Amazon breaks silence on Hachette dispute, says it is negotiating 'on behalf of customers'
After blocking preorders and delaying shipments for titles in the midst of ongoing negotiations with publisher Hachette, Amazon has now spoken out on the dispute, attempting to portray its decisions as advantageous to customers, while also admitting that the issues are not likely to be solved soon.
"When we negotiate with suppliers, we are doing so on behalf of customers," Amazon's books team said in a statement posted to the mega-retailer's website. "Negotiating for acceptable terms is an essential business practice that is critical to keeping service and value high for customers in the medium and long term."
The company was compelled to comment on the dispute with Hachette after generally negative publicity focused on Amazon began to swell last week, when it was highlighted that the market dominating bookseller had begun refusing preorders for several upcoming Hachette titles including "The Silkworm" by J.K. Rowling, written under the pseudonym Robert Galbraith. Hachette is one of the "Big Five" book publishers, and industry watchers believe Amazon's moves are intended to frustrate writers, hoping they will pressure publishers to give a more favorable -- and profitable -- contract to Amazon.
In its statement, Amazon reminded customers that Hachette is a major corporation too, saying it's "part of a $10 billion media conglomerate." The retailer suggested that the media's interest in the story is driven by the fact that Amazon's negotiations are "with a book publisher instead of a supplier of a different type of product."
Amazon did admit it is carrying less print editions and "safety stock" titles from Hachette, and is also not accepting preorders for the publisher's upcoming books. The company explained that it is its "right" to "determine whether the terms on an offer are acceptable and to stock items accordingly."
The online retailer didn't say exactly how many Hachette titles and products are affected, but characterized the dispute as affecting a "small percentage" of Amazon's total offerings. Amazon said that if a user were to order 1,000 items from the company, 989 would be unaffected by the interruption.
"If you do need one of the affected titles quickly, we regret the inconvenience and encourage you to purchase a new or used version from one of our third-party sellers or from one of our competitors," Amazon said.
The Amazon-Hachette dispute has been under particular scrutiny as Amazon dominates the e-book market while competitors such as Apple are looking to gain ground. Apple suffered a serious setback last year, however, when it was successfully sued by the U.S. government for conspiring with book publishers to raise e-book prices.
Apple led the charge in convincing publishers to switch to a so-called "agency" pricing model. That prevented content owners from being able to sell the same titles at a lower price elsewhere, without offering the same price on Apple's iBooks platform -- a "most favored nations" clause.
In contrast, the e-book industry prior to the launch of the first iPad was under the "wholesale model" preferred by Amazon. In that model, resellers such as Amazon had the power to set prices, selling titles at or below cost if they chose to do so.
As Apple attempts to compete with Amazon, the iPad maker is now saddled with an injunction that bars it from entering into any unsavory deals with publishers such as Hachette.
Apple has formally appealed the antitrust ruling, asking for either a dismissal of the verdict or a complete retrial. Apple continues to believe that the iBookstore and iPad created competition in the e-book space, where Amazon's Kindle platform controlled some 90 percent of the market as of 2009.
"When we negotiate with suppliers, we are doing so on behalf of customers," Amazon's books team said in a statement posted to the mega-retailer's website. "Negotiating for acceptable terms is an essential business practice that is critical to keeping service and value high for customers in the medium and long term."
The company was compelled to comment on the dispute with Hachette after generally negative publicity focused on Amazon began to swell last week, when it was highlighted that the market dominating bookseller had begun refusing preorders for several upcoming Hachette titles including "The Silkworm" by J.K. Rowling, written under the pseudonym Robert Galbraith. Hachette is one of the "Big Five" book publishers, and industry watchers believe Amazon's moves are intended to frustrate writers, hoping they will pressure publishers to give a more favorable -- and profitable -- contract to Amazon.
In its statement, Amazon reminded customers that Hachette is a major corporation too, saying it's "part of a $10 billion media conglomerate." The retailer suggested that the media's interest in the story is driven by the fact that Amazon's negotiations are "with a book publisher instead of a supplier of a different type of product."
Amazon did admit it is carrying less print editions and "safety stock" titles from Hachette, and is also not accepting preorders for the publisher's upcoming books. The company explained that it is its "right" to "determine whether the terms on an offer are acceptable and to stock items accordingly."
The online retailer didn't say exactly how many Hachette titles and products are affected, but characterized the dispute as affecting a "small percentage" of Amazon's total offerings. Amazon said that if a user were to order 1,000 items from the company, 989 would be unaffected by the interruption.
"If you do need one of the affected titles quickly, we regret the inconvenience and encourage you to purchase a new or used version from one of our third-party sellers or from one of our competitors," Amazon said.
