Otis Chandler is a tall, serious, bespectacled man in his mid-30s whose grandfather, also named Otis Chandler, used to own the Los Angeles Times. Chandler grew up in Los Angeles, attended boarding school near Pomona, and then, like his father and grandfather, went to Stanford. Upon graduation he entered the computer field. Because it was the turn of the millennium, that meant working at a start-up: Chandler found a job at Tickle.com, which was an early venture in social networking. At Tickle, Chandler eventually became a project manager, starting a dating site called LoveHappens.com. It did O.K. In 2004, Tickle was acquired by Monster Worldwide, parent company of Monster.com, the huge job-posting site, and about a year and a half later, Chandler left.
He started to think about what he should do with himself. One day, while visiting a bookish friend, he had what he calls an epiphany. “He had one of those bookshelves in his apartment,” Chandler told me when I met him in San Francisco. “You know what I mean, the bookshelf when you walk into someone’s house, the one where they keep all their favorite books. I walked into his living room and started checking out his shelf and just grilling him, like, ‘That looks cool. What’d you think of it? What’d you think of that?’ ” He left his friend’s place with 10 good books. “I was like, if I could go to all my friends’ living rooms and grill them about what books they like, I would never lack for a good book again. But instead of doing that, why don’t I just build a site where everybody puts their shelves in their profiles?”
Chandler started building an online platform that would allow users to link to and rate the books they’d read and also to add books that they wanted to read. He thought about calling it Bookster (“that was when -sters were hot,” he said), but by the time it launched, one year later, the site was called Goodreads. It quickly gained a reputation. By the end of the first year, 2007, it had 650,000 registered users. At the end of five years, it had close to 20 million.
The site was popular among readers, and it soon caught on with publishers also, Chandler recalled, because it addressed a looming dilemma: “What ended up happening was that discovery was becoming the biggest problem in publishing.”
This was true. The term came into widespread use around 2010, when, after 40 years in business, the major book chain Borders began its final decline. What was the value of these bookstores to publishers? It wasn’t just that they sold the merchandise and split the money. It was that they displayed the merchandise. And if bookstores were going out of business, as they were, and if readers were moving online, as they were, then how could publishers show off their wares? Chandler remembers being deeply impressed by a publishing executive’s telling him, in 2006, that the way to make a best-seller was to put a copy of the book on the front table of every bookstore in the country. But there was no front table online. Serendipitous browsing would need to be replaced by vastly superior recommendation engines. Goodreads did well by simply connecting people with their friends and also with readers who had similar interests, allowing them to share lists and ratings and reviews. In 2011 the company took things to the next level by buying Discovereads.com, a recommendation-engine outfit. The new technology allowed Goodreads to start recommending books based on a huge variety of relevant factors.
Goodreads gave publishers some hope that they could solve discovery; it may also have given them hope that they could solve a more immediate problem: Amazon. By the time Borders went bankrupt, in 2011, and closed all its stores, Amazon was selling more print books than anyone; was selling more e-books than anyone; was beginning to have success with unknown authors publishing directly in the electronic format; and, most important of all, was the go-to site for book-buying research and recommendations. Amazon was the publishers’ biggest customer but also, increasingly, a competitor, and also, increasingly, too good a customer. Publishers were becoming aware that they were overly reliant on Amazon. In 2011, several publishers announced a joint venture called Bookish, which was going to be a recommendation engine-slash-online bookstore, maybe even an Amazon competitor. But the Web site was a flop. Publishers weren’t very good at creating tech start-ups, but luckily Goodreads had already done it. Maybe the digital future wouldn’t be quite as scary as all that.
Then, in March 2013, for an undisclosed sum, Goodreads was bought by Amazon.
This past year has seen hostilities between Amazon and the publishers, which had been simmering for years, come out into the open, filling many column inches in The New York Times and The Wall Street Journal, not to mention numerous online forums. The focal point of the dispute has been a tough negotiation between Amazon and the publisher Hachette, with some public sniping between the companies’ executives (who have otherwise kept out of view). Hachette, it should be said, is no slouch: it is owned by the large French media conglomerate Lagardère. The other big publishers are similarly well backed. HarperCollins is owned by Rupert Murdoch’s News Corp. Simon & Schuster is a part of CBS. Macmillan and Penguin Random House are owned, or co-owned, by hefty German corporations. Nonetheless, all the publishers feel bullied by Amazon, and Amazon, in turn, feels misunderstood.
