Trying to Understand the IPG/Amazon Fight

If you’re like me, you’ve probably seen the online hubbub about a fight between Amazon and IPG over the pricing of Kindle editions.  I’m writing this post free-style as I work my way through some research to try and understand just what the hell is going on, in a hopes that others might understand as well.

First question, who is IPG?  They are the Independent Publishers Group.  According to their website, they were “the first organization specifically created for the purpose of representing titles from independent presses to the book trade,” a mission that dates back to 1971.  In this capacity they act as the distribution point for several smaller publishers, giving them a larger collective voice than they could muster on their own.  Most importantly, for this discussion at least, they offer digital distribution options to the publishers they are contracted with.  Again from their website:

IPG’s e-book program is a turn-key system for its client publishers. They submit—through an automated feature in the private Publisher Resources section of the IPG website—the digital file used to generate the print edition. From that point on the IPG staff is responsible for checking, storing, and disseminating the files; selecting and monitoring trading partners; negotiating the terms of trade with them; and setting the rules as to how much leeway they are allowed to give their customers in regard to viewing content before purchase and duplication after purchase.

They boast a catalog of “about 10,000 e-book titles.”  According to the New York Times, they had 4,443 titles available for Kindle.  “Had” is the important word there.  As of the 21st, none of these titles are available from Amazon electronically.  Amazon pulled the entire IPG catalog from the Kindle store, reportedly over a pricing disagreement as the two sides came to the table to negotiate an extension of their sales agreement.

If this sounds familiar, you’re probably remembering two years ago.  On January 30, 2010 Amazon did the same thing.  To Macmillan.  Though Amazon went a little farther, pulling both electronic and print, where now it is only pulling the electronic titles.  The disagreement in 2010?  Macmillan was leveraging their new agreement with the Apple iBooks store in an effort to raise electronic book prices on Amazon, and in general to control what prices Amazon was charging.  This is the so called “agency model” of pricing, contrasting with the older “wholesale model”.  The dispute lasted nearly a week, with Macmillan emerging with an agency model agreement on February 5th.  Harper Collins and Hachette soon followed suit.

This conflict is a little different.  Not because it isn’t still Amazon and a distributor sparring over prices, but because Macmillan is a member of the fabled Big Six, along with Hachette, Harper Collins, Penguin, Random House, and Simon & Schuster.  You’ll note that IPG is decidedly not on that list.  Why the different tactic?  Dennis Johnson, co-founder of Melville House and former distribution client of IPG, wonders if “[p]erhaps this time it’s simply sacrificing a smaller fish first, trusting there will be little media coverage for a lesser-known indie than a big, household-name publisher.”  There may be a grain of truth to this.  The Washington Post, for one, has no articles mentioning the IPG situation, whereas they did cover the Macmillan incident two years ago.  The story is, obviously, making its rounds in the industry press, however, and has been well covered by Publishers Weekly.

Johnson goes on to wonder whether this is all “a message to the big houses.”  If nothing else it could be an attempt to create a precedent for a new pricing arrangement, one that can be strong armed against “the kind of companies that don’t have the resources to absorb something like this so easily.”

They will be more damaged, more deeply endangered, than a Big Sixer could have imagined. There’s every likelihood that some of those little publishers sell most of their books on Amazon. This could put them out of business. For others, we could be talking about 20 or 30 percent or more of their business. It’s hard to recover from losses like that.

IPG is not taking this lying down, which is fantastic.  According to the New York Times, they’re asking their “publishers to immediately begin stressing that their books were available in other electronic formats, including from the Amazon rivals Barnes & Noble and Apple.”  IPG’s Mark Suchomel has even told Publishers Weekly that most IPG clients, “will be fine if they never sell another e-book through Amazon.”  IPG is also circling the wagons, attempting to stave off Amazon poaching away a client or two in an attempt to weaken their bargaining power.

In the end, I think I share much of Dennis Johnson’s concerns.  This is an attack that Amazon has launched before, but now against much weaker targets.  I hope IPG keeps fighting.  I hope more people see what’s going on and ask questions.  Look, I love my Kindle.  I like Amazon, in spite the impression my blog may give.  But I don’t want to see them competing unfairly in the marketplace, and attempts to strong arm special deals is exactly that.  We’re already seeing Amazon forced into more equal competition, especially with states like Virginia working to close the so-called “Amazon loophole” with regards to sales tax.  We’ll see how this fight for competitive equality fares.

In the closing words of Dennis Johnson, “Good luck to IPG and its publishers.”


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