The Amazon-Hachette dispute has been under particular scrutiny as Amazon dominates the e-book market while competitors such as Apple are looking to gain ground. Apple suffered a serious setback last year, however, when it was successfully sued by the U.S. government for conspiring with book publishers to raise e-book prices.
Apple led the charge in convincing publishers to switch to a so-called "agency" pricing model. That prevented content owners from being able to sell the same titles at a lower price elsewhere, without offering the same price on Apple's iBooks platform -- a "most favored nations" clause.
In contrast, the e-book industry prior to the launch of the first iPad was under the "wholesale model" preferred by Amazon. In that model, resellers such as Amazon had the power to set prices, selling titles at or below cost if they chose to do so.
As Apple attempts to compete with Amazon, the iPad maker is now saddled with an injunction that bars it from entering into any unsavory deals with publishers such as Hachette.
Apple has formally appealed the antitrust ruling, asking for either a dismissal of the verdict or a complete retrial. Apple continues to believe that the iBookstore and iPad created competition in the e-book space, where Amazon's Kindle platform controlled some 90 percent of the market as of 2009.
Comments
Amazon makes squat for margins. Their choices are to either raise prices somewhat, or get better deals from their suppliers. They are trying the supplier route first. If the suppliers are at the breaking point and won't budge on some of the titles- with Amazon out of the picture, other stores like Play and iBooks should be free to sell those books at a higher price.
Or Amazon could just tell the publishers they will raise prices on all their books by 30%, as long as the system effectively prevents anyone else from undercutting them. Could be a big win for publishers and Amazon.
Amazon's margins are fine, their profits are slim because they funnel extreme amounts of capital into lobbying and marketing activities that undercut new competitors, effectively driving them out of business to ensure that they're the only store in town.
The end effect is less competition, less choice of titles and no you don't get cheaper books in the long run, because everything else goes up as a result.
Screwing down vendors is only for two things: to help fund their undercutting practices, or provide more shareholder value. It's not for consumers.
Beware of any monopolist or would-be monopolist that says their actions are guided by their customers' best interests.
Squat for margins has been their business strategy since the beginning.
Wait I though Amazon would never raise prices and become a "bad" monopoly.
Amazon isn't doing this for the Customer, it's abusing its power.
"on behalf of customers" is what Microsoft claimed when it killed Netscape's Web Browser with Internet Explorer.
Amazon is doing pure evil by using its monopoly position against a bookseller. It even admitted to diverting sales away from the bookseller toward its own preferred books.
Where is the Justice Department now? Twiddling their thumbs.
The Justice Department lost to Microsoft. They are gun shy about losing to Amazon.
Of course, like a bully, the Justice Department picked on Apple and the book publishers.
>Amazon makes squat for margins. Their choices are to either raise prices somewhat, or get better deals from their suppliers.
Amazon's margins are fine, their profits are slim because they funnel extreme amounts of capital into lobbying and marketing activities that undercut new competitors, effectively driving them out of business to ensure that they're the only store in town.
The end effect is less competition, less choice of titles and no you don't get cheaper books in the long run, because everything else goes up as a result.
Screwing down vendors is only for two things: to help fund their undercutting practices, or provide more shareholder value. It's not for consumers.
While I don't have much knowledge of how much of that is true (I doubt that lobbying makes much of a dent in their profits), my impression is that the reason they can get by on slim-to-none profits is that they make their money (and big money at that) by playing the float to an unprecedented degree.
Selling quickly while paying your suppliers later gives you "other people's money" to use, invest, etc. At the scales Amazon now works at, this generates ungodly piles of cash.
Remember, Bezos is at heart a Wall Street guy, and he's the best at it. Keep that in mind when trying to figure out what Amazon is up to.
I'm pretty sure Amazon is negotiating on behalf of its de-facto monopoly, not the customers.
It's negotiating on behalf of its stockholders.
The only reason customers exist is to pay stockholders.
I think you are on to something. It certainly fits the profile of a company that uses it's cache with Wall Street to sell at a break even price. There is not much profit motive left if someone becomes more efficient then Amazon. Amazon knows they are the big dog and don't want competition. Hammering suppliers is the first sign of a monopoly.
I can definitely imagine Mr Bezo's asking for 90 days to pay for supplies sold in 5 days. That doesn't sound like such a big deal when money is cheap to borrow...but this is probably a long term contract that will keep this "supplier" under Amazon's thumb. Amazon is stupid enough to admit in public that they want to cut out all the publishers and be the only hand collecting money from buyers and sending it to writers. That is a good deal for new writers, and not so good if you have an established name. Established names are the ones who earn the industry all of its income.
