Friday, August 01, 2014

Michael Cader of Publishers Lunch

Joe: Yesterday I fisked Mike Shatkin, who openly brags he doesn't read my blog, and has removed my comments from his blog because he felt them too long.

I also fisked Michael Cader from Publishers Lunch.

Cader, however, showed he doesn't fear debate, and had no problem sharing his opinion in a forum where many have a contrary point of view. He responded to my points in the comment section, and that took integrity and more than a little bit of guts.

Michael Cader: Hi, Joe. I'm glad we have at least some points of agreement. Some of your other replies are tangential rather than on point.

Joe: Thanks for responding, Michael. While it isn't unprecedented for people I blog about to respond, it is certainly unusual, and shows both an open mind and a willingness to engage. You have my respect.

Cader: Amazon is very careful with their words, even if not elegant. The post begins, "A key objective is lower e-book prices." A lot of traditional media have written the post up as if it said "The key objective..." What are the other key objectives, Amazon? Why do your conversations with people in the trade talk about looking for your fare share of the "business efficiencies" produced by a rising ebook market and your investments, while your public words are only about pricing objectives.

Joe: Well, we agree that Amazon is careful with their words. It’s unusual to hear an observation like that leveled as a criticism. Does Cader prefer the Hachette approach, which is to clear English what a chainsaw is to a tree…?

That said, I'm pretty sure Amazon just agreed to a 30% cut of ebooks--that speaks directly to their business efficiencies of the rising ebook market, doesn't it? So they didn't just speak of pricing objectives. But since Hachette hasn't made any statements about pricing, we're left with the belief that this dispute is about ebook pricing, which is why Amazon is addressing that particular point.

Cader again: I was not criticizing Amazon's careful language, I was parsing it. As the post said, a lot of media acted as if Amazon had said ebook pricing is *the* key objective. They chose to say it was one objective, and they have chosen not to discuss any others. As I pointed out, what they say to people in the trade privately is different. So you can have your belief, but it's just that, and not necessarily backed up.

I wish HBG had more to say in public, but I also understand why a supplier is reluctant to iterate the steps of their negotiations with their biggest account in the media. Particularly since public statements across years were used against them by the DOJ, and because they have confidentiality provisions in their Amazon contract.

Joe again: Public statements were indeed used against publishers by the DOJ. So were private correspondences that these collusive publishers told each other to "double-delete".

The reason they were used against these publishers is because these publishers were breaking the law. Is that why they're reticent to speak again? More law-breaking going on?

Here we have a case of Hachette saying nothing. No denying Amazon's claims of dragging their feet. No denying Amazon's claims of wanting to control ebook pricing in order to raise prices. Not even pleading the fifth. The only substantive contribution Hachette has made in this debate is to repeatedly reject Amazon's offers to compensate authors.

I can understand, or at least speculate, why Hachette won't say anything. It's because their position is untenable. If they publicly admit what they're asking for in these negotiations, I believe it will cheese off a lot of their own authors, as well as everyone else.

Cader: Amazon says they have "quantified the price elasticity of e-books from repeated measurements across many titles" in their store. Will they provide that data to publishers? Will they do it for a variety of price points?

Joe: Have publishers released any price-point or sales data? No. We rely on third parties to attain that information, such as BookScan.

Cader again: Publishers do provide sales data to a trade service run initially by Bowker and now run by Nielsen, based on their ebook invoices (so it has a time delay). They are actually not allowed to share or publish the *sales* data provided to them by individual retailers, since it's the IP of the retailers.

BookScan would like to license ebook sales data. Amazon has declined to do so.

The point is Amazon is claiming to have determined a universal public good, based on proprietary information, and wants everyone to simply accept that and accept their terms. And they want readers of the post to simply accept Amazon's conclusion.

Joe again: So you're saying that Hachette can't disclose how many ebooks they've sold via Kindle? I've been disclosing that for years. And while it may violate Amazon's TOS, they have yet to ask me to stop doing it. Nor have they asked www.AuthorEarnings.com to stop, or any of the many other indie authors who post numbers.

I confess not knowing as much about BookScan as I used to, back in the pre-digital days. If memory serves (and I may be entirely wrong here, so correct me if I am), BookScan began by collecting point of sales data from retailers. At first, publishers didn't like this happening. They didn't want anyone to know their actual numbers; not their competitors, and not their authors.

They eventually got on board (probably because they wanted to see what their competitors were doing), and it is news to me that they are now willingly providing Nielsen with their ebook invoices.

Does Nielsen still track via ISBN? If so, they've missed a million books I've self-pubbed, and many more millions that other indie authors have self-pubbed.

But getting back on track to Amazon's claim about the profit difference between $9.99 and $14.99, a few of us indies have known this for several months. Amazon has a beta called KDP Pricing Support that estimates how our unit sales and profits will fluctuate at various price points, and offers suggestions for maximizing those price points.

I experimented with this for several weeks, and their predictions were accurate. I've also spoken with others in the program who have had similar results. AFAIK, this beta has now been opened up to other KDP authors, and we should soon have a pool of information that can corroborate this. But how much corroboration do we need? Amazon's KDP pricing structure has been in place for years; 70% royalties to ebooks priced between $2.99 and $9.99. Higher or lower is 35%. They seem to know their sweet spot.

Cader: Amazon keeps trying to push a public perception that most new ebooks are $14.99, overlooking the substantial number of titles at $11.99 and $12.99 -- and overlooking the post-settlement discounting provisions that led some publishers to raise ebook prices in anticipation of Amazon's discounting.

Joe: I had the impression that Amazon is focusing on $14.99 because that's the price Hachette is pushing for. Remember that the agency model is still in effect on Amazon, all the DOJ did was allow Amazon to discount those agency prices.

As for publishers raising ebook prices in anticipation of Amazon's discounting, I find it hilarious that there were abundant author complaints that Amazon stopped discounting Hachette titles. How about Hachette prices them fairly to begin with, in which case discounting wouldn't be needed?

Cader replies: So the technique has worked. Do some research, Joe. $14.99 was a rare price point following the introduction of agency. (It applied to books with a hardcover price of between $27.51 and $30.) The preponderance of new release agency books were lower -- the stipulated price band maximums are a matter of public record. (There was no $13.99 bracket, I guess for luck. So lower priced hardcover releases had ebooks at $12.99 and $11.99.)

Even now, many new release HBG ebooks are $12.99. Like CALIFORNIA, for one example. Data is available on their web site. Yes, some of their ebook prices probably did rise *post settlement* -- and *because of the settlement.* Once discounting was allowed, at least some agency publishers increased their ebook prices, to balance out the expected discounting within the post settlement limits.

I do agree with you on the discount complaints. You can't have it both ways. Either you want your prices observed, or you allow or even prefer discounting. It is clear that Amazon has used modification of discounts on HBG books as a tactic in the negotiation, but I don't think it is a tactic authors or the publisher ought to be complaining about.

Joe replies: Here are responses from William Ockham and Laura Resnick.

William: Cader makes much of the fact that most titles weren't priced at $14.99. He elides the fact that it is the number of copies sold at that price that matters. It is a fact (you can look it up in the Apple ebook antitrust judgment) that the colluding publishers raised the prices of some print books so that they could get to that $14.99 price. And it is a fact that they wanted even higher prices, but Apple wouldn't go along with that. Trying to give the publishers credit now for the fact that Apple kept them from raising prices as high as they wanted is a bit rich.