It wasn’t always this way. When Amazon first appeared, in the mid-90s, mailing books out of the Seattle garage of its founder, Jeff Bezos, it was greeted with enthusiasm. The company seemed like a useful counterweight to the big bookstore chains that had come to dominate the book-retailing landscape. In the late 1990s, the large chains, led by Borders and Barnes & Noble, controlled about a quarter of the adult-book market. Their stores were good. They may have lacked individuality, but they made up for it in inventory—a typical Barnes & Noble superstore carried 150,000 titles, making it as alluring, in its way, as the biggest and most famous independent bookstores in America, like Tattered Cover, in Denver, or City Lights, in San Francisco. Now a person on a desolate highway in upstate New York could access all those books, too.
The big chains were good for publishers because they sold so many books, but they were bad for publishers because they used their market power to dictate tough terms and also because they sometimes returned a lot of stock. People also worried about the power of the chains to determine whether a book did well or badly. Barnes & Noble’s lone literary-fiction buyer, Sessalee Hensley, could make (or break) a book with a large order (or a disappointingly small one). If you talked to a publisher in the early 2000s, chances are they would complain to you about the tyranny of Sessalee. No one used her last name; the most influential woman in the book trade did not need one.
The success of Amazon changed all that. It has been said that Amazon got into the book business accidentally—that it might as well have been selling widgets. This isn’t quite right. Books were ideal as an early e-commerce product precisely because when people wanted particular books they knew already what they were getting into. The vast variety of books also allowed an enterprising online retailer to leverage the fact that there was no physical store in a single fixed location to limit its inventory. If a big Barnes & Noble had 150,000 books in stock, Amazon had a million! And if Barnes & Noble had taken its books to lonely highways where previously there had been no bookstores, Amazon was taking books to places where there weren’t even highways. As long as you had a credit card, and the postal service could reach you, you suddenly had the world’s largest bookstore at your fingertips.
Amazon grew quickly. Within a decade, it had become a worthy rival to the chains. As the company sold more books, it sent book publishers more money. What was there not to like?
One of the interesting things about Amazon in its early years was the number of bad ideas it had. It was a bad idea to sell heavy home-improvement equipment on the Amazon site and charge a pittance for shipping, and it was a bad idea to consider storing merchandise in the apartments of college students living in Manhattan, so that the students could make deliveries in their neighborhoods. (The company had enough trouble worrying about theft at its warehouses; how was it going to monitor the apartments of kids?) Some people even thought that selling books was a bad idea.
When Amazon started meeting with publishers about the Kindle, its future e-book reader, in 2006, the device may well have seemed to them like just another goofy Amazon idea. E-readers had been tried, and had failed. Nonetheless, by 2007, publishers agreed to digitize a worthwhile selection of their books. But as one told the journalist Brad Stone for his book about Amazon, The Everything Store, none of the publishers spent much time thinking about how much e-books should cost. When, finally, at the press launch of the Kindle, Bezos announced that new releases and best-sellers would be priced at $9.99, the publishers had a fit. Then they checked their freshly inked contracts with Amazon and realized that they had forgotten something. They had no control over the price.
What was the problem with $9.99? The heart of the matter was that it was so much less than $28, the average price of a new hardcover book. Another problem with $9.99 was just how close it was to $7.99 or $6.99. Publishers believed that Amazon would eventually go even lower, putting intolerable price pressure on print books and the places that sold them. With print gone, what exactly would publishers be left with? They could still select and edit and market books, but their chief task, getting the books into stores across the land, would be eliminated.
Amazon launched the Kindle in the fall of 2007. It was not a revolutionary concept (it was merely “the iPod for books”) nor a revolutionary technology (Sony had already used e-ink in several readers) nor a particularly attractive item (with its thick plastic body and rows of keyboard buttons, it resembled nothing so much as an early-80s PC). Nonetheless, by combining several technologies and practices into one item (including a free 3G connection that allowed users to buy e-books anyplace there was a cell-phone signal) and putting real marketing muscle behind the Kindle, Amazon launched the e-book revolution. E-book sales skyrocketed in their first few years before slowing in 2012. In 2013, e-books accounted for about 27 percent of total adult books sold. In the U.S., revenue from e-books is now about $3 billion annually. Amazon controls about two-thirds of this market. It also controls about two-thirds of all print books sold online. It is the biggest bookseller in the world. And no one complains about Sessalee Hensley anymore.
In the early years of the Kindle, the thing that made publishers most nervous was Amazon’s insistence on selling many e-books at cost or even at a loss. Initially, publishers set their e-book list prices at a few dollars off the print price, and then gave Amazon a 50 percent discount, meaning that Amazon was receiving new books at an average wholesale price of about $12—and was selling them for $9.99 and below. When publishers raised their wholesale prices in order to pressure Amazon to raise its resale price, Amazon didn’t budge. When publishers started “windowing” some new titles—that is, delaying their release as e-books for several months after the hardcover release—Amazon showed no inclination to change its practices, and publishers lost e-book sales. The publishers wanted to sell e-books, and they wanted to sell them when people were most likely to buy—when a book was new. But they also wanted to set the price.
