Amazon tightens its grip - now dictating to publishers re their own prices !

Chris Work, who posted some comments on one of my earlier posts on this blog, I see from The Bookseller website, has added a form to his blog to contact the Washington State attorney with regard to the Amazon affair. This can be found here. All you have to do is simply copy the text and send it to the email address that Chris provides with any message of your own. I urge everyone involved in this affair to send this form post haste, as like Chris says on his blog, "Amazon isn't going to pay much attention to you or me... but they will listen to anti-trust lawyers of the state of Washington". I don't see that they will have an awful lot of choice in the matter, but then again, I don't know how US law operates, and anything is possible.

The Bookseller it seems though is not the only British heavyweight publishing website to be covering this story, as according to the latest edition of Publishing News, the headlines of which were waiting for me in my inbox when I got home from work today:

"AMAZON HAS THREATENED publishers who sell direct at discount on their own websites with punitive action. PN understands that it has said that if the publisher continues, Amazon will take the selling price as the RRP and apply its terms of trading to that price. In other words, if Amazon receives a 50% discount from Penguin, for example, but Penguin is selling a £20 book for £15 on its website, Amazon will only give Penguin £7.50, rather than £10. One publisher told PN: “This has been around for a while. There have been discussions going on since Frankfurt. Essentially, they're not happy when the manufacturer, as they call us, sets the price of a book. The threat is that they will apply the agreed terms of trading to our web price. But they are on very shaky legal ground. After all, they've been invoiced at an RRP less their discount, so if they refused to pay that amount, they would be in breach of contract.”

Another publisher was more forthright. “Nobody can tell somebody else what price to sell a book at. Publishers will resist this. We're talking about very few titles and we are very confident of our position.”

Although the number of titles being sold direct by publishers is very few, some observers believe Amazon sees it as the thin end of the wedge and wants to fire a warning shot. The move is being driven by Amazon's UK Head of Books, Christopher North, and comes as a blog storm has erupted over Amazon.com's announcement concerning its print-on-demand operation BookSurge. Independent publishers are angered by the US company's decision to economically favour those companies that switch their printing to BookSurge. The row forced Amazon to release an open letter clarifying its position. Amazon.com will sell titles from other POD providers it said, but the publishers would have to join Amazon's Advantage Program, which has a fee. Amazon UK said that are no plans to introduce the service here, but one publisher is taking legal advice. “They're abusing their monopoly position. Once they've got you, they'll start increasing the terms.”

In the background to the moves may be Amazon's realisation that it has effectively dominated online bookselling for some years. Its figures with publishers grow faster than any other retailer (hence publishers' reluctance to anger it), but with other players establishing their online operations - Waterstones.com and, shortly, Borders as well as increasing noise from Play.com and publishers' own sites - it realises that this might very soon change.

This is indeed the thin end of a very long wedge, and I think Clive Keeble is right when he said a few days ago that "Amazon are a dangerous predator that needs to be stopped".

I have a reading booked with my good friend Diana Summer tomorrow, my first for over a year, to discuss various issues regarding work and the book, and I plan to include this as one of the questions. I have my own theories, some of which I have mentioned in previous posts, but it will be interesting indeed to get spirit's take on this.

Angela Hoy says on her latest post, that she suspects the reason that Authorhouse, I-Universe and Lulu caved in was because there is a clause in their contracts (in Authorhouse and I-Universe's case anyway) that says that authors must pay $75 for inclusion on Amazon.com. They have therefore painted themselves into a corner with their own greed, since by failing to sign the Booksurge contract they would have left themselves wide open to being sued by disgruntled authors for breach of contract. I will have to check the Authorhouse UK website, but I believe I am right in saying that they also make a similar charge. Having had dealings with this company when I was looking for a suitable POD provider back in early 2006, I have to say that this would not surprise me, as they seem to charge for pretty much anything they can get away with, and more's the pity, they do ...

Angela goes on to say that "Lulu has third party service providers (that pay Lulu commissions) that offer Amazon listing enhancement services for a fee to Lulu authors. One Lulu author surmised on their forum, "Lulu will just have to supply Amazon with books..." So, perhaps they found themselves in the same bind as AuthorHouse.