Cader certainly chooses his words carefully. He completely distorts what actually happened when the publishers pulled their scam with Apple. There is a factual record available on the internet. You don't have to take my word for any of this. You can look it up for yourself.

Laura: What William just said. It's in the lawsuit.

Apple wants to set a $12.99 ceiling on ebooks; the colluding publishers resisted. Apple needed to close the deal before the launch of the iPad, which date was approaching, so it made a counter-proposal: an ebook could be priced higher, up to a ceiling of $14.99, =if= the print edition was more than $28, which was the typical hardcover SRP at that time. The publishers agreed and signed, and one immediately sent a memo to staff, introduced as evidence in the court case, telling them to start raising print prices above $28.

Cader: Their figures consider a world of ebooks only. Their "total pie" is really just a piece of the pie. But publishers and authors are looking to maximize revenue across all formats. "Total revenue" on an ebook is only part of the "total revenue" for a new release book, and the hardcover edition still generates substantially more revenue per unit.

Joe: As I mentioned while responding to Shatzkin, this dispute is about ebook prices. Hachette is welcome to counter with a "total pie" argument, but Bezos believes "your margin is my opportunity". He's not in business to prop up the paper book market.

Cader again: You are limiting the sphere because it serves your argument, Joe, but that doesn't make it any more true. First, as established above, you are relying on your "belief," when there are good reasons to believe the dispute is broader.

Joe again: I'm not limiting any sphere, Michael. I'm focusing on what Amazon said, not guessing about what other factors are in play.

Cader again: But also, even if ebook prices are the focal point of the dispute, that does not mean HBG should not be looking at the effect across their total business, and their total account base.

Joe again: I'm smiling, because I think we both know what effect HBG is looking at. I've been blogging about it for years. They have a paper oligopoly, and ebooks threaten that.

Cader again: Amazon's statement is rhetoric, posted on their own forum, which is of course their right and prerogative. My point was to illuminate some of the rhetorical devices at play and in what they, and don't, say. You seem to be arguing that we can only discuss their statement within their rhetorical box, which of course leaves little to say and nothing to learn.

Joe again: Careful you don't confuse "learning something but not as much as you'd like to learn" with "nothing to learn".

We've actually learned a lot from Amazon's statements, and Hachette's lack of statements. I'm sure there is much more to this story, but we can guess at what is left unsaid. Keep in mind that I've been blogging about what this was really about--Hachette wanting to control ebook pricing--before Amazon released a single statement.

http://jakonrath.blogspot.com/2014/05/fisking-lilith-saintcrow-and.html
http://jakonrath.blogspot.com/2014/05/turow-patterson-plateful-of-fail-with.html
http://jakonrath.blogspot.com/2014/05/fisking-charlie-stross-more-on.htm

It wasn't too hard to figure out what Hachette's intentions are. And Amazon has corroborated this.

http://jakonrath.blogspot.com/2014/05/amazon-speaks.html
http://jakonrath.blogspot.com/2014/06/konrath-vs-colbert.html
http://jakonrath.blogspot.com/2014/06/i-understand-and-sympathize.html
http://jakonrath.blogspot.com/2014/06/the-hachette-job.html
http://jakonrath.blogspot.com/2014/06/more-konrants.html

And this was before all the current Doug Preston/Authors United nonsense. We've learned a whole lot about what everyone wants.

Cader again: You are correct that Bezos is not in the business of benefiting anyone but Amazon. But that's not what the Books Team post tells consumers/readers. It tries to create the impression that lower ebook prices create more revenue for everyone, full stop, and therefore there is no arguing against it.

Joe again: Lower ebook prices will create more ebook revenue for everyone. That's what the Book Team said, and it's true.

Publishers know that higher ebook revenue comes at the expense of their paper oligopoly. But I don't expect the Big 5 to issue a statement like, "We colluded, and now Hachette is resisting negotiations because we're afraid of being disintermediated."

As I've said, Hachette et al should worry less about losing their cartel over paper distribution, and more about the legacy authors who are waiting for their contracts to end so they can self-publish. Amazon was even helpful enough to tell Hachette that, suggesting they double their author ebook royalties.

Cader again: Publishers and authors are concerned with all revenue, all types of readers, and all accounts as I stated.

Joe again: Well, publishers certainly are. And perhaps authors who have publishing contracts are.

Authors like me, and others who have opted into KDP Select because it is making them more money than all of those other platforms combined, aren't as concerned.

Besides, how am I supposed to care about the brick and mortar bookseller industry when most of them refuse to stock my books, either those I self-pub or those I publish through Amazon's imprints?

Cader again: Growing Amazon's dominant market so that it is bigger still and drives other players out of the business is not what HBG is "in the business" of either. Each party has its own objectives, for sure. But Amazon is the one posting as if they are addressing a mathematical, universal good.

Joe again: It is indeed a mathematical, universal good--for ebooks. Which is what the statement was about, and seems to be the major point of contention in their negotiations with Hachette.

I think we're talking past each other. We both agree that Hachette wants to protect their paper sales.

But, again, why should Amazon care about what Hachette wants to protect?

Let's say I own a store, and you want to supply me with widgets. We can't agree on terms. I explain to you that if you accept my terms, you'll maximize your revenue on widgets. But you also sell thingamabobs. And you need to price widgets high to continue to sell thingamabobs.

Why should I care about your thingamabob problem when we're negotiating over widgets? That's not my problem. You want control over pricing because you're worried you'll lose market share and power and revenue in other aspects of your business. I understand. What you need to understand is that if you want to sell widgets in my store, you have to agree to my terms.

Cader again: Yes, readers will vote with their wallets. HBG wants Amazon to continue let readers have that vote. If they don't like HBG's prices, whatever they might be, they won't buy the books.

Joe again: Now we have the reverse of the point you just made. Amazon wants low ebook prices not only to maximize ebook revenue for themselves (and, as they mentioned, for authors and publishers) but because it helps them increase market share, attract more customers, sell other stuff, etc.

But that's not Hachette's problem, anymore than Hachette's paper sales worries are Amazon's problem. Both companies have long term goals. Those goals may be at odds.

However, this dispute comes down to ebook prices. Everything else may be related. It may be a giant house of cards, and if Hachette (and the other Big 4 who are going to have to do the same dance with Amazon) don't get what they want, they'll collapse.

Well... so what? Why should Amazon care if Hachette flushes itself down the toilet in its efforts to remain relevant? Amazon has 600,000 ebooks in Kindle Unlimited. And if Hachette folds, Amazon will likely carry books by Hachette authors once they're free of their contracts.

Hachette is a middleman. Amazon is not.

Amazon is playing it very smart offering in Hachette authors monetary compensation. It's like scouting an opponent's team for star players. Preston and the Authors Guild understand this. Authors understand this. Hachette understands this, and is losing the PR battle, perhaps not in the biased media, but certainly in the hearts of authors. At least the ones who aren't super-rich or have Stockholm Syndrome.

Preston made a concentrated effort to gin up support for his letter. He found about 900 people, and it took him weeks, and required the help of the media.

We slapped together a petition in a few hours, and within a few days had thousands of authors sign it. Without any concentrated effort. Without informing the media.

I'm pretty sure the Ansel Adams Trust Publishing Rights Trust, as powerful as it may be, is less important to Amazon than the thousands of authors who disagree with Preston. Hachette should be paying attention to this. But according to their latest investor meeting--which took place after this dispute went public--they're more concerned with keeping control over ebook prices while smugly reveling in their position of "sifting" authors.