The publishers did see one white knight on the horizon, in a fashionable black turtleneck, with technological know-how as strong as Amazon’s, a proven track record of selling artistic products digitally, and infinite resources: Apple. In January 2010, as publishers were becoming increasingly desperate over Amazon’s growing dominance of the e-book market, Apple announced its plans to launch the iPad and include access to an iBooks Store. This time, publishers were going to do e-books right. Instead of letting Apple set prices, they’d set their own prices and let Apple take a 30 percent commission. (They called this “agency pricing,” because Apple acted as a sales agent rather than a retailer.) It would mean less money than they were getting from Amazon, but the peace of mind would be worth it.
In early 2010, five of what were then the Big Six publishers (Hachette, HarperCollins, Macmillan, Penguin, and Simon & Schuster, but not Random House) signed agency agreements with Apple for the iBooks Store. Now someone had to tell Amazon that the publishers intended to switch to the same model with Amazon as well.
The first to try was John Sargent, the C.E.O. of Macmillan, whose imprints publish Jonathan Franzen, George Packer, Marilynne Robinson, and many others. At Amazon’s Seattle headquarters, Sargent told the senior Kindle executives Russell Grandinetti and David Naggar that Macmillan wanted Amazon to switch to an agency model, and if Amazon didn’t like it, Macmillan would start windowing Kindle versions of all new releases for seven months after print publication. As Grandinetti later testified, when the issue landed in federal court, “We clearly expressed our view that this was a terrible move for them, for customers, and for authors.… Later that night, we decided to stop selling Macmillan titles—both print and Kindle—in an attempt to convince them to reconsider their position.”
In other words, Amazon removed the “buy” button from all Macmillan titles. This was greeted with outrage from commentators, customers, and, importantly, other publishers. The Department of Justice found e-mails from the (unidentified) C.E.O. of one of the parent companies of the big publishers attesting to this fact. “John Sargent needs our help!” wrote the C.E.O. to one of his executives. “M[acm]illan have been brave, but they are small. We need to move the lines.” The same or a different (unidentified) C.E.O. also wrote to Sargent directly. “I can ensure you that you are not going to find your company alone in the battle.” (It may just be me, but I can’t help reading these e-mails in a French accent.) A few days after Amazon removed the “buy” buttons, the company relented and put them back up again. It signed agency contracts with all five of the publishers that had demanded them, and in April 2010 the iPad made its debut to tremendous critical and commercial acclaim. Before too long, Apple claimed a 20 percent share of the e-book market, and publishers, happily, were able to set their prices—usually from $12.99 to $14.99. Despite the higher prices, the e-book market continued to grow.
Steve Berman is a class-action lawyer based in Seattle who has successfully sued such companies as Exxon, Toyota, and Jack in the Box. He has also lost a few cases. Apple’s wily attorneys were able to deflect Berman’s contention that the iPod music player was “defective in design” and could lead to hearing loss. You win some, you lose some. Generally, Berman wins.
In addition to lawyering, Berman is an avid reader of e-books. He enjoys fiction and nonfiction alike. In mid-2010, just after Apple launched the iPad, Berman noticed that many of the e-books he was looking at had increased in price: to $13.99. Berman clicked around the Amazon site. It wasn’t just one publisher—books from a number of different publishers were all priced at $13.99. “That just doesn’t happen in the real economic world,” he explained to me. “Unless something is going on.”
That something would have been a conspiracy to fix prices. After some digging and deduction, Berman concluded that this was exactly what had happened. In mid-2011, he filed a class-action suit. When he did so, he learned that attorneys general in other states had also been investigating the possibility of collusion. Then, in April 2012, the U.S. Justice Department filed a complaint against Apple and the big publishers. And the Justice Department had investigatory powers Berman could only dream of.
I was sitting in Berman’s spacious law office, on the 33rd floor of a brand-new office building in downtown Seattle, as he told me all this. There was a framed cover from The National Law Journal on the windowsill, because Berman had made the paper’s list of 100 most influential lawyers in America for 2013. Was it really such a problem that some of his e-books had become a couple of dollars more expensive?
“I enjoyed the $9.99 price,” Berman said. “It’s catchy.”
The federal complaint was a shock and an embarrassment to the publishing community. Why was a Democratic administration filing suit—on anti-trust grounds—essentially on behalf of Amazon, a monopolist-in-the-wings, against a group of publishers trying to battle that monopoly? Apple decided to fight to the end, but the publishers felt they couldn’t afford to, and settled. They paid millions in damages to rid themselves of the class-action suits (Berman told me he received $143 in the settlement, one of the largest sums in the class, because of his heavy reading), and they agreed to abide by a system that Michael Cader, founder of the industry newsletter Publishers Lunch, called “Agency Lite,” whereby the commission system remained in place but Amazon and other retailers retained the rights to some discounting.
