The Problem with Escaping from Stalag $7

1678913[1]There's a post going around today which is getting more attention than I think it deserves.Over on his blog, Rick Chapman lays out an argument in which he proves that Amazon, much to everyone's surprise, is acting in its own best interest in setting the pricing policies in the Kindle Store. 

The fact that he thinks that point should need to be proven, or that Amazon is wrong to do so, is just the tip of the iceberg of what is wrong with the post. The post is based on multiple questionable assumptions and makes at least one incorrect statement, and I'd like to comment on a number of the issues I see.

To start with, he has made several errant assumptions about what indie authors should write about on their blogs and their obligations toward him:

During the Hachette vs. Amazon struggle, I started to visit some of AAAG's (Aggregated Amazon Ankle Grabbers) most prominent websites and ask some hard questions. As I pointed out in my series on the book channels, independents had no stake in the outcome either way, but AAAG's intense interest in the business practices of the publishers inspired me to spend time investigating Amazon's pricing and operations model as it applied to indies. This was an issue in which I had a stake.

...

But after all the fireworks and fun, the one thing I never ever received from AAAG were coherent answers to my questions, particularly the most important one of all. And that is: Why has Amazon placed indies in a $7 dollar pricing box? Why does it grab 65% of your revenue (not counting its transmission fees, which it charges on every transfer and which vary based on book size) if you price under $2.99 and the same if you charge over $9.99? This is an issue of critical importance to indies because it is not financially feasible to hand over that level of margin to a reseller for a download service.

I can see that there are three flawed assumptions here:

  • one, that people in publishing should not discuss the topic du jour, namely a contract fight which could have had an impact on the entire industry.  This fight was robbed of its impact by the subsequent Amazon-S&S deal, but the Amazon-Hachette conflict was the key event for many months.
  • two, that indie authors had any obligation to explain Amazon's policies, and
  • three, that the sites Rick Chapman visited had any obligation to educate Rick Chapman.

Chapman says that he has been banned from a number of sites, including Hugh Howey's blog, David Gaughran's blog, and The Passive Voice (actually, he says his comments are blocked, which is largely the same thing).

I was shocked to learn of this, given that Hugh Howey and David Gaughran have each proven to be very helpful to all authors. Howey was even nice to me after I wrote a post claiming he had Amazon Infatuation Syndrome (not one of my brightest ideas, I'll admit).

What's more, The Passive Voice is a debate society more than a blog, and the commenters there have on several occasions shown themselves to be very helpful and answered my questions and explained points I didn't understand.

I don't understand where things went wrong, but that is between Chapman and them, so let's move on.

Next, Chapman claims that this point has never been mentioned on any of the AAAG sites:

...  indies had benefited from the fight as Apple's and the publishers' introduction of the proposed 70%/30% agency split had forced Amazon to compete and offer indies the same deal for books in their pricing box. Prior to that, Amazon charged indies 65 points to use their download service regardless of the book's price.

Since he includes me in the AAAG group, it's only fair that I should point out that I have made a similar point. I didn't quite frame it in the same way, but earlier this year I did say that:

All of this is true, but the 70% payment option also acts to fragment the publishing industry. ...

Amazon launched the 70% payment option on 20 January 2010. This was about a week before the iPad was unveiled, which means that Amazon might have launched it as a response to the blackmail pressure exerted by the 5 publishers who conspired with Apple. I think that view is a tad Machiavellian, but let's skip it and consider the effect.

The possibility of earning more money inspired new authors to jump in, and it inspired existing authors to ask for their rights back so they can take existing titles and go indie. This is a huge financial incentive to not deal with a legacy publisher or distributor but to instead go it alone.

I am not making quite the same argument as Chapman, but he and I do agree that Amazon changed the policy in response to the industry and did so for their own best interest.

But where we differ is that I never expected Amazon to behave any other way than in their own best interest, and that is why I was confused by the rest of his post where he proves the argument that Amazon acts in its own best interest.

I don't see why this point would need to be argued; it is simply a truism that, as Chapman put it, Amazon "doesn't really care about you, indie".

Many companies don't really care about me, so I don't understand why Chapman got so angry about Amazon not caring about indie authors.

In conclusion, there's very little I can agree with in this post.

Have you read it? What did you think?

