Simon Says

Joe sez: This is a letter I received from a mid-level legacy publishing insider who wishes to remain anonymous. I have his or her permission to post the letter here, and will add some thoughts of my own afterward. Let's call her Guy Fawkes. So here's Guy...

Guy sez: Writers House president Simon Lipskar has posted an open letter in response to the Justice Department’s suit alleging price-fixing among five of the Big Six publishers and Apple (there is also a similar suit brought by the Attorneys General of sixteen states).  In the letter, Lipskar argues that the DOJ is mistaken, and calls for “every one of us — publishers, agents, authors, retailers, wholesalers and device makers — impacted by the DoJ’s quite literally bizarre misunderstanding of the ebook, publishing and bookselling businesses... to stand up and make their voices heard.”  

I hear you, Simon.  And here I am.  I hope other publishing insiders will follow suit, and particularly hope we’ll also hear from readers -- the group we serve; the group most affected by the DOJ’s suit and the publishing practices at the heart of it; and the one group you neglect to mention in your call for greater public involvement.

Lipskar’s argument has two main premises.  First, that whatever publisher collusion might have been behind the simultaneous industry-wide imposition of the agency model on retailers, the collusion caused no harm to consumers because the collusion made only some books more expensive.  Second, and related to the first, consumers can’t be harmed by some books being priced higher because books are essentially fungible.  I’m not an antitrust lawyer, but I think I’m qualified by my position to examine these premises in turn.

1.  Publishing Collusion Caused No Harm.  This line of argument -- that “there has been no discernable [sic] consumer harm from the advent of agency pricing” -- is interesting because it functions as an implicit acknowledgement that collusion did indeed occur.  And unless the DOJ and sixteen states’ Attorneys General are fabricating the extensive allegations of collusion (including admonitions to “double delete” incriminating emails) in their complaints, it seems Lipskar’s lawyers are being tactically astute in steering clear of what would pretty clearly be a losing fight over collusion itself.  Their better bet is to essentially acknowledge collusion, instead arguing, “All right, fine, but nobody got hurt -- so no harm, no foul.”

And how do they argue that nobody got hurt?  Well, because:

2.  One Book Is Pretty Much The Same As Any Other.  Lipskar acknowledges, as he must, that the prices of New York Times bestselling books went up following the simultaneous industry-wide imposition of agency pricing (“prices for a limited number of titles published by these publishers increased, i.e. those ebooks that were digital editions of newly released bestselling hardcover titles.  Amazon had quite explicitly promised its consumers that these titles would be available at $9.99, and with the switch to agency pricing, these titles did indeed increase in price, mostly to $12.99”).  But, he claims, these higher prices couldn’t hurt anyone because the prices of other books decreased (“No Price Increase for Non-Bestselling Titles”).

Now, I want to say that I think Lipskar’s numbers are cherry-picked, and that using only 80 out of 100 titles from a single hour of a single day, with traditionally published titles and self-published titles mixed together, is for many reasons an inappropriate data set.  But for now I'll accept for the sake of argument that Lipskar’s numbers are accurate -- because I think his argument would still be terribly problematic even if his numbers were right.

So let’s just assume Lipskar’s broad argument is correct (“Even if an individual consumer was unhappy with the agency pricing of bestsellers, the existence of other options, including new competitive ones that have thrived since agency, means that harm cannot be ascribed to the decision to buy a $12.99 ebook”).  Let’s accept that alleged publisher collusion on agency pricing made bestsellers more expensive but didn’t affect the prices of non-bestsellers, and examine the premise that therefore readers couldn’t have gotten hurt because they could still find other books cheaper than the newly expensive bestsellers.

Implicit in Lipskar’s argument is the notion that a reader will be as happy with one book as she would be with another.  Because if the notion is untrue -- if, in fact, readers are drawn to certain titles more than they are to others, and if readers find some books are more attractive, more enriching, more life-changing than others -- then it’s impossible to argue a reader would be unharmed if the books she found most worthwhile were made more expensive.

Now, I can’t really prove readers don’t find all books to be of equal attractiveness, equal importance, and equal worth.  It’s possible, as Lipskar suggests, that books are pretty much as fungible a commodity as a bunch of M&M’s in a glass bowl, none of which has any special merit a consumer might weigh in making a selection.  Can’t easily reach that one you want at the bottom?  No problem, there are a bunch of others just like it right at the top.

Still, you’d think that if readers were as indifferent about picking books as they are about picking M&M’s, different books wouldn’t have different titles.  Or different covers.  Or different prices.  You’d think publishers wouldn’t be so fixated on increasing the prices of certain titles -- certain bestselling titles, as Lipskar himself is forced to acknowledge -- that they would allegedly collude, and then allegedly “double delete” the evidence of their collusion, to do it.  You’d think, in fact, that there was barely a reason for publishers to exist at all.  What are we nurturing, and curating, and passionately presenting to the public, if in the end it’s all just a bunch of fungible widgets?

