Amazon May Not Be the Bad Guy

The recent news about the IPG-Amazon struggle has people saying all the same things. “Amazon is flexing its muscle and hurting the little guys.” “Big bad Amazon.” Shelf Awareness ran the story with quotes from authors and publishers all complaining about Amazon’s tactics.

My understanding of the dispute is that IPG wanted better distribution terms for its ebooks—I believe it requested no discounting—and Amazon said no. Which the company has the right to do. Amazon already capitulated when the Big 6 publishers colluded to set their own high prices—a collusion that is now the subject of lawsuits and investigations.

So like all other retailers, Amazon wants to control the sale price of its inventory, and since it couldn’t get Independent Publishers Group to agree to its terms, it took IPG’s products off the shelf. (Caveat: There may be more to the issue than I realize, and if you know more, please leave a comment.)

The people hurt most by this are the authors whose ebooks are no longer selling at Amazon. But it’s important to remember that these authors have a choice. They chose to publish their work through a small publisher, which in turn, contracted with IPG for distribution. Or maybe some authors are working directly with IPG. Either way, these authors have chosen to hire middlemen for publication and/or distribution. Middlemen that take a chunk of the profit, and in this case, refuse to meet Amazon’s terms.

But this is the new age of publishing! Authors don’t need publishers, or distributors for that matter. Anyone can upload their ebooks to Amazon though Kindle Direct Publishing and to Barnes & Noble through PubIt. Granted, if you want to sell on Kobo and Sony, you need a distributor. But Kobo and Sony’s market shares are almost insignificant, and at the same time, they are the ebook retailers doing the discounting that, in turn, triggers Amazon to drop its price.

I pulled my books down from Kobo and Sony for that very reason. They caused me to lose far more money at Amazon than I ever made from either. And Amazon has never discounted my books except to match another retailer’s price.

I understand authors wanting to control the price the book is sold for, and thus, maximize royalties, but if your book is not selling on Amazon, you’ll never maximize your profit. From my perspective, it makes far more sense for IPG to pull its books from Kobo and Sony, and thus eliminate the discounting issue, than to give up its authors’ opportunity to sell on Amazon.

What is IPG offering its authors—besides getting their books pulled from the biggest retailer in the marketplace? I realize distributors may be able to get some print books into bookstores, but what can they do for ebook-only authors that those authors can’t do for themselves?

Of course, some—or many—may have signed contracts with small publishers (that in turn signed with IPG) and therefore, they no longer have the right to control their own work. But instead of complaining about Amazon, they should be contacting their publishers about finding a new distributor. Or if they work with IPG directly, maybe they should terminate that agreement and either find a new distributor, or better yet, simply join the indie revolution and upload their books to Amazon, B&N, and Apple themselves.

Another blogger has offered some excellent alternatives for IPG as well. I expect to take some heat for this, so tell me, what do you think?

 

11 Comments
  1. So far it’s the middle people who have had problems. And when authors use middle people, then it becomes the author’s problem. But Amazon offers authors direct publication to the readers so it can get confusing.

    I actually believe we’re going to look back at Feb 2012 as the month when traditional publishing died. Except few are aware of it.

  2. You bring up a very good point. We, as indie authors, have a choice in how we choose to distribute our books. With all the contracts that are being renegotiated (Smashwords, IPG, etc.), I am glad I decided to publish my book directly through Amazon, B&N, and iTunes. Hindsight is twenty-twenty, but in my case, I felt it was easier to eliminate the middleman. Now I’m glad I did :)

  3. I’m sorry but setting the prices for your own books, is not collusion. Amazon having the balls to try to set the prices for other people’s books is wrong just because they provide the virtual shelf space? That is wrong. Amazon seems to think it owns the books. It doesn’t. It has no right to set prices for anything that other people sell on their site. The people who own it have that right. That’s not called collusion. That’s justice.

    Of course IPG wanted better terms. Amazon was trying to bully them into giving more favorable terms to Amazon (i.e. so that Amazon can sell the books cheaper and cut into margin of IPG) and if they don’t, Amazon threatens them by pulling all their books.

    This is exactly the same kind of bullying tactics Amazon is using with the government. When the States tried to close down the loophole Amazon has been using to get out of having to charge sales tax, Amazon threatened to cut off all affiliates in that State. For charging sales tax? It’s not like Amazon is being asked to do something other book sellers are not required to do, just pay their fair share of taxes. But they use threatening tactics to force the government to back down. At a time when many States are in financial trouble. California already has.