The deadline given to some publishers was rumoured to be April 1st and AuthorHouse/ I-Universe and Lulu both announced agreements with Amazon on March 31st - the day before. This leads both Angela and myself to believe that Amazon may have had them both by the probverbial short and curlies. This is what you get though when you charge authors for something that happens automatically without you actually having to do a thing. Make no bones about it, if my publlsher leaves Lightning Source to do all the fulfilment direct with Amazon, then it is exactly the same with all these others too. They are then sitting pretty taking the authors hard earned cash for doing to put it politely, bugger all. I hear the sound of one thousand unseen chickens clucking as they come home to roost ...

Angela also confirms that there is as yet no word from Xlibris, as does my friend UK based author Marion Webb de Sisto, who because she is married to an American and has her largest market there, chose to publish with Xlibris.

I could write much more on this debate if I chose to, but I do have the questions to write for tomorrow, and it has been a long day, and so I am now going to sign off before I email Angela with the links posted on here tonight and hit the snooze button !

The Latest re Amazon.com

Breaking news from the Writers Weekly website regarding the Amazon debacle shows that the three largest print on demand providers within the United States have all bowed down and submitted to Amazons demands. In other words, all three Authorhouse, I-Universe and Lulu) have moved their printing for Amazon at least, from Lightning Source to Booksurge, in a move that will cost Lightning Source thousands of dollars in lost revenue. I cannot believe that they allowed themselves to be blackmailed in this way without even bothering to consult their authors, who as a result have lost valuable distribution through Ingrams, and in one fell swoop their best chance of becoming stocked in book stores throughout the United States.

This will have catastrophic consequences I feel for all involved in this dreadful situation, where one of America's largest corporations is effectively holding both authors and publishers to ransom. What a choice - book stores or Amazon. I know which I would prefer when I look at my sales figures, and thank goodness I live where I do and don't have to make that choice. I was hoping there may have been an email from Richard when I got home tonight, but no, there is still no official news as to how this will impact authors outside the US. At the time of writing my book is still on both sites, but for how long remains to be seen.

Amazon in the meantime, have released an official statement, which to untrained eyes, and those who do not understand how publishing works, will not mean very much, so I will explain here, in hopefully easy to understand terms that will help.

I copy the statement here in its entirety, with my own statements in bold throughout the text:

Open letter to interested parties:

We wanted to make sure those who are interested have an opportunity to understand what we're changing with print on demand and why we're doing so.

One question that we've seen is a simple one. Is Amazon requiring that print-on-demand books be printed inside Amazon's own fulfillment centers, and if so why?

Yes. Modern POD printing machines can print and bind a book in less than two hours. If the POD printing machines reside inside our own fulfillment centers, we can more quickly ship the POD book to customers - including in those cases where the POD book needs to be married together with another item. If a customer orders a POD item together with an item that we're holding in inventory - a common case - we can quickly print and bind the POD item, pick the inventoried item, and ship the two together in one box, and we can do so quickly. If the POD item were to be printed at a third party, we'd have to wait for it to be transhipped to our fulfillment center before it could be married together with the inventoried item.

Speed of shipping is a key customer experience focus for us and it has been for many years. Amazon Prime is an example of a successful and growing program that is driving up our speed of shipment with customers. POD items printed inside our own fulfillment centers can make our Amazon Prime cutoff times. POD items printed outside cannot.

Simply put, we can provide a better, more timely customer experience if the POD titles are printed inside our own fulfillment centers. In addition, printing these titles in our own fulfillment centers saves transportation costs and transportation fuel.

This is complete and utter rubbish. The truth is that Amazon have, according to Wikipedia, 10 distribution centers in North America alone; and 14 more abroad (one of which is based in Milton Keynes, the same town where Lightning Source are based - Lightning Source being the largest print on demand printer in both territories). Amazon though, for all their grand statements about saving time, money and fuel, do not print books at all ten of these sites. The majority of books printed by Amazon will then still have to be shipped back to the warehouse for distribution, which will cost just as much as if they had come from Lightning Source in the first place. This money saving rationale then is full of glaring great big holes and totally meaningless.

Another question we've seen: Do I need to switch completely to having my POD titles printed at Amazon?

No, there is no request for exclusivity. Any publisher can use Amazon's POD service just for those units that ship from Amazon and continue to use a different POD service provider for distribution through other channels.

Why though should the author and/or publisher be forced to do this? It effectively means that they will be forced to publish two different editions of the same book, one through Lightning Source and another just for Amazon using their own printer, Booksurge, thus incurring two sets of printing and publishing costs (the average Booksurge package costs $1000). Since Booksurge, Amazon's own printer do not offer distribution through Ingrams, the wholesaler through which 99 percent of US book stores source their titles, authors are being given a stark choice between online sales or sales through book stores. This is no choice and authors should not be placed in this position.