But again, I can’t really prove books aren’t like M&M’s.  I can only say that as a lifelong reader and lover of books, I know there are certain titles that I want more than others, that have added more meaning to and had a more profound impact on my life than others, and that cannot be replaced by others, even if those presumptive others might carry a lower price point.  And I can only solicit readers who share my passion for books to chime in with your own thoughts about Lipskar’s “all books are fungible” theory, and to share your thoughts with the DOJ directly at the address below (even though -- no, make that because -- Lipskar forgot to mention you when he was encouraging all those other people to act).

I have to add, on a personal note, that Lipskar’s argument makes me sad.  Not just because, in suggesting that books are fungible, Lipskar implicitly devalues them.  But also because Lipskar has made me aware of how hollow it is when the leading lights of my industry claim to value rich literary culture, and the special author-editor relationship, and the high-value, carefully vetted, professionally prepared books we curate and produce.  I believe all that -- believe the raison d’etre of publishing is to select, nurture, and collaborate with authors to produce books of lasting value and substantial impact.  And yet here is a top literary agent arguing that one book is pretty much the same as another -- traditionally published, self-published, genre, literary, whatever.  Obviously both these things cannot be true.  And yet publishing’s luminaries claim both, depending on which position suits them at any given moment.  Doing so isn’t just devaluing.  It’s dishonest.

So if you’re a reader, and you feel you’re being harmed when my industry increases the prices of the books you care most about, do something about it.  Post on your blog.  Share a tweet.  Most of all, send your thoughts to John Read at the Justice Department at the address below to let him know that although Simon Lipskar thinks that books are just another fungible commodity and that you don’t count, you beg to differ and you demand to be heard.

Yours sincerely,
Guy Fawkes


Letters should go to:
John R. Read
Chief, Litigation III Section
United States Department of Justice
450 5th St NW
Suite 4000
Washington DC 20530

Joe sez:

First off, I thank Guy Fawkes for her insights, and for contacting me. I did some checking via Google and she indeed appears to work within the publishing industry. But that's not the point. She could be a hobo who emailed me while squatting in her own filth, and she still makes a solid argument. No offense, Guy.

I agree with 100% of what Fawkes said, though she was a lot kinder than I'm gonna be.

I haven’t examined the data Simon claims to have because he didn't provide titles and prices. Maybe it’s correct. Maybe it’s cherry-picked, as Fawkes mentioned. Maybe it’s flat-out wrong. I'd guess the DOJ has ample evidence that prices went up, or they wouldn't have brought the suit. The one who has ALL the numbers, both sales and prices, is Amazon, and if needed they can be subpoenaed, which would be a lot more informative than the tiny sample Lipskar has presented.

But is Simon wrong only because he apparently thinks books are all fungible? Or is he wrong in other ways, too?

Here's what Simon says:

In fact, prior to the change to agency pricing, many ebooks were sold by Amazon for significantly more than $9.99 (the price that is widely and incorrectly perceived by the government and the public to be the highest price for an ebook before agency).  As reported by Publishers Lunch, an industry newsletter, on February 24, 2009, “Using two different methods for checking Kindle price data in Amazon’s system, we find that roughly 30 percent of the 240,000 or so Kindle titles sell for more than $9.99 (and well over 20 percent sell for more than $20).”

Joe sez: Amazon priced ebooks for more than $9.99 because at $9.99 they were losing money. As I have shown in my blog post, The Agency Model Sucks, under the wholesale model publishers were selling ebooks to Amazon for around $12.50. Is it a surprise Amazon sold at least some of them for more than that?

What drove publishers to collude was the fact that Amazon sold many of these titles for less than wholesale. Which, if memory serves, was what their customers wanted, and continue to plead for in the form of negative reviews and boycotts of ebooks priced above $9.99.

But publishers didn't care about readers, or their opinions. Publishers wanted to control price, and they didn't like Amazon discounting below wholesale cost. Hence the collusion, and the Agency model.

So let's be perfectly clear. The reason ebook prices were high under the wholesale model, and are still high under the Agency model, is because that's how publishers want it. But at least under the wholesale model, Amazon could discount some ebooks as they saw fit, even at a loss. And publishers and authors made more money per ebook sold.

With the Agency model, publishers exchanged a larger percentage of the sale for control over pricing.

So how'd that pricing control work out?

Here's what Simon says:

What this means is that, counter to the endless claims made by the government that agency prices for ebooks raised the consumer price of all ebooks, in fact, by setting most hardcover-period ebooks to $12.99, agency publishers were raising the consumer price of a small set of bestselling titles but simultaneously decreasing the price paid by the consumer on many other hardcover period ebooks.

Joe sez: I'd love to know what the ratio of bestseller sales to midlist sales were.

I could raise the price of a product that sells a million units by 30%, and drop the price of a product that sells ten thousand units by 30%, and that doesn't mean prices overall stayed the same.

Bestsellers are so-called because they (say it with me) sell the best. So if the agency model decreased the price on some titles that weren't popular, while increasing the price on those that were popular, then the AVERAGE price of ebooks would have gone up, based not on titles, but on the number of units sold overall.