 

About Nate Hoffelder (11585 Articles)
Nate Hoffelder is the founder and editor of The Digital Reader:"I've been into reading ebooks since forever, but I only got my first ereader in July 2007. Everything quickly spiraled out of control from there. Before I started this blog in January 2010 I covered ebooks, ebook readers, and digital publishing for about 2 years as a part of MobileRead Forums. It's a great community, and being a member is a joy. But I thought I could make something out of how I covered the news for MobileRead, so I started this blog."

22 Comments on The Problem with Escaping from Stalag $7

  1. I’d imagine the next Rule Set book would have been a bit further along by now if this post would never have gone up. It’s one of the reasons I don’t comment on many sites anymore – I don’t care about backlinks and the hassle often isn’t worth it. Here we see an author wasting a day and a lot of aggressive energy that could have created killer dialogue and quite a few blowups, the kind with fire and smoke, not comments and tweets.

    My eBook sales are up 121.8% from last year, but my income from those sales is up by 501.3%. Most of that can be accounted for by the higher prices I charge for my books, typically $7.99 to $9.99 (I have a lot of nonfiction).

    It works, and we’ve had many, many authors tell us this over the past year. So I’m left with one overriding question…will Rich Chapman be as vocal if he’s wrong as he’s being now?

    Honestly, I don’t really care.

  2. Chapman doesn’t recognize that Amazon is a retailer, not a public utility. As a retailer, they can pretty much do what they want, and Chapman can supply to them – or not – as he wishes.

  3. No thanks, I’ve read some of Chapman’s screeds on other sites, since he kept reposting them on any article mentioning Amazon. That’s probably why he’s been blocked by some of them.

  4. Boy, he looked awfully mature in High School…

  5. Amazon will start caring about you and me when we start making them a lot of money, and not a millisecond before. It’s the way of the world and lamenting it loudly is simply a badge of excessive narcissism.

  6. (Snicker) “Amazon is acting in its own best interest” — no, say it isn’t so… The horror. A business acting like a business, whatever next?

    Sarcasm aside, I giggled at Rick Chapman’s term “AAAG’s (Aggregated Amazon Ankle Grabbers)”, so I decided to be fair and read his blog post.

    Eeek… white text on a dark background. No thanks. I’m not that fair-minded.

    So, I skip-read to the end, and there we have it, the man’s conclusions: “Amazon should lift all restrictions on book pricing and establish a uniform service fee for the use of its downloading infrastructure. Within this framework, the authors will quickly learn what works for them and their books. Amazon’s “assistance” is not needed.”

    In other words, Bezos and his company can stay in the red, investing millions, just to help out a few scribblers.

    (No offense to scribblers, I am one.)

    Good grief, Charlie Brown. Words fail me. Well, except for this. If Chapman doesn’t like the way Amazon does business, he should immediately boycott them and remove his books.

    • One of the things I find most fascinating about Amazon Fan…errr…”Persons” is their inability to even try to think through numbers or money.

      Well, not always. Hugh Howey sobbed so very deeply for the authors when he wrote that touching petition on behalf of Amazon and asked all that indies to sign it. Oh, the horror of paying authors 12% royalties. Oh, the inhumanity of it all!

      I wonder how inhumane it is when Amazon is grabbing 65% of your sales, leaving you with 35 cents on the dollar to fund all your business operations to sell your books?

      Oh, wait. I forgot. That’s just “business.” Yup, yup, yup.

      Gosh, why didn’t Howey ever say that! “Hey, Amazon, it’s just business! Go try to get as much MDF and margin as you can, and don’t bother us indies. Not OUR business. And BTW, just what’s your justification for a 65% margin grab on my book sales in England?’

      And just how does Amazon “lose” revenue if someone sells an E-art book for 29.95 on AMZ with the company grabbing 30% of that? As opposed to 30% of $9.95?

      On what planet do the inhabitants think Amazon loses money on E-books? Because that’s not happening on this one. One of the reasons AMZ is so eager to grab control of the E-market is because it’s very profitable. No inventory, warehousing, returns, stuff damaged during transit, etc. Do you have any idea how glorious 30% gross margins on your indie E- sales are? No?

      Amazon loses money on the physical stuff.

      Let me suggest you buy a pair of filtered reading glasses that change the polarity of the screen, then read my series on channels. You will learn useful things.

      rick

      • If ever I felt any inclination to pay even the slightest attention to anything you were to say, Mr. Chapman, you have thoroughly killed it.

        • I believe my indifference to this can only measured at those levels of negative energy generated by the Casmir effect.