    Not to mention, Amazon has the gall to ask for millions of government money to build distribution centers for them. You get the joke? Tax payers are being asked to use their money to create jobs for themselves so that Amazon can get a free distribution center out of it. Amazon, who is the largest online seller in the world and is rolling in money, is asking poor tax payers to foot their bill.

    “only authors that those authors can’t do for themselves?”
    But the thing is…why should they have to? Aren’t we going backwards? Let’s get all the authors to do their own work now, on top of writing, like they’ll be really good at it and have lots of time to do it and would really love to do all kinds of things besides writing, so that most of the profit can be transferred to Amazon, which does what exactly? Someone still has to do all that work, either by themselves or pay for it and now the new model is, get the authors to do it themselves for free, or get them to pay for it, and whatever is saved by doing it that way, give the profit to Amazon. Yeah, sorry, don’t see much benefit in the new system except that everyone who can upload files now, can call themselves an author, which I also don’t see as a plus.

    • “Of course IPG wanted better terms. Amazon was trying to bully them into giving more favorable terms to Amazon (i.e. so that Amazon can sell the books cheaper and cut into margin of IPG) and if they don’t, Amazon threatens them by pulling all their books.”

      If you have access to either the contracts or negotiations, can you provide a link? I’d love to see them.

  4. Nice post with thoughtful analyses. So far as your understanding of the dispute itself, mine differs, but that may be because, unfortunately, nobody seems to be discussing the actual terms. You mention you’ve heard IPG requested no discounting; I’ve read that Amazon pursued more aggressive terms on its end that IPG refused. Then again, the reality is that Amazon could have pursued discounts IPG requested against, which would mean we’re both interpreting correctly.

    Everyone is saying Amazon removed buttons as a bullying tactic, which is unfortunate, because it seems like what occurred is that, after contractual renewal negotiations fell through, Amazon in fact lost the right to sell/distribute IPG books. The fact that only ebooks were affected (so far as I’ve heard) to me indicates the difference in sales model; Reebok, for example, would have already shipped its sneakers to Foot Locker, who’d have the inventory on hand for shelves. When dealing with virtual inventory–as we are here–there seems to be some difference in the retail business model.

    I think people are out to find “bad guys” lately; just recently, it was the Apple iBooks EULA kerfuffle, in which a whole lot of non-lawyers and non-business people got crazy about contractual terms they seem to have misunderstood. When Apple revised the contract, it seemed to be for clarity, not to correct nefarious intentions.

  5. As mostly an author, I don’t pretend to understand all the ins and outs and ups and downs of this situation. Thank you for at least giving me an opinion from which I could make a little sense. And I appreciate reading the comments that give the other side. Thanks to all for helping make the issue a bit clearer. My books and my publishers were not affected, but it’s still an important issue to me.

  6. Will, you’re right that this currently involves only the Kindle version, not the hard copies. (My publisher, Quill Driver/Linden, is distributed through IPG; the Kindle version is now down, though the trade paperback is still up.)

    I think it’s a bit of a red herring to say that authors now have the option to publish directly. That’s true, but it doesn’t address the core issues of pricing models, and of fairness in pricing regardless of who publishes the book. (Amazon’s actions affect books that were published before the rise of independent publishing as well as newer books for which that was an option.)

  7. For those just learning about the issue, here’s PW’s account: http://www.publishersweekly.com/pw/by-topic/industry-news/bookselling/article/50746-ipg-stands-firm-on-terms-with-amazon.html
    And commentary from the LA Times book blogger: http://latimesblogs.latimes.com/jacketcopy/2012/02/amazon-ipg.html

    The question’s been asked what value a distributor has for ebooks; I don’t know the answer, but it is clear they add great value for print books, enabling small and mid-sized publishers to get books into bookstores without having to maintain their own sales force, etc. I presume IPG does not currently allow client publishers to “unbundle” and distribute only physical copies and not e-books. If Amazon prevails, some publishers may withdraw from IPG, or press for a change that allows them to deal directly with Amazon on ebooks, without the market power of a group representing several hundred publishers. It’s hard to see that benefiting the author.

  8. By the way, I understand from my publisher that Amazon is also attempting to renegotiate terms on IPG member print editions — apparently mid-agreement. That changes the picture significantly.

  9. Elizabeth: When related companies work together to keep prices high, it is collusion and that’s why the publishing companies are being investigated. When they sell books from their own websites, they can price them how they want. When they sell a book to Amazon, it now owns that book and can sell it for any price it wants. Amazon is a retailer.

    Will: If you find out more about the actual terms being disputed, I’d love to know.

    Thanks, everyone for you thoughtful comments.

  10. Leslie: If you find out more, let us know. I hope this issue hasn’t affected you too negatively.

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