That said, the lawsuits were experienced by the publishers as a catastrophe, and may have cooled Apple’s ardor for the iBooks project. The publishers had finally gotten together and done something to slow Amazon. And the government stepped in and stopped them.
Meanwhile, in the background, a funny thing was happening. The publishers were doing well. Print-book sales were down, but e-book sales were up. On a unit basis, the new e-book sales more than made up for lost print-book sales. On a dollar basis, because e-books were cheaper than print books, revenues were flat. But with e-books there were no manufacturing costs, no warehousing costs, no shipping costs, no returns. Even at a lower price, the profit margins were higher. Some revenues, it turns out, are better than others. “I’ve been in this business a long time,” one publisher told me recently, “and it’s always been that one house was up one year and down the next, whereas another house was down one year and up the next. But for all the houses to be up at the same time, year after year? I’ve never seen that. And the number-one reason is the Kindle.” The Kindle was doing what Amazon had claimed all along it would do: it was making publishers money.
But nothing lasts forever. In early 2014, Hachette, the publisher of Malcolm Gladwell, David Foster Wallace, Donna Tartt, and many others, reached a deadlock in negotiations over a new contract with Amazon. With similar negotiations coming up with other publishers, Amazon decided to take a hard line in order to nip this kind of behavior in the bud. It began delaying the shipment of some Hachette titles to customers. Instead of being described on the site as “In Stock,” titles were moved into the “Usually ships in 1 to 3 weeks” category. (This didn’t apply to absolutely all Hachette books: Donna Tartt’s best-selling novel The Goldfinch continues to be labeled “In Stock,” as does Hachette backlist title The Catcher in the Rye. These have evidently been deemed too valuable to mess around with. Congressman Paul Ryan’s The Way Forward, also published by Hachette, shipped immediately after Ryan complained in an appearance on CNBC. But the paperback edition of Wallace’s Infinite Jest is delayed, as are many other worthy books.) Amazon also reduced its usual discounting of many Hachette titles. This, in itself, hardly seems blameworthy, but Amazon compounded the offense by suggesting cheaper alternative books to people who searched for Hachette titles—it directed users to “Similar items at a lower price.” And pre-order capability was removed from Hachette titles. Basically, Amazon was putting in place a blockade against Hachette. The Amazon war of 2014 had begun.
The exact nature of the negotiations between Amazon and Hachette is unknown. Despite months of speculation in the media, neither side has provided any details. In general terms, Hachette has claimed that the dispute is about money, whereas Amazon has claimed that it is about e-book pricing. These may sound like the same thing, but they’re not. At the same time, it is likely that the dispute is about both.
The money part of the issue would be the revenue split on book sales. Amazon now gets 30 percent on e-book sales; it has been reported that Amazon is asking for closer to 40 or 50 percent. Michael Cader has calculated that if Amazon were to charge an extra 10 to 20 percent on Hachette’s e-book sales it would amount to between $16.5 and $33 million. This would come to about a third of Hachette’s U.S. operating profit for last year. As one Hachette author put it to me, “That’s pretty easy to say ‘No’ to.”
Amazon says that the fight is actually about pricing. It believes that publishers will make more money if e-books are priced lower. Amazon wants books priced at $9.99 or less. “It’s also important to understand,” the Amazon Books Team wrote in one online post, “that e-books are highly price-elastic.” A higher price means fewer sales. A lower price means higher sales.
This is a business dispute, but it has grown into a very high-stakes business dispute. Some people feel very strongly about books, in particular their authors, and authors have therefore gotten involved in the fight. The thriller writer Douglas Preston, a Hachette author, organized a group called Authors United and circulated a petition that gathered more than 900 signatures. It called on Amazon to “put an end to the sanctioning of books.” The thriller writer James Patterson, a tremendously successful Hachette author, has been very outspoken about the situation, as has Hachette author Malcolm Gladwell. Stephen Colbert, the late-night television host and another Hachette author, produced an inspired rant about the dispute, culminating with his giving Amazon the finger and then suggesting that “customers who bought this also bought this,” at which point Colbert produced his other hand and gave Amazon the finger again.