          Though as a person who writes about history, I think you should be a bit embarrassed by that bit of silly invective. My post is full of facts, not speculation. I’d think if you had anything to say, you’d buttress it with data, not your pointless statement.

          Oh, and BTW. I don’t think the title of your books is accurate as the “Schlieffen Plan” was never executed. I believe the variant that was is “Von Moltke II.”

          You see, when I was 14 I purchased a copy of Avalon Hill’s “1914” game simulation and have played it many times, as well as other WWI sims, both paper and computer. I still have that game. When you execute Schlieffen as he drew it up in 1905, you tend to win 3.5 to 4 times out of five, depending on the variables you apply to the scenario.

          Hope that was helpful.

          rick

          • If you know as much about Schlieffen and his plan as you do about books and publishing, Mr. Chapman, as seems to be the case, then it truly is futile to pay the slightest attention to anything you say regarding either. Anyone who wants to see what actual sentient humans who have devoted serious study to the issue (beyond playing a cartoonish game with impossible assumptions) think about it is invited to look at http://www.amzn.com/1481955853/.

  7. This entire article and comment thread is…limp.

    I’ll respond on my blog. You are welcome to visit and comment. I won’t threaten or ban you. But no dirty words and legal threats against another person. That makes me personally liable. Got two lawyers in the family, father/daughter, who remind me of that periodically.

    • If they told you that you were liable for comments on your blog then they are not very good lawyers.

      • Yeah, you believe that. Believe whatever you want. And then put that policy into action when certain situations arise. Contact me for the name of a good lawyer to help bail you out when you do. But I’d plan on tightening my belt for a good long time. Shysters are expensive.

        rick

        • No, that is not my belief. It is what the law says. Just because someone chooses to ignore what the law says and sue anyway, it doesn’t make me liable.

          And since there’s no way to predict or stop said person from ignoring the law and suing me, I don’t see a reason to live in fear of them.

          • +++ It is what the law says. +++

            I’m sorry, but that statement just shows how ignorant of the law you are. The law says many things about slander, libel, threats, and says it in many different venues and is constantly changing. As is your liability and risk. These issues have been around since the days of Compuserve and The Well and are constantly evolving.

            But I’m not going to try to persuade YOU! Just give a heads up to someone foolish enough to believe in your blanket assurance.

            rick

  8. +++ If you know as much about Schlieffen and his plan as you do about books and publishing, Mr. Chapman, as seems to be the case, then it truly is futile to pay the slightest attention to anything you say regarding either. Anyone who wants to see what actual sentient humans who have devoted serious study to the issue (beyond playing a cartoonish game with impossible assumptions) think about it is invited to look at http://www.amzn.com/1481955853/. +++

    100% invective, with 0% content.

    I’m amazed that you’d write a book on 1914 and not step through a sim to gain the closest you can ever get to a hands on feel for what happened. The Pentagon used some Avalon Hills sims and many more from SPI in their planning and simulation work in the 70s and 80s. This is a well known fact, one I suspect YOU know because you were in the military.

    +++ Avalon Hill pioneered many of the concepts of modern recreational wargaming. These include elements such as the use of a hexagonal grid (aka hexgrid) overlaid on a flat folding board, zones of control (ZOC), stacking of multiple units at a location, an odds-based combat results table (CRT), terrain effects on movement, troop strength, morale, and board games based upon historical events. Complex games could and did take days or even weeks, and AH set up a system for people to play games by mail.[4] +++

    1914 was just one of the above. In fact, it was so complex it was unpopular. It took two weeks to run through the complete game if you applied all the rules.

    This link should provide some understanding of just how “cartoonish” 1914 was (and is). It’s available on E-bay, though unpunched versions are pricey.

    http://en.wikipedia.org/wiki/1914_%28game%29

    It’s not exactly a fun game from an entertainment sense. SPI’s The Marne is more enjoyable and its 1918 game versions are much more fun, though that’s because German tactical innovation made the entire campaign more fluid. Eastern Front WWI games are more fast paced and interesting because the size of the terrain the various armies fought over precluded the static front that formed in the West. To get a sense of how this “felt,” I recommend picking up a copy of “When Eagles Fight” by Command.

    My critique stands. Schlieffen was never executed. Schlieffen would have shoved a pickelhaube up Von Moltke’s fundament if he could have come back from the grave and seen what he’d done with the 1905 study.

    The ONLY way to see how things might have turned out if the plan had been executed as originally designed is play a simulation. Something you have not done and I have.