But then Simon says something that sounds like it could be persuasive:

the price of the average bestselling ebook has decreased significantly, from approximately $10.20 in Q3 2010 to $8.29 on April 27 – a decrease of 19% in the two years since the introduction of agency pricing – and that, furthermore, the average price today is in fact lower than it was before the introduction of agency pricing.

Joe sez: Wow. That's pretty damning.

But is it correct?

In the graph Simon refers to, included in the DOJ papers, the average ebook bestseller was $8.91 in the first quarter of 2010 under the wholesale model. It then rose to $12.11 by third quarter, 2012, under the Agency model.

According to Simon's info, on April 27th of this year the average price of a Kindle bestseller is $8.29.

Is that right? I decided to check for myself. At 5pm on May 10, 2012, I cataloged every Top 100 Kindle Bestseller. (I managed to do it all in under an hour, so I didn't limit it to 80 like Simon did.)

Here's a link to the spreadsheet.

The sheet shows there were 48 ebooks priced under the Agency model at that specific time on that list. Two of them were short stories priced at 2.99 and .99 cents. Whether or not we average those in with the full length ebooks is a judgment call. I would say it depends on if shorts were included in the DOJ's or Simon's counts, but neither listed titles so it is impossible for me to know. If we do exclude them, what is the average price of an Agency full-length bestseller?

$11.81 per title.

Hmm. That seems to be higher than the $8.91 from first quarter 2010, which was under the wholesale model. It also seems higher than the $8.29 Simon reported. Feel free to check my math. Unlike Simon, I'm posting a spreadsheet with titles, publishers, and prices, rather than just expecting you to take my word for it.

But numbers and facts can be manipulated to prove different points. Of the 48 Agency model bestsellers I listed, two were short stories, two were compilations, and two were obviously sale prices--in other words, the Big 6 publishers behind them had temporarily lowered the price for a small period of time. Hmmm, who was it that predicted that would happen? Hint: me, back in 2010.

So we can easily crunch the data other ways. We can remove the two sale-priced titles and we get $12.21 per Agency bestseller title. Or we can break up the bundled ebooks and average out their sale prices (A Game of Thones set would be $7.50 each, and the Shades Of set is $9.99 each) and put in the sale priced ebooks and the short stories, giving those Agency model ebooks every possible shot at looking cheaper. What's the average then?

$10.33 per title. Still markedly higher than Simon's total. Still two bucks more than the pre-Agency Model total.

So what have we learned?

Depending on how we do the counting, and on what day we count, numbers can fluctuate considerably. Now, I believe I've made a better case that average prices under agency went up than Simon made that average prices under agency went down, but the only one who can accurately gauge the veracity of this is Amazon, who has all the numbers.

And you can bet the DOJ will get those numbers if they need them. And they'll be more accurate than the attempts by Simon and me to figure it out using limited data. What we both did is called cherry picking, and it is a logical fallacy. A fallacy, of course, is  "an error in reasoning that renders an argument logically invalid". The Top 100 changes every hour. Simon's data, cherry-picked two years after the Agency model started, was 1 data point out of 17,520. (Two years is 730 days times 24 hours in a day, each hour a different data point.)

In other words, I believe it is entirely reasonable to throw out all of Simon's questionable data, and the conclusions he based on it.

What else can we pick on Simon for?

Plenty.

Simon says:

agency has fostered more competition at every level.  It has increased competition between retailers (the market is no longer dominated by a single retailer with 90% market share, but is now a competitive field with multiple retailers with significant share, and there is reasonable likelihood that we will see more competitors enter the market).

Joe sez: Can someone explain how ebooks being equally priced in every market increases competition? Because under Agency terms, THE PUBLISHER CONTROLS PRICES. This isn't a case of Wal-Mart undercutting Barnes & Noble on the cost of a hardcover, which is indeed competition. If publishers set retail, retailers CANNOT COMPETE on price. That's one of the big reasons price-fixing and collusion and cartels are bad. They inhibit competition, not foster it.

Simon says:

One specific area of competition that benefits from further illustration is the way that agency pricing has fostered aggressive competition in the area of the e-reading devices, leading to extraordinary consumer benefit in the form of fast-paced innovation and dramatically lowered prices for the devices themselves.

Joe sez: Ack. The Sony, Nook, and Kobo ALL EXISTED PRIOR TO THE AGENCY MODEL!

As for innovation and lower prices, there's that magic causality again. Can you say pirates and global warming?

Guess what, Simon? Technology keeps improving, and prices drop, ON EVERYTHING! THAT'S HOW TECHNOLOGY WORKS!

Did the Agency model make 32" LED TVs drop from $1199 a few years ago to $399 today? Did it make DVD players drop from $400 to $29 too? Can the Agency model also help me lower my mortgage payments, and improve my eyesight? Damn, it's like the Superman of pricing structures! Let's collude and force it on everybody!

Again, as I said yesterday, I wonder which is preferable in an agent; a smart man trying to use bullshit to fool people, or a moron who believes the bullshit?

Let's continue, shall we?

