Amazonia

Amazon has admitted to a second quarter loss of $126 million.  Which is not a lot on revenues of over $19 billion, but nevertheless it’s bad news for Hachette and any other Amazon suppliers, because it means Amazon is going to be squeezing every last little penny out of their suppliers, and coming up with every-more-ingenious “services” they can charge their suppliers for.

Amazon’s announced that they’ll lose even more money in the third quarter, but that doesn’t mean that Amazon’s doing badly.   Income is up 34% over last year, better than ever, but that income is being invested in more markets that Amazon feels it can dominate.  It’s just launched Fire TV and the Fire Phone, it’s putting over $100 million into original content to stream over these devices, along with the Prime Music audio streaming service and the Kindle Unlimited readers’ buffet of novels.

There’s also Amazon Web Services that provides computer services and storage (including some rented to sort-of-rival Netflix), and the Dash grocery scanner, a kind of magic wand with barcode reading capability that will enable Amazon customers to buy groceries from Amazon food warehouses.  (Currently in select cities only.  And I really don’t know why Dash isn’t available as an app for smartphones, because that would sorta make more sense.)

The Fire Phone has been getting mediocre reviews (partly because of the modest number of apps available), but I expect improvements over time.  The Kindle Fire tablet wasn’t that well reviewed at first, but now seems to be pretty much on a par with the competition.

The problem I see is that Amazon isn’t breaking new ground here, but charging into fields where there is already strong competition.  There are plenty of people making smart phones, tons of companies delivering entertainment,   lots of cloud storage available for your data.  It’s not like the days when Amazon was the only online book warehouse, and Kindle the only portable e-reader (barring the Sony Reader, which never really broke into the marketplace).  Amazon’s going to have to fight for share in these new markets, against companies like Google and Apple and Netflix that are already entrenched.  And, frankly, the Dash magic grocery wand is too reminiscent of Webvan, the world’s most catastrophic dotcom startup.  So profits may be constrained for a while.

Which is bad for publishers and authors.  Because in search of these lost profits Amazon will try to wring money from their suppliers, Amazon’s strong-arm tactics against publishers are far more damaging to writers than they would ever be to a multinational company like Hachette.

Various Hachette authors got up a petition asking Amazon for relief, which the president of SFWA signed, and then (as might be predicted by anyone familiar with the pugnacious, argumentative nature of SF writers) a heated controversy arose, in which it was claimed that SFWA unfairly chose sides, and that Hachette, too, was mean to authors.

Well yes, Hachette is mean to authors, if by mean you mean that Hachette, and other publishers, try to get authors to sign contracts that favor the publisher over the writer.  Horrors!

Well, duh.  It’s a business, and that’s what businesses do.   They try to do business on terms favorable to themselves. In traditional publishing, it’s the publisher who takes the risk, by giving advances to authors, paying for editing and publishing costs, paying for marketing, paying for cover art— and the publishers want to recoup their investment as much as possible, and that’s why they offer authors contract boilerplate that might as well have been dictated by Ebenezer Scrooge.

And that, in turn, is why there’s this whole class of being called “literary agents” whose job is to negotiate contract terms more favorable to the writers.

And in fact literary contracts are nowadays meaner and meaner, and publishers are less willing now than ever to negotiate the boilerplate.  And why is this? you may ask.  Because they’re feeling the pinch from the loss of nearly 50% of the US market when Borders collapsed, and because of competition from Amazon.  So, in a way, that’s all Amazon’s fault.

Except that I don’t fault Amazon.  Amazon, too, is a business, and it acts in concert with its interests.  It attempts not only to dominate its competition, but to crush them.  Its business plan is to be the last retailer standing and— dare I say it?—  to Rule the World.  (And that was Borders’ plan, too, and Barnes & Noble’s, and the plan of a lot of other people.)

Now it should be said that I like Amazon.  It’s convenient, it’s efficient, it’s there when I need it.  And I earn a fair deal of money publishing my backlist on Amazon— in fact, I just got my biggest payment from Amazon ever, and I’m very happy that Amazon pioneered the online market and let me find readers for books that had been out of print for decades.

But one mistake I don’t make is to assume that Amazon loves me.  And that’s a mistake that a lot of people seem to be making.