Cader: But they way they phrase it in the post -- "the 30% share of total revenue is what Hachette forced us to take in 2010 when they illegally colluded with their competitors to raise e-book prices. We had no problem with the 30% -- we did have a big problem with the price increases" -- is factually wrong. eBook prices paid by consumers may indeed have risen post agency, but the agency publishers themselves did not increase prices. They lowered their prices to their retailers, and they eliminated discounting.

Joe: Huh?

Ebook prices paid by consumers went up. The publishers controlled those prices. And publishers and authors made less money. But this is all apparently okay as long as Amazon could no longer do any discounting?

Amazon has no problem with 30%, because that's what they take from indies. They did have a problem with higher ebook prices.

In the short run, Amazon made more money per ebook sale when the publishers forced the agency model on them, and they still had a problem with it because it meant higher ebook prices overall, which they didn't want.

Cader again: I chose my words very carefully here, Joe, just as Amazon does. They don't talk about "ebook prices paid by consumers."

The ebook prices publishers charged to Amazon went down as a result of agency. That it is a clear, indisputable matter of fact.

For a $27 hardcover, agency publishers typically would have called the consumer MSRP anywhere between $27 and $21.60 (20 percent less). Amazon would have paid about half of that to the publisher ($13.50 to $10.80). That same ebook would have been agency priced at $12.99, and Amazon would have paid $9.10 to the publisher. The price between the publisher and Amazon decreased.

Joe again: Who cares if the ebook prices offered to Amazon went down? Amazon didn't want higher profit margins. They wanted lower ebook prices. Publishers weren't doing Amazon a favor. Publishers were guarding their own interests, while also earning less for themselves and their authors. And they colluded to do so. That's how frightened they are of losing their cartel.

Cader again: Consumer prices are a separate issue. Higher prices to consumers may have been the result on some books, but it was not because publishers raised their prices. Publishers lowered their prices, but eliminated discounting.

Joe again: Let's make it nice and clear for those in the cheap seats.

Consumers paid higher prices. Publishers were the cause.

You're conflating a separate issue here. Intentions don't ameliorate consequences.

Cader again: As for the myth of $9.99 and what Amazon "wants," did you see the document that surfaced during the proceedings showing Amazon's formula for when and how long they would discount to $9.99 and when they would let the ebook price rise again?

On the other hand, some publishers did raise their ebook prices *post-settlement,* to make room for the limited discounting allowed.

Joe again: Can you link to the document? I'm not following the argument here.

Cader: Smashwords founder Mark Coker wonders in our comments why that offer doesn't apply to the hundreds of thousands of Smashwords titles? "So agency is okay as long as it's accompanied by lower prices? Then why have they refused to allow Smashwords or other low-cost ebook distributors into their agency program?

Joe: I'll take a wild shot here: because Smashwords is a competitor?

Cader again: Yes, Smashwords is in some ways a competitor -- and there are many instances in which I will not quote Mark for that reason -- but shouldn't Amazon want them to be a supplier? Why does it matter if they get 30 percent from a KDP author, or 30 percent from a Smashwords author?

Joe again: Amazon could, indeed, treat Smashwords like it treats Hachette. They choose not to. They're allowed to make that choice. I can think of several reasons why, other than competition. Amazon prefers to deal with authors directly, because it pays authors more, and they want to lure more authors into exclusivity with KDP Select. Smashwords not only sells ebooks on their own platform, but they distribute to other sites. It isn't in Amazon's best interest to have ebooks available on other sites, which is why they offer so many KDP Select perks. And Coker is a rabble rouser intent of causing trouble and eventually wants to take over the world.

Cader again: Amazon is positioning themselves as speaking for and acting for all authors interests', particularly those of self-published authors. You and Barry have declared them the real Authors Guild. But here you are excusing the way they treat a couple hundred thousand independent Smashwords authors/publishers because of competitive interests.

So maybe you should sort that position out further.

Joe again: I'm kidding about Coker. I think he's one of the heroes in this revolution. I met Mark a few years ago, and we've traded emails and phone calls.

I'm starting two ebook businesses. Amazon may not want Mark and the Smashwords catalog, but I do. I'll take the whole thing, and I'm hoping we'll be able to work something out.

Cader again: Also, Amazon is still supposed to be a store, that sells books by other suppliers. The Kindle mission is "any book, ever published, in 60 seconds or less...," not "any book, published by us, subject to our broad rights claims and ability to change terms without any notice or consent...."

Joe again: I agree. Amazon is leaving some scraps on the table, and these scraps are worth millions. Watch www.ebooksareforever.com and www.bookloco.com. I'm going to pick up the scraps that Amazon doesn't want, and do so without competing with Amazon.

Publishers are correct to fear Amazon. Amazon is slowly disintermediating them. That's what this dispute is about.

Cader again: Yes, that. Hachette is trying to prevent that, and protect their business, their authors, and their other vendors. As you have implied in your comments, Amazon is also looking to disintermediate other retailers, and other suppliers/vendors/distributors like Smashwords.

Joe again: But there is one entity Amazon cannot disintermediate. The author.

Right now, authors are suffering. But we've actually been suffering for decades. I used to be a Hachette author. I found a way out of my contract. And I'm thrilled I was able to, because I'm making 10X as much money as I was through Hachette. If I was still bound to that contract, watching my income slip away, I'd be going out of my mind right now.

But I wouldn't be blaming Amazon. I'd be blaming the company I signed the contract with. The one who has the responsibility to get me into stores and is failing. The one who has rejected three Amazon offers to help me. I'd be mad as hell.

But I got out, because I suspected this was going to happen. This and a lot more. Give it a few more years when things really start getting crazy.

To Hachette authors: hire a lawyer specializing in publishing. Try to get your rights back. Or do what Courtney Milan did and release interactive multimedia versions of your books.

You're getting hurt right now because Hachette is negotiating for things it doesn't want to admit to in public. You trusted them to do what was best for your book, and they're botching it. Get your books back.

Amazon isn't your friend. They're a business, just like Hachette. But at this moment in time, Amazon's agenda aligns with yours. Their enlightened self-interest is helping authors.

You won't hear this from Publishers Lunch because it is Publishers Lunch is paid for by publishers, and when publishers start toppling, there goes PL's subscriptions.

I don't get paid for this blog. I have no horse in this race. I'm just an activist, a populist, trying to help authors make informed choices by reacting to the misinformation being spread by the media. I don't want your money. I don't hide behind a paywall. This is my public service to you.

Big props to Michael Cader for joining this discussion for free, and I expect any questions directed toward him in the comments to be polite. I will censor rudeness. We have a guest who has a different perspective which we can all learn from. Be nice, or I'll boot you.

Michael, I hope you stick around and address the comments that will pile up. I also hope you offer a response to Barry's post on anonymity.

Barry uses examples and links to many sources to support his position, but, here's his main argument.

Barry: Though I’m encouraged that Michael seems to at least be aware of my criticism, I’m concerned that he doesn’t understand it, because he seems to be conflating anonymity in an article with closed comments to an article. Both practices are problematic, but they’re not at all the same thing.