Simon says:

Absent demonstrable consumer harm, there is no competitive reason for the United States to punish the alleged collusion in the manner suggested by the settlement; rather, the terms mandated by the settlement should have focused on the collusion itself, not the damages from it, since there are none.

Joe sez: I agree. No damages, except for those readers forced to pay more for ebooks, and your clients, who got paid less. Other than that, a victimless crime.

Speaking of authors, in the post I mentioned earlier I break down, step by step, how authors were financially damaged by the Agency model. In short, under the Agency model, writers sold fewer ebooks, while making less money on each ebook sold. I know they sold fewer because cheaper sells more copies. I've done the math, many times.

Now, it’s natural that publishers didn’t consult with their authors before thrusting the Agency model upon retailers--after all, authors typically have no say regarding where or how publishers exploit the rights they've secured.

But if you’re an agent, tell me: have you ever had an honest discussion with your clients before publicly supporting a pricing system that is costing your clients money? And don’t tell me you honestly believe that yes, although Agency pricing costs authors money today, it’ll make authors more money tomorrow by fostering healthy competition and greater choice and blah blah blah. You can’t ethically make a decision to cost your clients money today because you speculate doing so might make them more tomorrow without even having a conversation about that decision beforehand.

So now we have agents publicly supporting Big Publishing at the expense of their own clients' finances--without even consulting those clients. Think about how insane that is. How widely unquestioned. Whose interests do these agents represent? Those of their authors? Or those of Big Publishing?

Shame on you, Simon. Not only for touting this bullshit, but for forgetting who you really represent. I'm thrilled you're not my agent. And I feel bad for those stuck with you.

Now, please, PLEASE can a few agents stand up and show they have the stones to disagree with Simon and all the AAR garbage? You can't all buy into this. Someone’s got to have some integrity.

Anyone?

AAR Fail

I just read the letter the Association of Authors Representatives sent to the DOJ yesterday. 

Then I threw up in my mouth. Ack. 

The letter in plain text, my comments in bold. 

My comments will not be kind. 

May 8, 2012

John R. Read

Chief, Litigation III Section United States Department of Justice 450 5th St NW Suite 4000 Washington DC 20530

Dear Mr. Read,

I write to you as the President of the AAR, the largest organization of literary and dramatic agents in the United States, and on behalf of the unanimous AAR Board of Directors. Our more than four hundred seventy-five members represent writers who number in the tens of thousands. We want you to know in the strongest terms possible that we firmly oppose the proposed settlement between the Justice Department and three publishers with respect to e-book pricing.

Translation: We're about to put our collective foot in our mouth. Stay tuned!

Joe sez: I count thirteen names on this letter. I don't see the names of the other 462 AAR members, nor the names of the tens of thousands of authors they seem to be insinuating they speak for.

They DO NOT speak for me. And I hope the majority of the AAR who didn't sign their name to this nonsense show some guts and leave an organization that erroneously claims to speak for them. Or at least fire the board members that sent this without getting a majority vote.

Readers, writers and the general public benefit when there is a healthy competitive literary marketplace. Two and a half years ago Amazon, with its proprietary Kindle devices and its willingness to discount e-book “bestsellers” to a level at which it sustained a significant loss on each copy sold, threatened the entire marketplace for books. 

Translation: Amazon invented a device that consumers wanted. That's BAD. Readers were getting cheap ebooks. That's BAD. It may not seem bad on the surface, and we don't back-up our claim with any actual evidence, but boy oh boy trust us it really is because we say so.

Amazon’s practice of targeting the very titles that drive profitability of our entire industry and pricing them several dollars below cost was clearly leading to the demise of the independent bookstore, hastened the loss of Borders, and threatened the existence of Barnes & Noble, the one remaining large chain store that sells books. 

Translation: Customers were changing how and where they shopped because Amazon gave them a clearly better alternative; ebooks delivered instantly for less.

Joe sez: Apparently the AAR doesn't remember that under the previous model, their authors were making more damn money.

Doesn't AAR stand for Association of AUTHORS Representatives? Why are they suddenly spokesmen for Barnes and Noble?

And Borders? Weren't they on the verge of bankruptcy (or at least in serious trouble) before Amazon even introduced the Kindle? Blaming Amazon for Borders’ woes is bullshit correlation. Or as a friend of mine calls it: causality magical thinking.

This was not healthy for competition or for authors or indeed for consumers in the long-term. 

Translation: Trying to outsell your competition, or attract customers with lower prices and better service, is bad.

And it's bad when authors get paid more for each copy sold and sell more copies because of lower prices. 

And lower prices are bad for consumers, because maybe one day Amazon will again raise prices, possibly even up to the lofty heights publishers have them raised to now under the current Agency Model.

Retailers shouldn't be allowed to set their own prices. That's bad. It's much better for the wholesaler to set both the wholesale and the retail price, because THAT and THAT ALONE encourages healthy competition. ESPECIALLY when there are several wholesalers in lockstep. 

Nothing is better for consumers than a group of companies who set wholesale and retail. And even though they set the SAME prices, it really still is competition! Really!