When Richard Patterson and Stephen King and the President of SFWA weighed in during the Amazon-Hachette battle, I saw a lot of eye-rolling.  “Oh, those literary dinosaurs, don’t they understand that the paradigms have totally shifted and now it’s all online, all Amazon, all the time!  Me and my equally cool friends are hip to the Good News, and Richard Patterson is so over, it’s pathetic.”

And the thing is, with very few exceptions, I’d never heard of any of the authors that were saying stuff like this.  They were hip and they were all like The Future Is Now, but where were the colossal sales that might point to the success of their business model?  I wasn’t seeing it.

And also to suggest that Patterson and King and Rowling and all those others don’t understand their own business is just a bit de trop, don’t you think?  They’re among the most successful authors in the world, and one thing they’re not is stupid.  And to suggest that they should throw over the business model that made them household words is just a little presumptuous.

I’d like to see an actual household word say that, not a buncha guys I never heard of.

And another thing I was hearing: “The mean ol’ Big Five publishers lacked the vision to publish my work, but now there’s Kindle Direct, AND MY GENIUS IS NOW AVAILABLE TO ALL  THE WORLD!  It’s clear that only Amazon recognizes my worth, and AMAZON LOVES ME.  ME!!!  MEEEEEEEE!”

No, you halfwit, Amazon does not love you.  And I can prove it by asking a simple question:

“Have you read your Amazon contract?”  You know, the boilerplate that you have to sign to be published on Kindle Direct.  The boilerplate that Amazon won’t negotiate.  The take-it-or-leave it boilerplate they foist on every single one of their authors.  Have you read it?

Here’s what it says:

2 Agreement Amendment. The Program will change over time and the terms of this Agreement will need to change over time as well. We reserve the right to change the terms of this Agreement at any time in our sole discretion.

It goes on to say that when Amazon changes the agreement, they don’t have to tell you, all they have to do is make an annotated version of the agreement available somewhere for you to read and agree to.  Because disagreeing with the contract means that your books leave the program.

Now the Big Five publishers may be a bunch of ol’ meanies, but you know what?  When they sign a contract, it’s law, they can’t change it, and they can be sued if they don’t live up to its terms.  They don’t get to say, Hey, we’ll change this stuff whenever we want, and there’s nothing the other party can do about it.

What Amazon’s Clause 2 above tells you is that Amazon doesn’t love you, Amazon finds you useful.  You generate income for them, and if you’re on KDP Select you provide content that no other vendor has, and that’s useful, too.

With indiepub, you take all the risk yourself.  The author pays all expenses: editing, formatting, cover art, promotion, etc.  Rewards are higher, sure, but most Kindle books sell under 25 copies, so for most epub authors, whatever money they spent is pretty well lost.

Now I’d like to pose the question: Why is that feature in the contract?

Now remember that Amazon’s business plan is to Conquer the World.  And once they’ve succeeded— once they’re a monopoly or monopsony or whatever— you won’t be nearly as useful, because they won’t need you as much.  They could chop your royalty from 70% to 35% (which they’ve already done in Japan and India), or go on to 25% or 15% and there won’t be anything you can do, because (1) they told you ahead of time this would happen, and (2) they’re really gonna need to pay their investors one of these days, really, and (3) there won’t be any other markets for your product.  Plus of course they could charge you for display space and for buy buttons and all the little nickel-and-dime crap they charge the Big Five for.

Now I’m not going to say you shouldn’t indiepub— I do, after all— or that all is sweetness and light with the Big Five, because it’s not.  Some people do really well with indiepub, but most don’t.  Some do really well with traditional publishing, but most people don’t even make it past the first gate.

I’m just saying that if you’re in the writing business, you should be aware that it’s a business.  Amazon doesn’t love you any more than Macmillan or Hachette or HarperCollins.  They’re in business to make money for stockholders, or to Rule the World, or for some other reason that seems logical to them.

So it behooves us to make ourselves useful to as many publishing titans as possible.  I want there to be more and more publishers and more and more avenues of distribution, because the more ways there are to be published, the more people there will be to compete for my work.  Variety is good, options are good, competition is good.  And our decisions on which options to take should be as ruthless and rational as those of  anyone else in the business, because that’s in our interest, not in theirs.

And whatever you do, don’t think some huge, impersonal business entity loves you.  Because they don’t.  And if you think they do, you’re in for a very sad surprise.