This was not welcome publicity, but Amazon hung tight, even pursuing some counter-offensives. In May, the company offered to fund an author pool (going 50–50 with Hachette) to compensate writers whose sales were affected by the disruption. (Hachette responded that they would discuss this possibility when the negotiations were over.) In July, Amazon offered to “return to normal” on all fronts provided that Hachette authors received the entire sale price of the book. This was an insidious proposal—under such a scenario, Amazon would be giving up its 30 percent commission, while Hachette would be ceding at least 45 percent (its 70 percent of the retail price minus the 25 percent author royalty), but in fact usually would be giving up the full 70 percent, since most Hachette authors would have been paid an advance against royalties and many would not yet have “earned out” that advance. Predictably, Hachette declined. Later, Amazon posted a message comparing the e-book to the paperback, and suggesting that the same hostility and snobbishness that had greeted the paperback were now behind the opposition to e-books. A controversial passage in the Amazon message quoted “the famous author George Orwell” talking about how it would be wise for publishers to collude to destroy paperbacks. New York Times technology reporter David Streitfeld (whose dispatches on the conflict seemed to some readers to be increasingly hostile to Amazon) immediately wrote a post disputing Amazon’s characterization of Orwell’s position. A debate about Orwell ensued.
Amazon did not have to fight the battle alone. Writers who had been self-publishing on Amazon, some of whom had made a good living out of doing so, now rose to the defense of their benefactor. In early July, a group of pro-Amazon authors, led by the science-fiction writer Hugh Howey and the mystery-thriller writer J. A. Konrath, published a petition on the site Change.org. It was titled “Stop Fighting Low Prices and Fair Wages,” was addressed “Dear Readers,” and was, any way you looked at it, a remarkable document. “New York Publishing once controlled the book industry,” stated the authors. “They decided which stories you were allowed to read. They decided which authors were allowed to publish. They charged high prices while withholding less expensive formats. They paid authors as little as possible.” (Actually, that last sentence is largely true.) “As book lovers,” the authors continued, “you may have noticed a lot of the recent media coverage about this dispute. Some of it might be confusing. Exactly who is fighting whom? Why are Stephen Colbert and James Patterson so angry? Why is Douglas Preston drafting a letter to convince you that Amazon is evil?” The reason, the petition went on, is simple:
Many in publishing blame Amazon for the natural and inevitable transition to online book sales. This same transition has happened with other forms of entertainment. Rather than innovate and serve their customers, publishers have been resisting technology. They could have invented their own Internet bookstores, their own e-readers, their own self-publishing platforms. Instead, fearing the future, they fought to protect the status quo.
The Change.org petition, which as of this writing has attracted more than 8,000 signatures, urged people to e-mail Michael Pietsch, the C.E.O. of Hachette, to ask him to end the contentious negotiations and make peace with Amazon.
Many of these offers and petitions were self-interested or disingenuous or silly, but they did reveal a true divide. Amazon really had made self-publishing incredibly easy and in some cases remarkably lucrative. And it really had made books more affordable.
Amazon’s self-published authors’ books were particularly inexpensive, and also something else: they were a particular kind of book. In publishing terms they were known as “genre” books: thrillers, mysteries, horror stories, romances. There were genre writers on both sides of the dispute, but on the publishing side were huddled the biographers, urban historians, midlist novelists—that is, all the people who were able to eke out a living because publishers still paid advances, acting as a kind of local literary bank, in anticipation of future sales. Some pro-Amazon authors boasted of the money they’d earned from self-publishing, but the authors of books that sometimes took a decade to write knew that this was not for them—that in an Amazon future they would be even more dependent on the universities and foundations than they already were. When, in turn, pro-Amazon authors lashed out at traditional publishing, they often spoke with the passion of the dispossessed. The publishing houses made a lot of money on their own genre best-sellers, but the Amazon backers were not wrong to think that some of the institutions associated with American publishing—such as The New York Times, which has reported on the Hachette-Amazon standoff in great detail—did not take self-published genre writers all that seriously, and probably never would. (But get yourself on the Man Booker Prize short list and your call to the Times will go right through.) And perhaps the pro-Amazon writers also preferred the Amazon executives—Grandinetti, who talks about defending regular customers from the big “media conglomerates” (though he went to Princeton and worked for Morgan Stanley), and Bezos, who comes across as an excitable mad inventor (though he also went to Princeton)—to the buttoned-up representatives of the “legacy publishers,” such as the soft-spoken and impeccably articulate Michael Pietsch, who had gone to Harvard. In this way, the Amazon-Hachette dispute mirrors the wider culture wars that have been playing out in America since at least the 1960s. On the one side, super-wealthy elites employing populist rhetoric and mobilizing non-elites; on the other side, slightly less wealthy elites struggling to explain why their way of life is worth preserving.