The steep discounting from Amazon was a practice of selling our clients’ work at a loss in order to make it impossible for other businesses to enter the e-book marketplace in a way that made financial sense for them.    

Translation: This predatory pricing is driving competitors out of business, like it did with... um... what's that famous case where a company lowered prices, destroyed competition, and then became a monopoly and raised prices?

It must happen all the time, right?

Or if it doesn't, it's because the government steps in and stops it. Like in the case of... um...

Joe sez: Like in the case of the DOJ stepping in because 5 of the Big 6 were colluding to raise ebook prices?

This artificially low pricing unfairly threatened the world of publishing and bookselling and would ultimately have a devastating effect on the choices available to book consumers.

Translation: Apparently starting a company that allowed writers to self-publish their books, and that sold all the major publishers' books for less, is VERY BAD for authors and readers. Because more titles being sold at lower prices means less choice. 


Joe sez: How could they write that with a straight face? What's worse, knowing you're spouting BS and doing it anyway to further your own self-interests, or actually believing the BS you're spouting?

What's a better quality to have for an agent? Someone more concerned with buddying up with Big Publishing at your expense, and making bullshit arguments to defend Big Publishing? Or being so stupid they actually believe they're correct?

Personally, I want my agents to be smart and to look out for my best interests. I want them to recognize they work for me, not the Big 6 or bookstores. And if I were repped by one of the 13 agents who signed their name to this, I'd be a lot angrier than I am right now. 

When Apple launched the iPad and offered to sell books at the “agency model” terms it was already using for other media sales, our members breathed a sigh of relief. This would create a fair playing field for Barnes & Noble, Apple and others to develop devices and join the e-book marketplace. 

Translation: For healthy competition to exist we need to disregard consumer preference and put floundering competitors on life support. Because no one can ever start a company to compete with Amazon.

Which is odd, because Amazon started a company to compete with bookstores and did just fine. 

And soon Amazon will compete with publishers as its imprints begin to outsell theirs. 

Which is what we're REALLY afraid of, because Amazon doesn't return our calls. Or take us out to lunch all the time at posh Manhattan restaurants.

Consumers would be able to buy their books at various retailers or e-booksellers; the threat of a monopoly was diminished. 

Translation: Consumers couldn't buy ebooks from other retailers prior to the agency model. After all, there was only Kindle.

And the Nook.

And the Kobo.

And the Sony Reader. 


And even though publishers band together to control price, making it impossible for these different companies to ACTUALLY compete on price, it really really still is competition. 

We cheered this development despite the fact that, as you no doubt know, under the agency model publishers were taking in less money per copy sold and therefore we and our clients were getting less in royalties and commissions. But we believe this sacrifice was in the best interests of the book landscape and therefore our clients long-term.

Translation: We're in bed with Big Publishing, even though we allegedly work for authors. 

Joe sez: How noble of you guys to sacrifice your authors' incomes by taking up this worthy cause, without consulting us.

How about changing your name to the Association of Book Landscape Protectors? Or the Champions of What We Call Healthy Competition Even if Authors Get Screwed?

The proposed settlement would allow for a resumption of predatory discounting of our clients’ most important and profitable new ‘frontlist’ and bestselling titles and undermines the growth of a competitive marketplace for books. 

Translation: Discounting is predatory, even if it benefits our authors and consumers in general. But higher ebook prices via collusion and lower royalties isn't predatory, it encourages a competitive marketplace.

Also, the Big 6 in no way ever undermined the growth of a competitive marketplace for books.

Sure, the Big 6 never created an ereader or an ebook store. And never innovated anything. 

Sure, the Big 6 all price their books comparably.

Sure, the Big 6 offer authors shockingly similar contract terms and royalty rates.

Sure, the Big 6 fit the definition of a cartel.

But Amazon is the real enemy here! Can't you see?

Joe sez: This is the part in the letter where Mr. Reid is laughing so hard he falls off his chair.

It seems to us outrageous that the Department of Justice would choose to interfere in a functioning marketplace where consumers can choose from a broad array of titles with huge differential in prices and formats with a very unclear picture of whether or not ‘agency pricing’ did indeed raise e-book prices on anything but a select number of titles that had been targeted for underselling by Amazon. 

Translation: The marketplace can only function to our satisfaction with collusion and price-fixing, even though we admit it is harmful to our clients' wallets. You DOJ folks should just mind your own business. Stop picking on our crooked industry!

We do not want to return to an environment in which our clients’ intellectual property is irrationally priced in order to stifle innovation and harm consumer choice.

Translation: Because the only choice consumers should be allowed is paying more money for ebooks, which is what Big Publishing wants. 


Joe sez: Where is there more choice—the legacy way? Or via the kind of self-publishing Amazon has enabled? Which system produces more titles and more variety? Which bestseller list has more variety—the NYT? Or the Kindle Store? Which bookstore has more variety, a brick and mortar shop stocking 200 copies of Patterson's latest near the front door, or an online bookstore were EVERY title ever in print is available and given equal virtual shelf space?

Of course we have no way of knowing if there was collusion among the publishers and Apple. 