Furthermore, since Booksurge are based only in the United States (unlike Lightning Source), they are unable to offer distribution in the UK, so US authors choosing to print with Booksurge will not be able to access the UK market and vice versa. UK authors using Booksurge will be the mercy of fluctuating exchange rates and high shipping costs in order to buy their own books.

Alternatively, you can use a different POD service provider for all your units. In that case, we ask that you pre-produce a small number of copies of each title (typically five copies), and send those to us in advance (Amazon Advantage Program - successfully used by thousands of big and small publishers). We will inventory those copies. That small cache of inventory allows us to provide the same rapid fulfillment capability to our customers that we would have if we were printing the titles ourselves on POD printing machines located inside our fulfillment centers. Unlike POD, this alternative is not completely "inventory less." However, as a practical matter, five copies is a small enough quantity that it is economically close to an inventory less model.

What they don't tell you, and what the average book reader also doesn't know, is that in order to be accepted on to the Advantage Program, you have to offer Amazon terms of 55 percent discount (in other words, they buy books from you at 45 percent of the cover price). These are terms more usually offered to wholesalers, such as Ingrams, or Gardners in the UK, but Amazon are not a wholesaler - they are a retailer. You also have to join the Search Inside programme, whereby your book is scanned so that buyers can browse inside and see if it is indeed suitable for their needs. This violates the authors copyright and may result in lost sales rather than more sales as you are effectively giving your work away for free.

If this were not bad enough, publishers/authors also have to pay a set fee of $29.95 per year, PLUS shipping costs to get the books to Amazon, in addition to the 55 percent discount. Why though should Amazon be worried about that when they don't have to pay? To add the icing to the cake, I bet that like the wholesalers, they also reserve the right to send back books that they can't sell at any time within one year - guess who has to pay for these - yes, you got it, the author! They wrote the thing while Amazon get all the money !

Might Amazon reconsider this new policy?

Only if we can find an even better way to serve our customers faster. Over the years we've made many improvements to our service level for consumers. Some of these changes have caused consternation at times, but we have always stuck with the change when we believe it's good for customers. An early example: many years ago we started offering customer reviews on our website. This was a pioneering thing to do at the time. The fact that we allowed *negative* customer reviews confounded many publishers - some were downright angry. One publisher wrote to us asking if we understood our business: "You make money when you sell things! Take down these negative reviews!" Our point of view was that our job was to help customers make purchase decisions. It made sense to us to stick with the customer-centric position of embracing customer reviews, even negative ones.

Another example: a few years ago, we made the decision to offer used books, and to make those used copies available directly alongside the new editions. This caused significant consternation, but we stood by the decision because we were convinced it was right for customers. Sometimes a used book will do and it can sometimes be had at a significant cost savings relative to a new book. We stuck with the customer-friendly decision.

Our decision with POD is the same. Once a book is in digital format, it can be quickly printed on modern POD printing equipment. It isn't logical or efficient to print a POD book in a third place, and then physically ship the book to our fulfillment centers. It makes more sense to produce the books on site, saving transportation costs and transportation fuel, and significantly speeding the shipment to our customers and Amazon Prime members.

Only of course that isn't what these changes will mean - as like I said, Amazon have 10 distribution centres throughout the US, but just the one printing plant. It will not then make the blindest bit of difference to their service, transportation costs, or anything else for that matter. Even if by some fluke, they open another 9 print centres, surely this will cost a lot more than had they stuck with their current system in the first place. It does not make economic sense no matter how you look at it.

We hope this helps those who are interested understand what we're working to do and why. We believe our customer-focused approach helps the entire industry in the long term by selling more books.

If they really think this then they are seriously deluded. Those three publishers may have bowed down, but this is far from over. How many Authorhouse/I-Universe/Lulu authors I wonder will change publishers because of this, choosing book stores over Amazon. The author should not have to make this choice. Internet book sales may be rising, but Amazon and print on demand authors would be wise to remember than 90 percent of book sales are still made through book stores - the Internet market is a drop in the ocean compared to this.

Furthermore, I fail to understand how this is better for the customer either; if the majority of print on demand companies refuse to give in to Amazon's demands, then this will mean that their customers have access to less books. This is not better service but worse, as it means less choice.

Sincerely,

The Amazon.com Books Team

My parting shot then is a request that all readers of this blog boycott Amazon until further notice or until they see sense (whichever is the sooner) and that you also add your names to the online petition which can be found here.