Andrew Wylie is an energetic and enterprising man with a mid-Atlantic look who, as a literary agent, has made a name for himself as a fierce advocate for his authors. The Wylie Agency list includes the estates of Ralph Ellison, Vladimir Nabokov, Saul Bellow, Czeslaw Milosz, Norman Mailer, Hunter S. Thompson, and Evelyn Waugh. Among the living, its clients include Philip Roth, Salman Rushdie, Jamaica Kincaid, Orhan Pamuk, Martin Amis, V. S. Naipaul, Bob Dylan, and many, many others. (Wylie also represents several contributors to Vanity Fair—including myself—as well as the magazine’s book deals with outside publishers.) His battles on behalf of his writers have often put him at odds with publishers but at the same time have won the fealty of his clients. The nickname associated with him is the Jackal, and it cuts in two directions, depending on your point of view
In 2010, Wylie took on the publishers over e-book royalties. Naturally enough, e-books had not been included in the contracts for books published in the pre-digital age, and some publishers proposed to pay the standard 15 percent royalty. Wylie found this rate “exceedingly low.” Taking matters into his own hands, he signed a deal with Amazon to publish the e-books of several of his most notable backlist titles—including Invisible Man, Midnight’s Children, and Lolita—without consulting their traditional print publishers. When the largest of these, Random House, threatened to stop working with all of Wylie’s clients, Wylie was forced to retreat. But he had made his point. E-book royalties, which for the most part settled at 25 percent, remain a contested sphere.
When I met with Wylie in the fall in his corner office, on the 21st floor of a building on West 57th Street (I sat in the waiting room with Picasso’s granddaughter—it’s that kind of place), he was furious about Amazon and fully engaged on behalf of the publishers. He had just returned from Buenos Aires, where he’d spoken out about the Amazon dispute, and was set to address the board of PEN, in Manhattan, after which he was flying to Turin, and then Toronto, to speak about it some more.
The issues at the heart of the conflict are both margin and price, according to Wylie. Publishers have been slow to recognize the danger of percentage creep, he told me. “There was a European publisher in here recently who proudly sat on that sofa and said, ‘I’ve worked everything out with Amazon. I’ve given them 45 percent.’ I said, ‘Really?’ He said, ‘But they wanted 50 percent.’ ” The European publisher thought he had won. Wylie stared incredulously at the memory of this encounter. “He’s a moron!”
Losing the fight over margins would be an immediate blow to the publishers’ profits, but losing control over pricing could be fatal. “If Amazon succeeds,” said Wylie, “they will lower the retail price—$9.99, $6.99, $3.99, $1.99. And instead of making $4 on your hardcover, you’ll be making 10 cents a copy on all editions. And, Keith, you will not be able to afford to write a book.… No one, unless they have inherited $50 million, will be able to afford to write a serious work of history, of poetry, of biography, a novel—anything. The stakes are Western culture.”
Western culture I could take or leave, but the part about me sent a chill down my spine. This is not what you want to hear from your literary agent. Surely we’ll think of something, I said to Wylie, if Amazon does win?
“You think?”
Wylie was not in the mood for a pep talk.
And yet he believed that the publishers had finally wised up. Not only Hachette but HarperCollins and Simon & Schuster had started negotiations with Amazon, and none of them seemed willing to agree to Amazon’s demands. Perhaps a new era was beginning. Pointing to my Kindle, Wylie asked, “What if all the publishers pulled all their books from that fucking idiot device? Then what would you read on your silly Kindle?”
But doesn’t Amazon deserve something for building the device, for making it work?
“If the Kindle didn’t have any books on it, guess how many Kindles would be selling,” Wylie said, putting up his fingers to indicate zero Kindles. “They want the books, and they want the publishers’ profits, too? They should get nothing. Zero.”
I pointed out to Wylie that his willingness to take the fight to Amazon partly on behalf of the publishers was a curious position for the famous scourge of publishers. He said, “It’s the first time since I got into the business that the interests of print publishers and authors have been closely aligned. And the reason is that, like ISIS, Amazon is so determined to wreak havoc on the culture that unlikely alliances have been formed.”
The next morning I got an e-mail from Wylie. In eight years of being a client at his agency, I had never received an e-mail from him, much less a mass e-mail prompting me to action. In it, an impassioned Wylie urged all his authors to sign the Authors United petition, the one organized by Douglas Preston. A few days later, The New York Times ran an article reporting that Philip Roth, the estate of Saul Bellow, and Milan Kundera, among other Wylie clients, had joined the Authors United campaign.
On an unseasonably hot day in late September, I visited a latest-generation Amazon warehouse in San Bernardino, California, out in the desert an hour and a half east of Los Angeles. The Amazon warehouse covered the equivalent of 28 football fields. Inside, it was a wonder of organization. Amazon warehouses fall into two categories: those that ship small objects (toys, Kindles, corkscrews, books) and those that ship large ones (refrigerators, flat-screen TVs, kayaks). The one in San Bernardino is for small objects.