Let me start by trying to find some common ground here: I generally agree with Michael (and with top literary agent Ted Weinstein) that Amazon should have enabled comments on its post. Though I think there’s a bit of a difference between what one might reasonably expect from a corporation, on the one hand, and what one might expect from an organization calling itself the “Authors Guild,” which bills itself as “the nation’s leading advocate for writer’s interests in effective copyright protection, fair contracts, and free expression” (my emphasis, because I love irony), on the other, let’s not quibble. Let’s just agree that whether it’s the “Authors Guild;” or Amazon; or James Patterson, Douglas Preston, Richard Russo, or Scott Turow, the failure to engage substantive critiques of your arguments (yes, that’s you, Douglas Preston of “Authors United”) is a disservice to the public and belies a lack of confidence in one’s own positions.

Which, I have to emphasize, is why I’ve been so disappointed in the failure of Publisher’s Lunch to respond to my critiques of their pernicious habit of granting publishing executives anonymity. Michael, you’ve clearly read the critiques; is a misfired jab in response really all you think you owe your readers?

All that said, to equate granting anonymity for sources quoted in a news publication, on the one hand, with a blog post closed to comments, on the other, is incoherent. Let’s talk about why.

Amazon’s post was issued on behalf of the corporation. It’s signed, “The Amazon Books Team.” Michael, if there’s some way you think the post would have been more transparent or more accountable if it had instead been signed, “Jane Doe, on behalf of Amazon,” I’d be grateful if you could elaborate. But either way, we would know the statement was made on behalf of Amazon and that Amazon stands behind it.

By contrast, the Publisher’s Lunch anonymous quotes I’ve addressed have been about (i) speculation regarding the basis for an author’s business decisions; and (ii) refuting Amazon’s on-the-record assertions about how Hachette has dragged its feet in negotiations. In this context, is there any question that transparency and accountability would be improved if the executives making these assertions allowed the use of their names?

Or to put it another way, why won’t they use their names? If Amazon is lying when it lays out the factual history of Hachette’s foot-dragging, wouldn’t a Hachette executive—wouldn’t the entirety of Hachette management!—want to go on the record to rebut? Of course they would.

And that being the case, why doesn’t Publisher’s Lunch, in the interest of transparency, accountability, and accuracy, insist that any such official it quotes go on the record?

Look, if I publish my own blog post without enabling comments, I’m being small-minded and cowardly. But if I publish someone else’s comments without attaching his or her name to those comments, I’m potentially enabling score-settling, propaganda, and straight-up lying in the pages of my own publication.

So when the White House publishes bullshit on its own website, we know where the bullshit is coming from, even if we can’t directly respond. But when the New York Times publishes that same bullshit—attributed to “Senior Administration Officials”—we don’t know who to hold accountable. The official seems to be speaking on behalf of the government, but maybe she’s not. We can’t question her assertions or otherwise hold her to account because we don’t know who she is. We don’t even know if she’s speaking on behalf of the government, some faction of the government, or herself alone. It’s all deniable—with the newspaper’s complicity.

Michael, in the end, maybe we won’t be able to agree on any of this. But even if your point that “Hey, Amazon does it, too!” were correct, would that absolve you when you fall short of your own journalistic benchmarks? Shouldn’t you set your own standards based on your own integrity and on what’s best for your readers, and without regard to what Amazon or anyone else does or doesn’t do in their own blog posts?

In the spirit of transparency, accountability, and engagement that (I think) we both agree on, I hope to hear from you in the comments. Mine are always open. :)

Joe: As an addendum to what Barry said about why it is pointless, pernicious, and promiscuous, you obviously talk to a lot of sources high up at publishing houses. Since we've seen, through the DOJ suit, how these people lie, deny, and actively attempt to cover up, have you considered that you're being used, manipulated, and deliberately misled? That's what they have a documented history of doing, whereas Amazon does not.

When Amazon says something, they're automatically suspect. But you believe it's okay to quote an anonymous publishing source, when anonymity isn't required.

It's more than just a question of accountability, or journalistic ethics. They could be playing you, Michael. And they haven't shown themselves to be smart enough to get away with that. Add in people like me, and Barry, and Hugh, and David Gaughran, and David Vangergriff, who are paying close attention to this situation, and you might find yourself in a sticky predicament of having to defend outright bullshit because you chose to anonymously cite it.

Or, even worse, what stops any of your critics from accusing you of fabricating the quote? Obviously Amazon didn't fake its own press release. We know where it came from. But if you keep citing anonymous sources, it really puts a big question mark over your veracity.

"A Big 5 editor, who asked not to be named, confirmed that every new publishing contract will contain a 'Love Room' clause, where once a month the author will be taken into a room and repeatedly sodomized. This will continue for the life of the author, plus 70 years."

See? I can make up anything I want to, and without citation, I can use it to further my own agenda without being forced to defend it. That really is pernicious.

Barry Eisler is currently on the road, but he also wanted to weigh in on your responses. Rather than take them line by line, Barry has focused on three main areas of disagreement. Though he brings up many of the same points I did (we didn't read each other's comments), he also brings up some I missed.

So here's Barry…

Barry: Michael, thanks for weighing in here. One of the primary characteristics of any establishment is an unwillingness to acknowledge the legitimacy of critics of the system (which manifests itself, among other ways, in a refusal to respond to criticism itself). That tendency is unfortunate because it prevents systems from improving (in fairness, improving a system, rather than preserving it, isn’t what establishments are typically about). Anyway, kudos for being better than that, and for demonstrating thereby that you care about improving the current system of publishing more than you do about preserving it.

I’ve read all your comments, and I think we have three broad areas of contention. Here are my thoughts on each.

First, I think we agree that Hachette (and all legacy publishers) are heavily invested in preserving the position of paper. Where we differ, I think, is on whether this focus is ultimately beneficial for the publishers in question and, more importantly, beneficial for books and reading.

But as long as we agree on the first part, I’m happy. My primary aim is to make writers aware that when publishers like Hachette are pricing books high, it’s not being done with the primary objective of maximizing revenue. Rather, the primary objective is to protect the position of paper. As long as authors understand this, they can make informed decisions.

In this regard, it’s perfectly legitimate to observe the opposite: that Amazon, which has as a strategic objective the growth of digital, might be pricing its books below the sweet spot, leaving money on the table as a way of growing the digital market. My own sense is that, while this might have been true in the early days of the digital books ecosystem, it isn’t any longer. Amazon doesn’t seem to pump-prime markets for longer than they think they need to (for example, the recent price increase of Amazon Prime), and my sense is that Amazon understands the digital market has achieved a self-sustaining altitude and now they can ease back on the throttle.

Beyond that, (i) I’m making far more money from my ebooks priced in the $2.99 to $7.99 range than I ever did when they were at the legacy-set price of $12.99; (ii) I know scores of other authors whose experience has been the same; and (iii) there’s lots more data on the way from Author Earnings indicating that significantly more revenue is generated at lower price points.

Second point of contention: that Amazon is somehow being deceptive in comparing only $9.99 and $14.99, and that the real sweet spot price is somewhere in between. Based on the experience and data I mention above, I don’t believe this is the case. But again, the main thing for me is that this conversation is happening and that our respective views are being aired and engaged, so authors can make better informed decisions.

Third, on pricing I think we’re talking past each other. I don’t particularly care what wholesale formulas are used to derive retail prices. The point I, and Joe, and others have been making is that legacy publishers want a higher retail price point for ebooks and that Amazon wants a lower one. If you’re arguing that the purpose and the effect of the Big Five’s collusion with Apple was other than to achieve a higher retail price point, then it’s probably time for us to just respectively disagree and move on. I’m happy to let the facts, and the DOJ price-fixing case and consent decree, speak for themselves.

