The process of paying co-op fees to promote individual titles grew increasingly complex, especially after Amazon began selling different levels of promotion. Without dropping co-op fees entirely, Amazon simplified its system: publishers were asked to hand over a percentage of their previous year’s sales on the site, as “marketing development funds.” Publishers dread the annual negotiation of this payoff; one of them described it as “squeezing our nuts.” The figure keeps rising, though less for the giant pachyderms than for the sickly gazelles. According to the marketing executive, the larger houses, which used to pay two or three per cent of their net sales through Amazon, now relinquish five to seven per cent of gross sales, pushing Amazon’s percentage discount on books into the mid-fifties. Random House currently gives Amazon an effective discount of around fifty-three per cent. For a smaller house, Amazon’s total discount can go as high as sixty per cent, which cuts deeply into already slim profit margins. Because Amazon manages its inventory so well, it often buys books from small publishers with the understanding that it can’t return them, for an even deeper discount. Publishers sometimes pass on this cost to authors, by redefining royalties as a percentage of the publisher’s receipts, not of the book’s list price. Recently, publishers say, Amazon began demanding an additional payment, amounting to approximately one per cent of net sales. Once the fee was paid, publishing executives could discuss marketing strategies with Amazon staff; otherwise, they’d have to rely on the company’s algorithms.
- www.newyorker.com