Translation: We didn't do nothing! We swear! We can’t look to the lockstep royalties, the draconian rights lockups, and the absolute absence of innovation from legacy publishing, to see if maybe there’s been some collusion. We can’t even read the allegations in the DOJ’s own complaint or in the complaint brought by sixteen states! There’s just no way to know! What are we, psychic or something?

But this proposed settlement damages our clients and the industry in a way that goes beyond any appropriate remedy for any possible misconduct. 

Translation: Any possible misconduct?!

Look, I know we did a crappy job of presenting our terrible argument, but it should be okay for the Big 6 to break the law. So can you allow it? Just this once?

We urge you to reject the proposed settlement and allow the market to return to one that protects the value of our clients’ intellectual property from unfair and predatory discounting. This will protect and encourage broader competition among all booksellers, will allow the consumer the protection of a range of choices in format, price, and retailer, and will encourage digital innovation in the burgeoning field of e-book publishing and retailing.

Translation: If we keep repeating the same bullshit over and over, maybe someone will believe it.

Respectfully,

Gail Hochman,

President, AAR

The AAR Board of Directors:

Brian Defiore

Mitchell S. Waters

Anne Edelstein

Beth Blickers

Sarah Lazin

Jim Rutman

Jodi Reamer

Liza Dawson

Ellen Geiger

Dorian Karchmar

Barbara Hogenson

Anne Reingold

Here is my response, which they won't reply to but will be seen by over a hundred thousand people this week thanks to readers like you.

Dear AAR-

I understand these are uncertain, even scary times. But methinks you're forgetting who you work for.

Your clients are writers, not publishers. Your job is to make them more money, not support a program (the Agency Model) that makes them less money. 

Your job isn't to defend publishers—that would be the job of the Association of Publisher Representatives. 

Your job isn't to make sure Pop's Books on 3rd Street doesn't go out of business—that would be the job of the Association of Brick-and-Mortar Representatives. 

Again, last I checked, you were calling yourselves the Association of Author Representatives. If the name you’ve bestowed on yourselves means anything, you should be representing authors. By costing us money without even consulting us, you’re not representing us. You’re screwing us.

I know you're worried that without the Big 6, more and more authors will self-publish, and won't require your services to the extent they do now. But the disservice you're doing your authors with this letter is damn near unforgivable. 

You are taking the side of the companies you're hired to negotiate with. You really don't see a problem with that? Even worse, the side you're taking is one that continues to screw authors--your clients--in many, many ways.

Am I the only one who sees ethical problems with this stance? First the Writers Guild, now the AAR. Those who are supposed to protect authors, are betraying authors. 

It's appeasement, caused by fear.

Winston Churchill said it best. “An appeaser is one who feeds a crocodile—hoping it will eat him last.”

I've accused authors of having Stockholm Syndrome. Apparently it is alive and well in the agent biz as well.

I know you feel threatened by Amazon just like publishers do. But your letter is bullshit. To imply that the tens of thousands of writers you represent agree with your bullshit is even more bullshit. 

I assume John R. Read will be able to detect bullshit when he hears it, but I'm going to send him a copy of this blog post just the same. 

If this blog post made you mad, your anger is misplaced. You shouldn't be pissed at me, or the DOJ. You should be mad at Big Publishing, which has screwed you guys the same way it has screwed your clients for decades. Think about all the books they abandoned or orphaned or tanked or passed up on, all the hoops you had to jump through to get your clients slightly better terms, all the onerous, unfair clauses in those archaic, one-sided contracts that they en masse refuse to consider changing, all the accounting errors and questionable royalty statements, all the shitty covers and poor editing jobs, all the late checks and late contracts, all the pain and depression your writers have had to deal with because they had no power and no other choice. Now publishers have forced Amazon--a company that benefits authors and readers--to accept the Agency Model, which I've clearly explained sucks. 

And how do you react? You defend them.

Your clients trusted you. You were supposed to be advocates for authors. Champions for authors. 

Instead, you've shown yourself to be self-interested cowards.

You've sold out. Shame on you.

Once upon a time I praised the AAR for its ethics and standards.

I won't be doing that in the future. Your behavior has made it impossible. 

Joe Konrath


Addendum: Many have asked why I haven't taken agent Simon Lipskar to task for his bullshit letter to the DOJ. Now I have. http://jakonrath.blogspot.com/2012/05/simon-says.html

Bestselling author Bob Mayer also wrote a terrific piece worth checking out. http://www.digitalbookworld.com/2012/aar-publishers-bookstores-facilitators-need-to-adapt-not-defend/

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Harlequin Fail

This is a guest post by my friend Ann Voss Peterson. But it's more than that. It's a call to arms, a cautionary tale, and a scathing exposé.

Don't believe it can be all those things? Read on...

Ann: In this world, there are a lot of things I can't afford to do. A trip around the world, for instance, although it would be amazing. Remodeling my kitchen. And until recently, sadly, braces for my son.

There's one more thing that I find valuable and enjoyable that I can no longer afford to do, and that is write for Harlequin.