Again, kudos for showing up here and engaging your critics, and I hope your example will prove contagious within establishment publishing generally. If it does, everyone stands to benefit. Along those lines, I’d love to hear your thoughts in response to my post Publishers Lunch and Pernicious Anonymity -- it was addressed to you, and so far you’ve ignored it, which seems like a lost opportunity. But even if you prefer not to engage my arguments there (or here), I hope you’ll at least consider them. Publishers Lunch is an important and valuable source of information and insight, and I think you’d be even better if you insisted that, with rare exceptions, your sources go on the record rather than hiding behind unaccountable anonymity.

Joe: Michael, You're welcome to respond again in the comments, or you can send me an email and I'll add your comments directly to this blog post.

I also hope that other industry pundits reading this consider the tone Barry and I have used. I've purposely been rude and confrontational in an effort to shame people like Turow, Patterson, Preston, Russo, Robinson, Shatzkin, et al into responding. For years, my polite appeals to debate have been ignored. So I've grown increasingly frustrated, and snarky, when dealing with soapbox tape-recorded megaphones spouting the same nonsense over and over without acknowledging or engaging opposing viewpoints.

But when someone does engage, like you, or Steve Zacharius, I take extra efforts to make sure I am as polite and considerate as my guest is.

That also goes for the comments. Once again I'll warn my commenters to attack the facts, not the person. If we can all be civil and play nicely, we all have the chance to learn. I will moderate people who step out of line, so err to the side of polite.

Addendum: Michael Cader responds

Cader: As you say, some of this is getting circular, so I'll try to keep this reply briefer, and focus on places where I might have something new to add, rather than repeating what I said before in a different way. (Also, together we've shed thousands of words over Amazon's 600-word statement, and I'm trying to get out of town.)

Fundamentally, I think we are agreeing -- though stating in somewhat different fashion -- that both Amazon and Hachette are looking to protect/advance their own interests.

Joe: Yes. But there is self-interest that hurts authors, and enlightened self-interest that benefits authors. I think Barry and I have presented a good case showing which is which.

Cader: Hachette did deny Amazon's claims of dragging their feet, albeit in a fashion Barry did not like -- but the denial was issued nonetheless.

Joe: Not to go circular, but the denial was issued by whom? Was it on the HBG website? Via a Press Release? In an email to authors, by CEO Michael Pietsch? Was it done through any official source, or by anyone who could be held accountable?

Cader: I wish they would say more, but it's not at all unusual for a company to decline to negotiate with a key supplier in public. It's probably the norm. What's more unusual is Amazon's multi-pronged, multi-message approach -- sometimes negotiating with people who are not authorized to make deals, sometimes eliciting feedback from publishing community members and then ignoring that feedback, sometimes via these statements on their forum, like Clint Eastwood at the Republican convention. You see it as noble and clear; others see it as desperate and flailing. There's some dignity in HBG not letting Amazon set the public terms of engagement.

Joe: Michael Pietsch is the one who set the public terms, when he sent out letters to Hachette authors whining about Amazon not stocking titles and removing pre-order buttons, but negelecting to mention Hachette ignored Amazon's continued attempts to negotiate.

Hachette currently has no contract with Amazon. Staying silent isn't dignified. The word I'd use is "shitty."

Cader: Yes, Hachette cannot disclose how many ebooks they've sold via Kindle on a per unit basis. (They have disclosed, both to the court and their public investors, Kindle's share of their ebook sales.) The jeopardy that attaches to a big company for such a violation is different than the jeopardy to you as an individual.

Joe: Fair enough. So why demand more figures from Amazon?

Cader: I agree that publishers have been uncomfortable with all kinds of transparency (including our PM deal reports). But Bookscan would not exist if publishers did not pay fees to keep it going.

Joe: That's not the same thing as saying they freely give Boocan information. Which, if they did, would go against your previous statement about being unable to disclose how many ebooks they've sold via Kindle

So do publishers share info with Bookscan? Or does Bookscan find it by tracking UPC codes and ISBN numbers?

Cader: Your new businesses sound interesting, and savvy. The ebook world is still full of possibilities and room for growth. And at least some consumers are clearly uncomfortable with the idea of having only one reliable, viable place to buy their ebooks. I'll look forward to hearing more.

Joe: We're in beta, and should be rolling out an enhanced beta in about 8 weeks.

Cader: I'd rather not launch into a long debate on paper versus digital. Yes, big publishers have distinct, leveragable market advantages in the physical supply chain. They may indeed want to "protect" that.
But they are also servicing readers and I don't think we should lose sight of that. In the latest survey from a non-publishing-related polling entity, Pew, only 4 percent of respondents are reading e-only, and a substantial percentage don't read digitally at all yet and don't want to. And for mainstream publishers, 75 percent of dollars (or more) are spent on print.

Joe: Servicing readers? ;)

Is making readers wait a year for the cheaper paperback version actually serving readers? Is DRM servicing readers? Was windowing servicing readers? Are $14.99 ebooks servicing readers?

I make my books available in paper, for readers who prefer it. I consider that servicing readers.

Controlling what gets published, and what gets onto bookstore shelves, and the prices readers will pay, is not what I'd call servicing readers. I'd call it charging whatever you want to because you control supply, i.e. a cartel.

Cader: Again, it's a very long, separate conversation about when and how to trust sources and when not to. I am careful and circumspect; I know (and am told) a lot more than I report, and am always looking to have an understanding of the broader context; and as you've noted, I do have access and interaction with people all across the publishing world (including retailers, authors and agents). And they all know where to find me if we run something this isn't correct or doesn't sound right.

I have been on this beat every day for over 14 years. Like anyone I've made my share of mistakes but I'll stand my record against that of anyone who has covered the trade publishing business.

Joe: And we can enter all of that into the public record. I'm sure you're a reputable, stand-up guy.

That doesn't excuse using anonymous sources in the context with which you used them. Especially when they furthered a specific agenda that I've shown to be disingenuous.

Cader: Since you have gone to admirable lengths to conduct a respectful dialogue here, I would like to take issue with this:

"You won't hear this from Publishers Lunch because it is Publishers Lunch is paid for by publishers, and when publishers start toppling, there goes PL's subscriptions. I don't get paid for this blog. I have no horse in this race."

The notion that you, or Barry, or Hugh -- or Shatzkin, or me, are truly writing in defense of personal economic interests is illusory, and offensive. I don't think an exchange among people who are likely to disagree will ever get very far if we lean back on an implication that the other guy is really in the tank for personal gain.

Joe: Michael, I write thrillers about cops. There's a reason cops talk about motive. Someone with something to gain is likelier to commit a crime than someone who doesn't.

We can agree that both Amazon and Hachette have distinct and different motives for their actions, above and beyond what they've stated.

You might be offended that I would consider someone paid by the industry as sympathetic to the industry. I consider it entirely plausible and rational. When I pick apart your arguments, or take you to task for citing anonymous sources, of course I see bias there.

We all have bias. But my bias in this debate isn't currently connected to a revenue stream. You may believe that bringing that up is illusory, and I respectfully disagree. I think motive should be considered, as it is in any court of law.

Cader: (You said you're starting businesses to help sell ebooks by other self-published authors; I say good for you, rather than focusing on how that might give you a horse in the race....)