All the merchandise enters the warehouse from a series of docks in the back, where it is unpackaged. The discarded boxes are placed on one conveyor belt, for recycling. The merchandise is placed on another belt, which takes it to the three-story storage area, where it is scanned and entered into the computer system. A “stower” then takes a couple of cratefuls of the merchandise and puts it all on shelves that resemble no-frills library stacks. The merchandise is placed on a shelf wherever it can be made to fit, not necessarily neatly, and in no particular order, so one cubbyhole on the shelf might be filled with a book, some paper plates, some jars of marmalade, and a chess set. Amazon’s supply-chain engineers have calculated that it’s more efficient for the items to be randomly dispersed, because as the next person in the supply chain—the “picker”—walks around to fill someone’s order, the scanner in her hand will tell her where the closest item is and then the fastest way to get to the next item after that. The job still requires a tremendous amount of walking—it has been estimated that some pickers end up covering as many as 11 miles a day, on punishing hard concrete—but it is a very efficient system.
The ingenuity is in the software—it knows exactly where everything is and knows the shortest route to get there. After an order has been boxed and placed on the conveyor belt, a machine stamps the proper label on it as it passes and then an electronic scale weighs the item and makes sure it is the right weight for the contents that are meant to be in that order. The boxes then travel, all in a row, toward the loading dock, and on the way a scanner identifies all the packages that are supposed to leave in a particular truck, and a little arm nudges the box off the conveyor belt and into a chute down to the proper loading dock. The crucial software systems that make it all work had to be developed by Amazon pretty much from scratch.
The next day I flew to Silicon Valley and visited Amazon Lab126, the Amazon subsidiary that develops all of the company’s Kindle products. A tremendous amount of thought and research has gone into these devices. At Lab126 there is a “reading room,” where test subjects are asked to read on various devices for hours at a time. They are filmed and studied. People reading in a chair will, naturally, hold their Kindle differently from people standing up (on the subway, for example), but even people sitting in a chair will shift their positions over time. Eighty percent of page turns are forward, by the way, but 20 percent (20!) are backward. On the conference table before us were the dozens of iterations of possible page-turning buttons for the new Kindle Voyage, buttons that would have been on the back of the Kindle, a switch button, and also arrows alongside the screen—a > for forward and a < for back—the most visually pleasing design and by far the most intuitive, but then in testing it turned out that people liked to turn the Kindle and read horizontally, which meant that the arrows were pointing, confusingly, up and down. (The designers settled on two sleek lines for forward and two cool dots for back.)
After meeting the designers and engineers, I went down to the Kindle stress-testing lab, where various machines twisted the Kindle and dropped it and tumbled it around as if in a dryer. There was a machine that specialized in tapping the Kindle, pressing the on-and-off button thousands of times, until the Kindle couldn’t take it anymore. There was a machine that sprayed a salty mist over the Kindle, because the devices are frequently taken to the beach. All of this testing was monitored by quiet, serious people in light-blue lab coats who looked as if they had once worked for Dr. No.
So much ingenuity had been deployed to solve the problem of “reading”—in their different ways by the Kindle engineers, by the warehouse-software specialists, by Otis Chandler at Goodreads. And I remembered something a book editor, one of the best I know, had said to me about the Amazon situation. “They’re always talking about inefficiency,” he said. “Publishing is inefficient; print is inefficient. I mean, yeah. But inefficiency, that’s human. That’s what being human is.” The Kindle really is an extraordinary device—the fulfillment centers are wonders of undeniable efficiency. They too represent a remarkable human achievement. But art by definition is something for which there is no practical use.
The dispute between Amazon and the publishers is a dispute between an e-commerce giant and companies that have for generations been printing text on paper. In some respects it is also a dispute between the East Coast and the West Coast. It is definitely a dispute between hyper-capitalism and cultural conservation. But in the end it is a dispute that comes down to different visions of the future of the written word.
Various companies and personalities have been vying to shape that future alongside Amazon and the publishers. In the past year and a half, two start-up companies, Scribd and Oyster, have made a serious push into the book-subscription market, on the Netflix model. You pay about $10 a month and then read all the books you want on the digital device of your choice; for every book you read the publishers are paid as if you bought the e-book. When I asked Trip Adler, the 30-year-old C.E.O. and co-founder of Scribd, how this kind of operation could possibly make economic sense, especially if subscribers read a lot of books, he said, “There are many business models along these lines. A gym, for example, or a buffet. If a person goes to your gym every day, that is not a profitable customer. But most people don’t go every day. You have to look at the average-use case across millions of users.” Adler was confident that his subscription model, which is having success with films and music, was the future of books as well. Of the major publishers, so far HarperCollins and Simon & Schuster have signed on.