    Here’s a link to a cheap copy on E-bay. Only 12.75! Snap it up, play it, and learn. It will make your book better.

    http://www.ebay.com/itm/1914-World-War-I-Strategy-Game-by-Avalon-Hill-1968-/391000497056?pt=Games_US&hash=item5b09721ba0

    There are rules variants you can buy to allow you to further explore and learn.

    (I’m not a fan of AH’s Guns of August.)

    Best of luck.

    rick

    • As a military professional I have played the A-H game, and far more sophisticated professional simulations developed as research/teaching tools by U.S. postgraduate military education (PME) institutions as well as Army operational research agencies. I’ve actually owned two sets of the A-H 1914, and believe I still have one in my closet. All earlier games (including the A-H version) were rendered obsolete by the discoveries of much additional documentation that had been locked away in Russian and East German archives, as I explain in the book.

      The false confidence that simulations can generate is a well-understood phenomenon. It’s particularly so with naïve players, but it affected even the pros of the Prussian Great General Staff (Großer Generalstab), as I show. No doubt it’s doubly true for 14-year-olds.

      Schlieffen’s original “plan” depended on some very strong counterfactual assumptions and can be played only as a fantasy exercise — again, something that’s much clearer now than it was when the A-H game was developed, nearly half a century ago. I was already a plans officer on a major unified command staff by then.

  9. +++ As a military professional I have played the A-H game, and far more sophisticated professional simulations developed as research/teaching tools by U.S. postgraduate military education (PME) institutions as well as Army operational research agencies. I’ve actually owned two sets of the A-H 1914 +++

    Ah. You finally decided to be a professional. In your previous comments, this had seemed to be out of your reach.

    And I guess we can put aside the claim that 1914 is cartoonish? The designer, Jim Dunnigan, has and still does serious consulting with the Pentagon and military planners and is not regarded as a tyro in in these areas. And the fact remains that the game seems to do a good job recreating what actually transpired. Of course, you can game the game, but until you figure out how to, it’s pretty realistic.

    +++ All earlier games (including the A-H version) were rendered obsolete by the discoveries of much additional documentation that had been locked away in Russian and East German archives, as I explain in the book. +++

    I have read some of this material because, as you may have noted, this period in history has a particular fascination for me. I, personally, remain very unconvinced, as are others with very impressive credentials, but this is the way of history. Smart people disagree on these issues all the time.

    The fact remains that Schliefen’s plan was not executed:

    +++ From his assessment of French defensive capability Schlieffen concluded that the German army would need at least 48.5 corps [1.36 million combat troops] to succeed with an attack on France by way of Belgium, but Moltke planned to attack through Belgium with just 34 corps [970,000 combat troops] at his disposal in the west. +++

    I believe, and many replays of the scenario always come out with the same statistical spread, that Germany wins in the west if Schlieffen is executed as originally laid out. I don’t believe that the new information enables you to introduce variables into a scenario that change this. And yes, I know that the Russians mobilized in 10 days instead of six week and that’s really tough on East Prussia, but if Paris is surrendering at the same time, you’re in good shape.

    And nothing I have seen convinces me that the French weaken Plan XVII or change its trajectory in any significant way. By 1914, their mindset was locked, even though tactically they were unable to execute what the campaign called for.

    All issues people can dispute.

    I have to admit that I’m tempted to buy your book because this topic is catnip to me. But you were so nasty (and with no good reason) that I hesitate.

    I’ll think it over.

    Best of luck.

  10. Alright, I forced myself to read through his whole post (and a lot of the comments) so I’m going to weigh in.

    As you say, Nate, it should surprise no one that Amazon does what they think is in their own best interest. (As does Apple and Hachette and every other smart business.)

    My guess is the main motivation to push publishers into a $2.99-$9.99 box is not related to Amazon’s costs, or even to sell more of an individual title, but to help build the overall ebook market. In terms of books priced over $9.99, I think Amazon, correctly, assumes that buyers are going to be put off if they come to the conclusion that most ebooks are too expensive. Then they won’t buy Kindles and they won’t bother to build ebook libraries. So I think it’s more than just books under $9.99 sell better, the entire ecosystem for ebooks thrives when books are priced in a window customers are happy with.