Joe: Once those businesses are up and running, I will definitely have a horse in that race, and a much greater need to protect my self-interest. But, again, it is enlightened self-interest. EbooksAreForever is starting with 70% author royalties, and we're hoping to go higher from there. BookLoco will have days where authors make 100% royalties.

Full disclosure: I don't want to run a business, let alone two. I'd prefer just to write books. But I've been pretty good at predicting the future of publishing, and I see some areas that aren't being attended to by any current business model. Libraries are getting screwed. Authors and readers who want free ebooks aren't being properly catered to.

So I could ignore what I believe the future holds, and continue to rely on companies who hopefully will keep my best interests in mind. Or I can do something that will give authors another revenue stream, libraries a fair shake, and readers more choices.

Once upon a time I relied on a company to have my best interests in mind. That company was Hachette. They did not have my best interests in mind, and this current debacle shows me how right I was to leave them.

I hope to make some money in these new ventures. But most of all, I hope to give opportunities to readers, writers, and libraries that they currently don't have.

Cader: We've all been fortunate in our work; we're all engaging passionately in precious free time in ways that none of us has to because we think it's important and valuable to a community we all care about and want to see endure and succeed. Even if we have different ideas about what that future path might look like, or ought to be.

The idea that Publishers Lunch serves only publishers and is supported only by publishers is incorrect. PL and PM have welcomed and served all publishing professionals since inception, and from the beginning we included authors -- both published and aspiring -- in that definition and that community. Authors are a substantial portion of both paid and free subscriptions. (As are agents, retailers, digital startups, international publishers, film and tv people, media, and more.) The transparency and accessibility we have helped bring to information about deal transactions, dealmakers and how to contact them have had a radical effect on how the business works, and how those outside a very limited circle can use the same resources and information that editors, agents, publishers and others use all the time to get business done. And through that, among other things, we have helped create substantial opportunities, and revenues, for authors.

I don't want to turn this into an infomercial, but I wish we all could not rely on facile ideas about what is motivating a dissenting voice.

Joe: When my start-ups kick into gear, and you see me being unethical, disingenuous, hypocritical, or motivated solely by greed, I hope you take me to task for it, because someone should call me on it.

And when you quote another anonymous publishing executive, I'll take you to task.

I don't see the publishing industry existing in its current form for many more years. Once B&N goes away, and with it the paper midlist, we'll see layoffs and mergers and bankruptcies and lawsuits and a lot of hurt, confused, disillusioned authors. Many will feel blindsided, when the signs have been there for years.

If Publishers Lunch is able to weather this upcoming storm, and provide information that the survivors are willing to pay for, I'll be surprised, but I'll also admit I was wrong to pigeonhole PL in such a myopic, bigoted way.

See you on the intertubes, and thanks again for stopping by.

Addendum Deux: Barry replies

Barry: By odd coincidence, today President Obama acknowledged that the CIA “tortured some folks” (yes, folks. He called the CIA people folks, too. Just folks, who torture folks). Contrary to treaty and federal law, no one will be investigated or prosecuted. But don’t worry, because "We have to as a country take responsibility for that so hopefully we don’t do it again in the future.”

http://www.theguardian.com/world/2014/aug/01/obama-cia-torture-some-folks-brennan-spying

You might wonder how there can be any taking of responsibility for breaking the law if the law goes unenforced. Which brings me to Michael’s thoughts on anonymous sources in journalism…

Amazon executives claim on the record that Hachette has been dragging its feet, and lay out a whole timeline for the foot-dragging (see William Ockham’s reconstruction at the link below). An unknown Hachette official, who requested anonymity and was granted it by Publisher’s Lunch, then denies Amazon’s claim.

http://jakonrath.blogspot.com/2014/07/amazon-hachette-sounds-of-silence-guest.html

Imagine you’re a child, and terribly unsophisticated about the worlds of journalism, business, and publishing. Might you ask… “Why won’t Hachette deny this in public? Don’t they want people to know the truth?”

The child would know why, too. Because: the Hachette official was lying. But failing to understand something even a child would recognize, Publisher’s Lunch granted that executive anonymity rather than saying, "Sorry, if you want to correct that timeline, you’ll have to do so on the record, just as Amazon did.”

Instead, knowingly or not, Publisher’s Lunch allowed itself to be used to launder corporate bullshit into what looks on the surface like journalism.

And Michael’s response to being criticized for this is, "Hachette did deny Amazon's claims of dragging their feet, albeit in a fashion Barry did not like -- but the denial was issued nonetheless.”

Wow.

The fact that you would believe — and claim in public — that “Hachette” is responsible and accountable for something uttered by some presumptive executive who wouldn’t even agree to have his name attached to the statement is breathtaking. Do you also believe that when some anonymous administration official is quoted in the newspaper, that’s the same as the White House issuing a public statement?

As I explained in my post to you on this topic, good journalism isn’t about what some other corporation does or doesn’t do in its own press releases. And it’s not about what someone like me “likes” or doesn’t like. It’s about what’s more likely to result in accuracy, transparency, and accountability… and what’s more likely to result in distortions, falsehoods, and propaganda. You really ought to read it — for the links to informed thinking on this topic if for nothing else.

http://barryeisler.blogspot.com/2014/07/publishers-lunch-and-pernicious.html

Michael, there are times when the sensible and dignified thing to say is just, “Those are good points. Thanks for bringing them up — I’ll consider them.” Instead of digging a deeper hole for yourself.

Ponder whether this is one of those times.

But however or even whether you want to respond, again I hope you’ll reconsider your practices on granting anonymity to people who have no legitimate reason to ask for it. Why not correct mistakes? Why not try to be better?

Peace.

Thursday, July 31, 2014

Fisking Shatzkin's and Cader's Fisks of Amazon

Two days ago, Amazon released a statement explaining their position in the negotiation difficulties with Hachette. As many of us had guessed, it's all about ebook pricing.

Barry Eisler did a post about the statement, and I fisked Douglas Preston, history's worst poster child for publishing, because he continues to beat a drum that only 1% of authors can hear.

The fact that Preston acknowledges that many disagree with his position, but never responds to or addresses criticism, is equivalent to stuffing his face from a big bowl of fail with a spoon in each hand.

But elsewhere on the Internets, there are those who remain on Hachette's side and are vocal in their concerns about the Amazon statement. Among them, John Scalzi, Mike Shatzkin, and Michael Cader of Publishers Lunch.

Scalzi's take was skewered on the Passive Voice, with 178 comments so far, the majority of them critical of his POV.

I decided to address some of Shatzkin's and Caders comments, and Barry Eisler also weighed in on Cader on his own blog.

I'll start with Mike Shatzkin.

Mike: “Unjustifiably high” is an opinion, not a fact.
Joe: Mike, when Amazon has the data on what pricing structure is the most lucrative, that's not opinion. It’s math.
Mike: Publishers pay money for the right to exploit copyrights and their “opinion” on pricing should be at least as important as anybody else’s.
Joe: A publishers' opinion on pricing certainly applies to the wholesale price at which they sell their content to retailers. They've always controlled that. Publishers also insist on a recommended list price (books are one of the very few retail items that have the price printed on them). But unless the contract with the retailer states otherwise, that's where their opinion ends.
Mike: Agency publishers had a lot of experience with higher ebook prices that couldn’t be discounted before the DoJ stepped in and they apparently disagree.
Joe: Huh? Ebooks were being discounted, which is why publishers colluded to force the agency model on Amazon. The agency deal meant Amazon couldn't discount. When the DOJ stepped in, Amazon went back to discounting.

