Amazon Admits It’s Discouraging Customers From Buying Hachette’s Books

A blog about business and economics.
May 28 2014 10:24 AM

Amazon Admits It’s Discouraging Customers From Buying Hachette’s Books

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No James Patterson novels here.

Photo by Peter Endig/AFP/Getty Images

With an online outcry growing among some readers and authors, Amazon published a blog post last night in which it admitted to discouraging customers from buying books published by Hachette because of a contract dispute.

Jordan Weissmann Jordan Weissmann

Jordan Weissmann is Slate's senior business and economics correspondent.

Shipping times for titles by best-selling Hachette authors such as Malcolm Gladwell and James Patterson have grown as long as three or four weeks as Amazon has cut back on buying print inventory from the publisher. It has also stopped offering preorders on some upcoming books.

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While Amazon did not offer many details about its disagreement with Hachette, the New York Times has reported that the fight is over e-book pricing. The company defended its tactics by arguing that it was negotiating for better terms on behalf of its shoppers and that the vast majority of its merchandise hasn't been affected by the showdown. Amazon also encouraged readers who need a copy of a book fast to purchase it from "one of our competitors."

So there are at least three ways one could look at this situation. Hachette would of course like you to see it as a David vs. Goliath battle, with itself as the underdog hero. Amazon would like you to see it as normal hardball negotiations between two giant multinational corporations (it notes that Hachette is owned by a "$10 billion media conglomerate," Lagardère). And then there's Jack Shafer's view at Reuters: Amazon has now crossed the line into inconveniencing its customers in pursuit of higher profits. (I, for one, am not so sure about his thesis. It's not as if this the first time Amazon has messed with a publisher's inventory during a contract fight).

In any event, both sides appear to be digging in. "[T]hough we remain hopeful and are working hard to come to a resolution as soon as possible, we are not optimistic that this will be resolved soon," Amazon wrote. At least there's always Barnes & Noble.

Here's the company's statement in full:

We are currently buying less (print) inventory and "safety stock" on titles from the publisher, Hachette, than we ordinarily do, and are no longer taking pre-orders on titles whose publication dates are in the future. Instead, customers can order new titles when their publication date arrives. For titles with no stock on hand, customers can still place an order at which time we order the inventory from Hachette -- availability on those titles is dependent on how long it takes Hachette to fill the orders we place. Once the inventory arrives, we ship it to the customer promptly. These changes are related to the contract and terms between Hachette and Amazon.

At Amazon, we do business with more than 70,000 suppliers, including thousands of publishers. One of our important suppliers is Hachette, which is part of a $10 billion media conglomerate. Unfortunately, despite much work from both sides, we have been unable to reach mutually-acceptable agreement on terms. Hachette has operated in good faith and we admire the company and its executives. Nevertheless, the two companies have so far failed to find a solution. Even more unfortunate, though we remain hopeful and are working hard to come to a resolution as soon as possible, we are not optimistic that this will be resolved soon.

Negotiating with suppliers for equitable terms and making stocking and assortment decisions based on those terms is one of a bookseller's, or any retailer's, most important jobs. Suppliers get to decide the terms under which they are willing to sell to a retailer. It's reciprocally the right of a retailer to determine whether the terms on offer are acceptable and to stock items accordingly. A retailer can feature a supplier's items in its advertising and promotional circulars, "stack it high" in the front of the store, keep small quantities on hand in the back aisle, or not carry the item at all, and bookstores and other retailers do these every day. When we negotiate with suppliers, we are doing so on behalf of customers. 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.

A word about proportion: this business interruption affects a small percentage of Amazon's demand-weighted units. If you order 1,000 items from Amazon, 989 will be unaffected by this 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.

We also take seriously the impact it has when, however infrequently, such a business interruption affects authors. We've offered to Hachette to fund 50% of an author pool - to be allocated by Hachette - to mitigate the impact of this dispute on author royalties, if Hachette funds the other 50%. We did this with the publisher Macmillan some years ago. We hope Hachette takes us up on it.

This topic has generated a variety of coverage, presumably in part because the negotiation is with a book publisher instead of a supplier of a different type of product. Some of the coverage has expressed a relatively narrow point of view. Here is one post that offers a wider perspective. 

http://www.thecockeyedpessimist.blogspot.com/2014/05/whos-afraid-of-amazoncom.html

Thank you.

Jordan Weissmann is Slate's senior business and economics correspondent.

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