I published my first novel with Harlequin's Intrigue line in August of 2000. My twenty-fifth was released in November, 2011. I had a lot of fun writing those books--taut, page-turning, action-packed romantic suspense staring a myriad of different heroes and heroines and a boatload of delicious villains. I had four editors during that time, and all of them were great to work with. The senior editor has a strong vision for the line, and that vision appeals to readers all over the world. My books were in bookstores and Target and WalMart, and my office overflows with foreign copies from countries I've never visited. I have around three million books in print, and Harlequin throws the best parties in all of publishing, hands down.

But as lovely as all that is, I can't afford to write for them anymore.

Why?

If you do a (very) little digging into publishing companies, you'll discover that while the industry standard royalty rate for mass market paperback sales is 8% for US retail, Harlequin pays its series authors only 6%.

The royalty goes down from there.

All Harlequin series authors know that US retail royalties are going to be lower than industry standard going in. We also know that Harlequin pays rather low advances. My largest and most current advance was only $6,500 per book, but here's the kicker; the books are widely distributedand sell a lot of copies. I have NEVER failed to earn out in my first royalty statement. That's right, ALL of my books have earned out and then some.

So why can't I afford to write for them any longer?

Let me share with you the numbers of a book I wrote that was first published in January, 2002, still one of my favorites. My life-to-date statement says this book has sold 179,057 copies so far, and it has earned $20,375.22. (bold text by Joe) That means the average I've earned is a whopping 11 cents per copy. If you use the cover price to calculate (the number used in the contract), which was $4.50 at the time of release, I've earned an AVERAGE of 2.4 % per copy.

Why is this?

First, while most of my books are sold in the US, many are sold under lower royalty rates in other countries. In this particular contract, some foreign rights and -ALL ebook royalties- are figured in a way that artificially reduces net by licensing the book to a "related licensee," in other words, a company owned by Harlequin itself.

Harlequin uses the Wholesale Model (not the Agency Model) with retailers, including Amazon. So the money Harlequin receives is determined by the list price, and retailers can set any price for the consumer that they want. This is how the numbers break down when Retailer X lists the ebook for $4.00 (doesn't matter what they sell it for).

Retailer – $2.00 (any discounts are taken from this amount)

Harlequin's related licensee – $1.88

Harlequin - $.06

Author - $.06

So Harlequin makes a total of 1.94, and I make .06.

Six cents is 1.5% of the list price of $4.00. It is 7.7% of what most publishers define as net earnings, (in this example $1.94).

To make things worse, the reversion clause is also onerous. It requires the book to be totally out of print everywhere in the world in every format for 5-7 years before an author can request reversion. After the request is made, Harlequin has another 18 months to release the book in any format anywhere in the world, and it gets to keep the rights. The book in my example is not eligible for reversion because it was issued as an ebook in Spain in 2009; a license which has earned me a total of 33 cents according to my most recent royalty statement.

So why publish with Harlequin in the first place?

In the past, Harlequin brought a lot of value to the table. Like I said at the beginning of this post, my books are in the big box stores. My books are published all over the world. Harlequin's paper distribution is valuable. Another value is the Harlequin brand, probably the only publisher that readers recognize and seek out. But distribution doesn't matter with ebooks. And while Harlequin does have its own community and ebook store, they have yet to show their brand sells ebooks. I have sixteen Intrigues available digitally, and my independently-published books consistently outsell all of them (a fact made even more dramatic if you figure out how many more Harlequins they would have to sell for me in order to equal the amount I make with the indie books).

Harlequin has offered an amendment to the ebook clause of past contracts. It raises the ebook royalty to 20% of net for US, English language ebooks. However they refuse to define net in the contract, among other problems, making it impossible to determine whether the amendment is a better deal for the author or not, and as a result I have not signed.

In the end, all these points make my business decision of choosing a publisher clear. The 70% and 35% rates offered by Amazon and others are a better deal than 6% of cover price, 2.4% of average cover-price-based earnings, 1.5% of cover price and even 7.7% of what most publishers define as net earnings. I might not sell 179,000 copies of a book, but in ten years (the length of time they've had that 2002 book, ACCESSORY TO MARRIAGE), that number is more than possible. And if you look at the money instead of the number of copies, I need only sell 10,000 copies of a $2.99 book to reach 20K.

Now to be fair, I have many books I want to write that don't fit Harlequin's publishing program, like the CODENAME: CHANDLER stories I'm writing with Joe and my new solo novel PUSHED TOO FAR, which has some romantic elements but is a thriller. However I like writing romantic suspense, and when I write another, I won't send it to Intrigue, because now I have a choice.

It comes down to a business decision. I can choose to write for Harlequin (high paper distribution/low royalty rates) or some other New York publisher (likely hit-or-miss paper distribution/slightly less low royalty rates)—or I can have my son's teeth straightened.

For me, that choice is a no brainer.

Joe sez: I met Ann a few years ago at a writing convention. She's a terrific writer, and has a better grasp of story structure than nearly anyone I've encountered in this business.

The way she's been treated by Harlequin is disgusting.