Okay, upon rereading your sentence, I think you're saying that the price- fixing publishers seemed to like higher prices.

Did they like them because they made more money? Probably not, because they had to give a lot of that money back to readers in the settlement.

Or did they like those high prices because they retarded the growth of ebooks and protected their paper oligopoly? How is that counter to Amazon stating that $14.99 is unjustifiably high? It seems to be sympatico. The price fixers wanted those ebooks to be priced high, and their justification was to protect paper. 

Mike: This elasticity measurement considers only sales of ebooks at Amazon. What is the impact on print book sales when the ebook price goes up and ebook sales go down?
Joe: It only considers ebooks because ebooks are the items that Hachette wants to raise prices on. Hachette and other publishers make higher profits on ebooks, but they don't run a cartel over ebook distribution like they do with paper.
Mike: What is the impact on the bookstore distribution network when ebook prices go up and ebook sales go down? It would be commercially irresponsible of publishers not to consider those effects as well.
Joe: What's commercially irresponsible is not giving readers what they want. In the past, publishers had all the control. They priced hardcover books as luxury items, and those who couldn't afford them either had to wait for the library copy or wait a year for the less-expensive paper version to come out.

Publishers no longer wield that power. It's understandable that they don't want to let it go, but you can't put that cat back in the bag.

Amazon's press release isn't meant to be a comment on the state of the paper publishing industry. It's meant to explain the current negotiation situation with Hachette, which is about ebook pricing.
Mike: It is true that ebooks live in a world where they compete with other media. It is also true that the they live in a world which includes print, also an important component of a publisher’s and an author’s economic world. This analysis is very short on measurements of the impact on print sales of lower ebook prices.
Joe: Print is important to my economic world. It's about 2% of my income.
Ebooks are 1% of Legandare's income. And, again, this pricing issue is about ebooks, not paper.
We know Hachette wants to protect their paper sales. Why should Amazon care about that? Amazon cares about the needs of its customers, and Amazon and Hachette can apparently agree on terms for selling paper books. How does your argument that Amazon isn't taking paper sales into account affect Amazon at all? That isn't Amazon's concern.
Mike: It is good to hear that Amazon accepts a 30% share for retailers as reasonable. Will they now extend terms reflecting that to all the non Big-Five publishers who are trapped in “hybrid” terms, giving 50% or more in wholesale discounts to Amazon for ebooks? Of all the points raised by Amazon in this document, this is the most consequential in terms of commercial impact.
Joe: You mean "trapped" as in "willfully entered into the contract"? I'd be fine with a 50% wholesale deal with Amazon. I'd love it if they heavily discounted my books. I'd love it even more if they sold them as a loss-lead. But I don't have a paper empire to protect.
Mike: How about the academic and professional title universe that never operated on trade discounts until Amazon forced them into the trade discount world recently?
Joe: I don't think you understand the word "forced" anymore than you understand "trapped".
I'll give you a correct usage: "Amazon was forced to accept the agency model because publishers illegally colluded, and they became trapped by those terms."
No one is forcing any publisher to accept Amazon's terms. Amazon isn't a monopoly. Those publishers are free to go elsewhere. Amazon isn't breaking any laws by being a fierce competitor and negotiator. The same cannot be said about Hachette.
Mike: The economics of those segments of the book industry are being devastated by trying to put them into the trade paradigm where they never belonged and never intended to be.
Joe: Yes, the world will weep over the loss of $200 textbooks. I'm getting teary-eyed just thinking of it.
Again, it is not Amazon's job to give life-support to a business model that no longer works, whether it’s 8-track tapes or textbooks.
Technology, and consumers, have moved on. Publishers also need to move on if they want to continue to be relevant. Go with the flow, or drown.

Michael Cader of Publisher's Lunch was also critical of Amazon's statement, and he says some things worth responding to.

Cader: As most of our readership has likely seen by now, on Tuesday afternoon the Amazon Books team put up another unsigned, closed to comment post (an exercise in what Barry Eisler ought to call shameful "pointless, pernicious, promiscuous anonymity") on the Kindle Forum. The post is said to offer "specific information about Amazon's objectives" in their negotiations with Hachette Book Group.

As to why Amazon doesn't allow comments, I'm puzzled by that, as well. They haven't allowed comments on any of their Hachette related posts. I doubt it would be because they fear criticism--Amazon tends to ignore criticism, even from the highest sources.

If I were forced to speculate, I'd guess--and this is a pure guess--that Amazon believes the comment thread would fill up with anti-Hachette sentiments, and that's not conducive to the negotiations they are currently involved in.

Or maybe Amazon truly fears that a pro-Hachette avalanche of posts would overwhelm them, as pro-Hachette authors have been lighting the Internets on fire with their fact-based, common sense posts.

(Can anyone point me to a single pro-Hachette fact-based common sense post? Anyone?)

Cader: If you have not read the post yet, check it out. It raises many questions, among them:
Amazon is very careful with their words, even if not elegant. The post begins, "A key objective is lower e-book prices." A lot of traditional media have written the post up as if it said "The key objective..." What are the other key objectives, Amazon? Why do your conversations with people in the trade talk about looking for your fare share of the "business efficiencies" produced by a rising ebook market and your investments, while your public words are only about pricing objectives?

Joe: Well, we agree that Amazon is careful with their words. It’s unusual to hear an observation like that leveled as a criticism. Does Cader prefer the Hachette approach, which is to clear English what a chainsaw is to a tree…?

That said, I'm pretty sure Amazon just agreed to a 30% cut of ebooks--that speaks directly to their business efficiencies of the rising ebook market, doesn't it? So they didn't just speak of pricing objectives. But since Hachette hasn't made any statements about pricing, we're left with the belief that this dispute is about ebook pricing, which is why Amazon is addressing that particular point.

Cader: Amazon says they have "quantified the price elasticity of e-books from repeated measurements across many titles" in their store. Will they provide that data to publishers? Will they do it for a variety of price points?

Joe: Have publishers released any price-point or sales data? No. We rely on third parties to attain that information, such as BookScan.

I find it interesting that Amazon is, finally, sharing some price point data, and Cader immediately wants more from Amazon and nothing from Hachette. It reminds me of that Louis CK joke about WiFi on airlines.

Amazon, like legacy publishing, has always been tight-lipped about sales figures. But with Amazon, authors get timely, easy to understand royalty statements.

Cader: Amazon keeps trying to push a public perception that most new ebooks are $14.99, overlooking the substantial number of titles at $11.99 and $12.99 -- and overlooking the post-settlement discounting provisions that led some publishers to raise ebook prices in anticipation of Amazon's discounting.

Joe: I had the impression that Amazon is focusing on $14.99 because that's the price Hachette is pushing for. Remember that the agency model is still in effect on Amazon, all the DOJ did was allow Amazon to discount those agency prices.