    This was the same logic Steve Jobs applied when he forced the music industry to accept uniform $.99 cent pricing on iTunes. It was nice to know whenever you wanted a song that it would be $.99. That encouraged you to jump onto iTunes whenever you wanted a song. If you had no idea what it would cost, you might hesitate and not bother. Apple recently caved and let labels raise (and lower) prices in some fixed parameters. Apple was probably okay with that because by then the market was established. (Though I think raising song prices is a good part of why overall music download sales are down.)

    Likewise, I think the motivation to “punish” publishers who charge too little (under $2.99) is to make sure that everything doesn’t fall to $.99. Amazon wants ebooks to be viewed as more valuable than a 3 minute song.

    So it’s not just sales on individual books. I believe Amazon concerned about the broader health of the ebook market and with growing it (within their ecosystem). If I feel like reading a book, it’s nice to know that if I do a search on Amazon, odds are it will be between $2.99-$9.99, which I can live with.

    I get that some writers, like Rick Chapman, would like to use a business model where they charge a lot per book. That’s certainly their right. But Amazon doesn’t have an obligation to accommodate them. I frankly get annoyed when I see some specialized ebook selling for $49.99. If whenever I did a search on a subject on Amazon, most of the books were priced like that, I would stop searching. (I don’t feel the same way about physical art books, or books that have specialized printing. Maybe it’s unfair, but I just don’t see charging too much for a digital copy, regardless of how hard the author may have worked on it.) On the other hand, I also understand there might be certain academics or professionals who would have no problem paying that much or more for something that interests them. But maybe there needs to be a website devoted to those kinds of books.

    In the meantime, I believe Apple let’s you charge whatever you want and I’m sure there are some other companies that do that. But wait! Those sites don’t have as much traffic or sell as many ebooks as Amazon! Right. That’s because Amazon was concerned about creating a friendly marketplace that lots and lots of customers would flock to. And my guess is large numbers of readers aren’t going to flock to a service where a lot of the books seem overpriced. Whenever that is fair in an author’s opinion is irrelevant. I think that’s just marketplace reality.

    As far as the download prices that Amazon charges, that seems like a fairly smart incentive by Amazon to get publishers to compress their books properly. Otherwise, publishers have no motivation to compress their books. (And some of the size of an ebook can be total wasted data.) This helps not only with Amazon’s data costs (which are probably pretty marginal) but also assures that books will download quickly when customers want them. That also helps to make customers happy.

    Obviously, if you have a book with a lot of graphics, that can be a pain. So put it on Apple, which doesn’t charge for data size. Perhaps this will become enough of a strategic advantage for Apple (with graphic novels and such) that Amazon will be forced to revise their policy. We’ll see.

    Likewise, I think eventually Amazon will probably be more flexible about pricing. It’s still pretty darn early in the creation of this market to expect it not to have room for improvement. But everything has a cause and effect. If Amazon stops charging for data, publishers might get sloppy and toss in a bunch of needless graphics and download times for books might grow and piss customers off. If they allow to many overpriced books, s0me customers might stop buying ebooks all together. Or they might encourage a really healthy pirated ebook market, which will help no one. (This was the big problem with the music industry, they wanted to charge too much and as a result they encouraged a huge pirate market in music. That is until Apple came along and created a customer friendly music market. Then they got pissed off that Apple had too much control. Just like Amazon and publishers.)

    In terms of the Hachette Amazon war, what Chapman seems to overlook is that many self-publishers believed, (correctly, in my opinion) that Hachette’s (and the other publishers) main goal was to try to cripple the ebook baby with high prices to protect their print sales. Why Amazon shouldn’t try to fight against that is beyond me. And that’s why most indies were on Amazon’s side in that particular case. Chapman charging a bundle for one of his books doesn’t effect the market much. They either sell or they don’t. But if thousands of Chapman’s flood Amazon will high priced books, and the big publishers do the same, to the extent that customers have no idea what the price of an ebook might be, I think that could hurt Amazon’s overall ebook business.

    If there are fairer, better alternatives, like Apple iBooks, then they will thrive and grow to the point that Amazon will be forced to change. If those alternatives have drawbacks, slower downloads, unpredictable prices, increased piracy, then Amazon will continue to dominate because that’s where the majority of customers will prefer to shop.

  11. During the Hachette vs. Amazon struggle, I started to visit some of AAAG’s (Aggregated Amazon Ankle Grabbers) most prominent websites and ask some hard questions.
    Yeah, because the absolute best way to begin a polite debate is to start by accusing your opponents of bending over for a corporation. No wonder the idiot’s banned from multiple websites!

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