Buy from other sources when the price is the same and keep the competitors in this game. We do not need another Walmart in this country. Has anyone else noticed that Walmart has dropped the Always the low price tagline? They put high prices on anything that is an impulse buy now. With all the data from 1000's of stores it is quite possible to figure out where customers are willing to pay more. Case in point, 2 years ago I bought a cheap mechanical juicer from Walmart for $10. Went in last week to replace it after wearing out. There were no simple mechanical juicers for citrus fruits. The lowest price was $32 for a low power fruit grinder, not a juicer. The high end was $120 with several choices in between. The point is the low cost item is no longer on the shelf. I wonder why that is?
The good of the customers? Excuse me? Delaying or denying customers the right to order is not for the good of customers. Time to stop buying from Amazon for anything. I will not be ordering from them anymore. Now that is good for the customers!
The true test of character is not how you act when you are the little guy, but how you act when you have all the money & power. Now that Amazon.com is the only game left in town, they have shown that they intend to use their power for evil instead of good. The U.S. Department of Justice was supposed to protect us against anti-competitive monopolies like Amazon, but instead, they decided to shut down any businesses who tried to compete against Amazon. And now, this is what has happened.
Amazon is far from the only game in town. Both Google and Apple offer epub stores and both are much larger than Amazon in terms of cash, capitalization, etc.
Your hyperbole is ridiculous. By not allowing Apple a fat profit, they've "shut down" everyone who wants to sell epub books. The claim is garbage and laughable.
Amazon makes squat for margins. Their choices are to either raise prices somewhat, or get better deals from their suppliers. They are trying the supplier route first. If the suppliers are at the breaking point and won't budge on some of the titles- with Amazon out of the picture, other stores like Play and iBooks should be free to sell those books at a higher price.
Or Amazon could just tell the publishers they will raise prices on all their books by 30%, as long as the system effectively prevents anyone else from undercutting them. Could be a big win for publishers and Amazon.
The big loser would be the customer. When did it become so awesome to argue that Google, Apple and Amazon need more billions while we are all jerks for wanting affordable products?
Beware of any monopolist or would-be monopolist that says their actions are guided by their customers' best interests.
You mean like Apple mandating all in-app purchases through the iTunes store and forcing them to toss their competing stores? Apple more of a monopolist in app and smartphone profits.
"on behalf of customers" is what Microsoft claimed when it killed Netscape's Web Browser with Internet Explorer.
Amazon is doing pure evil by using its monopoly position against a bookseller. It even admitted to diverting sales away from the bookseller toward its own preferred books.
Where is the Justice Department now? Twiddling their thumbs.
The Justice Department lost to Microsoft. They are gun shy about losing to Amazon.
Of course, like a bully, the Justice Department picked on Apple and the book publishers.
They didn't lose to Apple. What does that say about how plain and evident Apple's actions must have been?
Beware of any monopolist or would-be monopolist that says their actions are guided by their customers' best interests.
You mean like Apple mandating all in-app purchases through the iTunes store and forcing them to toss their competing stores? Apple more of a monopolist in app and smartphone profits.
Sure, if you think the shoe fits. Why you would jump to the conclusion that my original statement is a defense of Apple is beyond me.
Although what you mean by a 'monopolist in smartphone profits' makes no economic sense at all. Figuratively, yes they 'monopolize' the profits but that is not a technically accurate or meaningful use of the term. Because certainly, Apple does not monopolize the smartphone market. The fact that they get most of the industry's profits without monopolizing the industry just means that they sell a highly desirable product that costumers are willing to pay a lot more for.
In truth what you say sounds very much like criticizing Apple for monopolizing the market for Apple products.
Amazon is far from the only game in town. Both Google and Apple offer epub stores and both are much larger than Amazon in terms of cash, capitalization, etc.
Your hyperbole is ridiculous. By not allowing Apple a fat profit, they've "shut down" everyone who wants to sell epub books. The claim is garbage and laughable.
The big loser would be the customer. When did it become so awesome to argue that Google, Apple and Amazon need more billions while we are all jerks for wanting affordable products?
You mean like Apple mandating all in-app purchases through the iTunes store and forcing them to toss their competing stores? Apple more of a monopolist in app and smartphone profits.
They didn't lose to Apple. What does that say about how plain and evident Apple's actions must have been?
First and foremost, while Apple and Google are large companies and maintain sales in the ebooks market, they don't make the majority, not even combined. It's actually Amazon that controls over 70% of the ebook market and have even more of the physical book market.
'Acting on behalf of customers' is what my cable company says too.
A reader of Orwell should be able to recognize a show trial conducted by a malevolent state when he sees one.
1. Please. Amazon has a commanding market share. DOJ just pretty much legalized its monopoly.
2. Everyone would have recd 30% and that's not all profit. In addition Amazon gets up to a 70% "discount" on hard covers. So your greedy Apple narrative falls short.
3. Can I use another ebook app on the Kindle? Can I buy from other ebook stores on the kindle?
You can still go through the browser to buy ebooks from Amazon, etc.
not sure how you can be a monopolist in profits.