House. Follow him at @mobylives

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