As for publishers raising ebook prices in anticipation of Amazon's discounting, I find it hilarious that there were abundant author complaints that Amazon stopped discounting Hachette titles. How about Hachette prices them fairly to begin with, in which case discounting wouldn't be needed?
Cader: And will they back up the contention that lower prices raises overall revenue in the form of advance guarantees, one publisher asks? Amazon is essentially offering an assurance that an ebook that sells 100,000 units at $14.99 will sell 174,000 units. Even if true, does that only work in isolation? E.g., if all $14.99 ebooks moved to $9.99, would the sales effect be mitigated as consumers are back to choosing among a wide swath of comparably priced books?
Joe: Well, we could always run a controlled experiment by using a parallel universe...
Oh, wait. We can't.
But we can allow Amazon to price ebooks where they choose, and publishers to wholesale those ebooks to Amazon for the price they choose. Which is how it used to be, except publishers hated the discounting so much that five of them colluded with Apple to fix prices.
Cader: Their figures consider a world of ebooks only. Their "total pie" is really just a piece of the pie. But publishers and authors are looking to maximize revenue across all formats. "Total revenue" on an ebook is only part of the "total revenue" for a new release book, and the hardcover edition still generates substantially more revenue per unit.
Joe: As I mentioned while responding to Shatzkin, this dispute is about ebook prices. Hachette is welcome to counter with a "total pie" argument, but Bezos believes "your margin is my opportunity". He's not in business to prop up the paper book market.
Cader: Publishers and authors are also looking to maximize exposure of their titles and revenue across all possible outlets. More viable outlets makings books available for perusal and sale is an essential part of the "healthy reading culture" Amazon talks about.
Joe: So it's Amazon's job to bolster its competition? It's one thing making books competitively priced with other media types. It's another thing to be competitive with other retailers selling books. Amazon wants low prices. It’s in Amazon's best interest if other retailers price books higher, or don't sell books at all. That's a no-brainer. Amazon's arrival on the publishing scene has given the industry a much needed shot in the arm. Writers, and readers, are benefitting. Amazon's position seems to be it wants those benefits to continue, but it isn't Amazon's job to enable the competition to compete better.
Cader: Of course it's in Amazon's interest to drive higher ebook sales -- where they have a 60 to 70 percent market share -- over print sales, where their market share is half of that or less, but it doesn't mean that is the solution for publishers and authors, or even readers.
Joe: As I stated above, my paper income is about 2% of my overall income. But publishers still have an oligopoly over the paper industry, and they want to protect that. This isn't an impasse. Readers will vote with their wallets. Because, for the first time ever, readers have a choice.
Cader: Tangentially, first-run movies would sell a lot of downloads on Amazon at most any price. The lower the price, the more downloads they would sell. Would that be good for the movie business as a whole?
Joe: Funny you should mention that -- because more and more pay-per-view movies are being released while the film is still in theaters, or in some cases before it is in theaters.
With some titles, like Transformers, the bean counters have decided a theater-first option is best. Others, like 4 Minute Mile, http://www.amazon.com/Minute-Mile-Watch-Before-Theaters/dp/B00LFE2558 are takign a different approach. And this seems to be good for the movie business as a whole, and for film lovers.
Cader: People in the business will smile at Amazon's writing, "Any author who’s trying to get on one of the national bestseller lists should insist to their publisher that their e-book be priced at $9.99 or lower." As we've demonstrated, it's harder than ever to get a regular new release ebook onto to Amazon's Kindle bestseller list, which now gives 40 percent to 50 percent of its slots to books Kindle Unlimited free trial members have clicked to download.
Joe: Uh, then maybe those publishers should enroll their books in Kindle Unlimited?
I just hit #11 on the Amazon Top 100 with Whiskey Sour, which was published back in 2004. I sold over 6000 ebooks in a week. I can get a ten-year-old book on the list with just a few ads, but giant publishers can't hit the Top 100?
But this is a straw man. Amazon is talking about lists like the NYT, which publishers deem to be extremely important (I've sold a few million books and never hit the NYT list). And if publishers want to get on the NYT or USA Today lists, Amazon is helpfully suggesting an ebook priced at $9.99 or less, because Amazon has data to show this is the best price point.

It just isn't a price point that publishers like, because they care more about losing power and therefore relevance (that paper oligopoly) than they do about losing sales.
Cader: We understand Amazon is playing to the crowd, where the idea has been embedded that agency pricing raised prices.
Joe: How could that idea have been embedded? Maybe because, under the agency model, prices went up? Isn't that what the DOJ proved? Why does Cader think five of the then Big Six colluded to fix prices? Were they trying to force Amazon to lower its prices?
Cader: But they way they phrase it in the post -- "the 30% share of total revenue is what Hachette forced us to take in 2010 when they illegally colluded with their competitors to raise e-book prices. We had no problem with the 30% -- we did have a big problem with the price increases" -- is factually wrong. eBook prices paid by consumers may indeed have risen post agency, but the agency publishers themselves did not increase prices. They lowered their prices to their retailers, and they eliminated discounting.
Joe: Huh?
Ebook prices paid by consumers went up. The publishers controlled those prices. And publishers and authors made less money. But this is all apparently okay as long as Amazon could no longer do any discounting?
Amazon has no problem with 30%, because that's what they take from indies. They did have a problem with higher ebook prices.

In the short run, Amazon made more money per ebook sale when the publishers forced the agency model on them, and they still had a problem with it because it meant higher ebook prices overall, which they didn't want.
Cader: "We had no problem with the 30%" is raising lots of questions from other players. Many publishers would love to limit Amazon's share to 30 percent.

Joe: And I'd love to sell my ebooks to Amazon at a 50% wholesale that they're free to discount. It all comes down to what sort of deal you're able to make with Amazon.

Cader: Smashwords founder Mark Coker wonders in our comments why that offer doesn't apply to the hundreds of thousands of Smashwords titles? "So agency is okay as long as it's accompanied by lower prices? Then why have they refused to allow Smashwords or other low-cost ebook distributors into their agency program?

Joe: I'll take a wild shot here: because Smashwords is a competitor?

Cader: We'll give them 30% *and* give their customers lower prices. If Amazon wants its customers to have lower prices, then why the doublespeak? And why then has Amazon been so stingy with free pricing?"

Joe: It's a mystery to me why Amazon doesn't see the value of free. They're leaving a lot of potential money on the table. But Amazon, like any company, is free to do business with whom it chooses, and how it chooses.

Cader: On Amazon's remarks about authors' interests and their share of ebook revenues, Coker adds: "Nice of Amazon to care about authors. But do they really care? If they care about the welfare of authors, then why for last four years has Amazon been robbing KDP authors every day via draconian price matching? Amazon routinely steals revenue from authors even when the price differentials are due to a competing retailer's error, and not the author's intention or fault."

Joe: I don't like KDP Select's exclusivity either. I also think Amazon should sell in epub format. I'd like to be able to make my books free whenever I want to. I've been telling Amazon this for years. But it's their house, their rules. If I don't like the rules, I can opt out of Select, or take my books off Amazon completely.

I don't expect Amazon to become altruistic, but since the days of DTP they have been operating according to a philosophy of enlightened self-interest. I have benefitted. So have tens of thousands of other authors. So have many millions of readers.

Publishers are correct to fear Amazon. Amazon is slowly disintermediating them. That's what this dispute is about. That's why Hachette wants $14.99 ebooks. Because as the ebook market grows, and the paper market shrinks, what’s the point of having a publisher? Most authors with even a pair of functioning neurons will cut out the middleman and take that share for themselves. 

Publishers are middlemen. Once they were essential middlemen. Now they are, as Barry Eisler says, a value-added option. If you find value in turning over ¾ of your ebook royalties in return for cover art and editing. 

Because when B&N closes, and paper distribution exists only for the big names like Patterson, Preston, and Turow, cover art and editing will be all the legacy industry can offer authors. And the legacy industry knows how lame that is.