Another big player is Apple, which, after its bad experience with the anti-trust lawsuit (Apple lost in court but is appealing), seems ready to try to compete again through the medium of its iBooks Store. The company has sold 237 million iPads and an astonishing 550-million-plus iPhones. Amazon, on the other hand, has sold something like 80 million Kindle devices, both e-readers and tablets combined. With its great color display, the iPad is well suited to visually complex books, whether art books or kids’ books or travel guides. An Apple executive explained that iBooks already has a strong foothold with books that have a movie tie-in (if Apple has a 20 percent overall share of the e-book market, with a book like The Fault in Our Stars, this share can be more like 35 to 40 percent) because people who watch movies on their iPads seem happy to read books on the same device. In September, Apple released a new iOS for the iPhone and iPad that finally had the iBooks app on the device’s home page; it bundled this in the U.S. with a number of free books, including one from Hachette author James Patterson. As with subscriptions, publishers are simultaneously hopeful and wary. “Apple!” said one industry lawyer. “They come in here every two years, and it’s like they’ve never been here before. They say, ‘We’re going to get really serious about books now.’ At least they finally put the app into the iOS. But why didn’t they do that four years ago? It took Steve Jobs’ dying for that to happen?”
(An Apple executive explained that keeping iBooks out of iOS meant the software team could do more frequent updates than otherwise. He added that they were excited to have iBooks finally be a “first-party app.”)
Inside and outside of publishing, people disagree about how the business will shake out. “Book publishers had the longest time horizon to prepare for the digital transition,” the industry lawyer told me, “and they were the least prepared.” From Amazon’s perspective, demographics is destiny: people who read print are dying, while digital natives are being born. But in fact e-book adoption has been slower among young readers than among adults, and the growth in e-book sales overall has slowed considerably. And it is possible that Wylie was right, that the publishers were finally standing up for themselves. A less optimistic industry analyst wasn’t so sure. “The publishers are going to say, ‘Beyond this line we shall not cross,’ ” the analyst argued. “Then a year later they’ll say, ‘Actually, beyond this line we shall not cross.’ The question for publishers is ‘How long can we say yes and still have a business?’ ” In late October, Simon & Schuster announced that it had signed a multi-year agreement with Amazon. It was too early to tell whether this meant that Amazon had become more accommodating, or that Simon & Schuster had gained real ground, or that the publisher had accepted terms that it might later come to regret.
Everyone is waiting to find out what happens with the recent merger of Random House and Penguin into one giant publisher, Penguin Random House. The merger might create a house strong enough to battle Amazon. It also provides one response to the government’s anti-trust case, some feel: Penguin and Random House cannot be accused of colluding, since they are the same company. This new company is not just bigger than each of the other four publishers that with it make up the Big Five; it’s almost as big as the other four combined. What this new giant decides to do with its market power is so far anyone’s guess. It’s also anyone’s guess as to how writers and agents in recent months have been assessing their options about which publishers to approach. No one wants to speak on the record when this subject comes up. “This can’t go on forever, everyone says,” one prominent agent (who isn’t mine) told me. “But part of the reason for that is because Hachette can’t weather it forever! And what kind of shape will they be in if they lose this battle and have to accept terms they’ve been saying for over six months they just can’t accept?”
Authors United has announced that one of its members, Barry Lynn, author of Cornered: The New Monopoly Capitalism and the Economics of Destruction, was putting together a letter to try to persuade the Justice Department that Amazon is violating anti-trust laws by, among other things, delaying the shipment of Hachette books. It could be that there has been enough public outcry about Amazon’s tactics that efforts of this kind will get some traction. Possibly. Maybe.
I spoke about this with Steve Berman, the class-action lawyer in Seattle. “I’d love to sue Amazon. It’s the only big company I haven’t sued,” he said. “But you need a Microsoft moment: ‘We need to cut off Netscape’s air supply.’ ” He was referring to the famous and only somewhat successful federal anti-trust lawsuit brought against Microsoft, in 1998, which focused in part on a Microsoft executive’s alleged remark about what the company would like to do to its competition. Berman wasn’t optimistic.
He took me over to his window, which looked out over Seattle’s downtown. Due largely to Amazon’s expansion, Seattle is one of the fastest-growing cities in America. The size of the self-publishing program alone within Amazon is already so large that, because the company does not reveal any sales figures about self-publishing, some believe that statistics about book publishing in general can no longer be trusted. Some huge and growing part of the market is simply unaccounted for. Berman pointed at the dozens of yellow and red construction cranes that rose in spikes above Seattle all the way to the water. He made sure I was looking and said, “That’s all Amazon.”