The Digital Reader

A New Leak Reveals that Amazon Wants Increased Co-op Fees from Hachette

Posted: 21 Jun 2014 06:16 PM PDT

New details concerning the ongoing Amazon-Hachette contract dispute were leaked yesterday in the NY Times.

According to James Stewart, Amazon’s tough negotiating techniques come as a sindeline to demands for higher co-op fees.

The article is well worth a read (you’ll need to get around the paywall).

As has been widely reported in the press, Amazon has incrementally been increasing the pressure on the publisher by selling Hachette titles at retail, reducing stock on hand, and disabling the pre-order buttons.

Amazon has only publicly commented about the ongoing contract dispute with Hachette once, while Hachette has released several official statements (here’s one) and multiple leaks. And today we have another leak from Hachette.

According to the NYTimes, the current contract fight is your ordinary run of the mill negotiation over service fees manufacturers (in this case, a publisher) regularly pay to major retailers. The only difference this time is that Amazon is ratcheting up their demands:

I spoke to someone involved on the Hachette side of the negotiations, who is under orders not to discuss them and asked not to be named. This person said that Amazon has been demanding payments for a range of services, including the pre-order button, personalized recommendations and a dedicated employee at Amazon for Hachette books. This is similar to so-called co-op arrangements with traditional retailers, like paying Barnes & Noble for placing a book in the front of the store.

Amazon “is very inventive about what we'd call standard service,” this person said. “They're teasing out all these layers and saying, 'If you want that service, you'll have to pay for it.' In the end, it's very hard to know what you'd be paying. Hachette has refused, and so bit by bit, they've been taking away these services, like the pre-order button, to teach Hachette a lesson.”

This type of negotiation is fairly common, even in the book industry. In fact, Barnes & Noble had a similar dispute with Simon & Schuster last year. That fight went on for at least 8 months (January 2013 to August 2013), with B&N stooping so low as to forbid S&S authors from having events at B&N stores and letting S&S titles go out of stock.

So not only is Amazon playing dirty, they also ripped off B&N’s idea.

On a more serious note, little in the current leak comes as a surprise; it matches with what I assumed was going on when the story broke (and then was confirmed) 6 weeks ago. Amazon is gambling that the sales they lose by cutting off Hachette will be made up in the long run in fees. Amazon has good accountants, so they could well be right.

As a consumer, I don’t have a horse in this race and thus I only have a bystander’s interest in who wins. I will note, though, that Amazon appears to be taking steps to fix one of the longstanding gripes shared by many in publishing.

One common refrain in the book industry is that Amazon has too large of a share of the book market in the US. I won’t comment on whether or not that is true, nor if it is good or bad. But it is worth noting that in the case of Hachette, Amazon is reducing their market share.

Amazon is giving its detractors what they wanted: for Amazon to sell fewer books.

I plan to send Amazon a gift basket to say thanks; would you like to chip in?

NY Times

image by Tambako the Jaguar

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