Even worse, it isn't just Ann being treated this way. Harlequin has been screwing romance writers for decades. Some of the most prolific authors on the planet write for Harlequin, and they're forced to be prolific because the only way to make a living is to pump out multiple books as fast as they can.

Since discussing numbers with Ann years ago, I've been appalled by her tiny income versus her worldwide reach. She's outsold me in paper by at least a factor of 5 to 1. Yet there hasn't been a single year we've both been in the biz that I haven't earned at least triple what she has, while writing fewer books.

Something that disgusts me even more, not only in Ann's case but in the case of all writers being bled by Harlequin's company store, is the fact that they can't get away.

There have been some notable exceptions. Romance authors who managed to escape Harlequin's stranglehold and eventually become huge bestsellers. I'm friends with many of these ladies. While they admit they're doing much better financially with their current publishers, they each acknowledge a debt of gratitude to Harlequin for giving them their start.

Sorry, but that's just awful. They were used and treated unfairly, and their books caught on so they were able to make the leap to higher royalties. But you really shouldn't thank the company that subjugated you.

Naturally, Harlequin lauds these successes and rereleases these authors' old backlists (which it still controls) with new covers, confusing their new fans. Many readers have been burned thinking it is a new thriller release, only to find out it is a misleading repackaging of an old romance, which leads to one star reviews and hate email, and the authors can't do a thing about it. Nor can they get better royalty rates on these old titles, which are piggybacking off their recent successes.

Harlequin wants all writers working for them to believe: "Someday, if I work hard, I'll be as big as (insert any Top 10 NYT bestseller here who once worked for Harlequin.)"

But here's the kicker. In order to put food on the table, Ann and her peers have to turn out books quickly, leaving them ZERO TIME to write that standalone which could break them out.

You load sixteen tons, and what do you get? Another day older and deeper in debt.

Now, it took a great deal of guts for Ann to leave Harlequin and become a fulltime self-published author. It also took a lot of guts for her to write this guest blog at my request.

But that's Ann. She has guts. Her terrific self-published ebook thriller, PUSHED TOO FAR, is going to be free for the next few days. Download a copy. You'll love it. Tell everyone you know to also download it.  Retweet this, help me spread the word. I really want to see PUSHED TOO FAR rocket up the freebie list and hit the Top 100.

Unfortunately, many authors aren't as brave as Ann. They won't give up a guaranteed paycheck, no matter how small, for the uncertain risk of going it alone.

Even as hundreds of authors bemoan their treatment by Harlequin (the single biggest group who thank me for preaching about self-pubbing are romance authors), there are still newbie authors by the scores eager to sign with Harlequin because they don't know any better.

Well, now they know. Link to this blog, post comments, post your own experience, make sure EVERYONE knows that earning 2.4% is unacceptable and that no author will take those miserable terms.

And Harlequin? I challenge you to do right by your authors, and by your own seemingly tiny conscience. Here's some obvious ways you can:

1. The royalty rates of the Big 6 are lousy. Yours are repulsive. Change them. Then backdate those changes and give all of your authors a nice, fat check.

2. Give out-of-print titles back to your authors. I just had a long conversation with a friend of mine (not Ann) whose publisher won't give him his rights back because they state even though they no longer sell the paper copies, they are still selling them in ebook format. WTF? If that's the case, why does every contract have an out of print clause? Show me an ebook that has ever gone out of print! I offered to pay my buddy's legal fees when he sues the hell out of those assholes, because he'll set the precedent that frees us all. 

3. I'm no lawyer, but licensing rights to yourself and calling it a separate company doesn't seem kosher. I have no horse in this particular race, but I urge those with horses to do something about it.

Harlequin isn't the only one to blame, here. They're a company, interested in making money, so naturally they try to get the best terms.

But shame on the agents who vetted these pitiful, one-sided contracts and then encouraged their authors to accept them. You have consigned thousands of books to a monstrous, voracious black hole. Harlequin NEVER should have been allowed to wield this much power, to control this much of an industry. You could have stopped them, and helped your authors. You didn't. 

Everyone fears Amazon, because they someday may give authors less than 70% royalties.

Less? Like the 2.4% Ann earned on a book that sold almost 200,000 copies?

Hey, Amazon! Are you reading this? You want to corner the market on the biggest selling genre in the world? Start courting Harlequin writers. They're eager to jump the Harlequin ship. Offer them a lifeboat and you'll become the biggest romance publisher in the world.

As for Ann? She and I just signed a three book deal with Amazon's Thomas & Mercer imprint for our CODENAME: CHANDLER series. Ann is going to do just fine.

But Harlequin, and all you publishing pinheads who seriously believe you can continue to keep screwing authors--I'm counting the days you have left. There will be a mass exodus of authors leaving you. There will be civil lawsuits. And the DOJ is going to--rightfully--crucify you yahoos, as laid out in this terrific post by Kris Rusch.

If you are a publisher, be afraid. Be very afraid.

If you are an author, share your stories here, warn each other, and band together. There is strength in numbers, and this revolution is about to draw blood.

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