Amazon's E-Book Pay Plan: Bloomberg West (07/09)

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July 9 (Bloomberg) -- Full episode of "Bloomberg West." Guests: JMP Securities' Ron Josey, Culture of Profit founder Rafi Mohammed, Smashwords founder Mark Coker, authors Douglas Preston and Hugh Howe, and Kleiner Perkins Caufield & Byers' Juliet de Baubigny. (Source: Bloomberg)

Live from pier three in san francisco, welcome to "bloomberg west" where we cover innovation, technology and the future of business.

Amazon ups the ante in its digital book dispute, proposing authors get to keep 100% of the proceeds from digital book sales.

But has shut says not so fast.

Many authors are speaking out against it.

We will tell you have a stalemate is impacting the businesses of both companies.

Some of the biggest names in technology and media are in sun valley idaho for the annual allen and come me summit that kicks off today.

Among them are bob iger and warren buffett.

No major deals have come out of it but consolidation, especially the pay-tv industry is expected to be a major focal point.

Germany wasn't the only big winner in yesterday's world cup semi final -- turns out put her was a big winner.

There were more than 35 million tweets sent during germany's blowout against brazil.

Twitter says there are 580,000 tweets per minute as germany was scoring five goals in an 18 minute span.

Now to our lead story of the day -- it's the latest your in amazon's bitter battle.

Amazon is making a direct appeal to authors, proposing letting them keep 100% of the revenues from digital sales until the pricing dispute is resolved.

The idea is the lack of revenue and foes -- would force both parties to get a deal done.

But hachette is refusing the deal, saying they have cut off the deal with amazon.

Amazon responded with its own statement saying we call baloney.

Hachette is part of a $10 billion conglomerate.

They are making clear they want their authors caught in the middle of this negotiation because they believe it increases their leverage.

Joining me from washington is ron josie and paul sweeney, the bloomberg director of north american research.

Set the stage for us.

How did we get to this point?

Thanks for having me.

It is one of multiple partners that amazon does have.

Each one is in a multiyear contract and here we are six months later with the renewal comment gone.

From my perspective, it is amazon trying to take a greater share of the dollars, but pricing e-books to get back to the consumers.

I look at amazon as focused out what can consumers do and hachette is looking at what they can do to protect their dollars.

Is amazon being the bully here?

Clearly, amazon's value proposition has always been low price, great selection, and customer service.

Amazon is under pressure over the last couple of quarters to really take a look at its margins or lack thereof.

Amazon has been a company focused on growth and not necessarily moffett margin.

The pressure on the company has been ratcheted up and this is one small area, that being the media content cause where they are looking to play tougher rowland comes to negotiations with their partners.

It sounds like you don't think it is amazon.

Is it hachette or is it the authors?

I would probably say the authors.

I think amazon is doing what they're doing to make sure they have the right selection and convenience for customers and there are some pretty popular authors working with hachette.

So consumers may not be able to get those titles and books.

As a result, that's why i think amazon did offer that sell those yesterday, saying let's give that back to the publishers of the consumers can have it.

I would say the authors and consumers and from an amazon perspective, and media is a very important part of their business, but we project them to have about $90 billion in revenue this year.

One publisher is not really going to change much to the overall financial well-being, but it's all about selection and convenience and that's what they are really going after.

How much does it affect hachette's. online?

I think it's a pretty big deal and for all of those looking at following these negotiations closely, when you take a look at the book publishing business, it's a tale of two cities will stop the traditional ink on paper, that is mrs.

Dying, down about 25 are sent in the last five years.

But the growth of e-book sales is up eightfold.

Clearly, the future of book alleging is in the e-book business.

So hachette has to do business with the amazons of the world.

But they and other publishers need to hold off on the hard line with amazon terms of rising and margins.

Are we going to see more of these kinds of content dispute in the future?

We know there was a similar dispute with time warner over movie distribution.

I think physical is not growing at all and this is a shift to digital.

Everything, every device is going to be collected, whether it's the tablet or the fire phone.

So i think distribution as we have known it is completely changing and every single is ms.

, amazon is a leader here and am -- everyone needs to be on amazon and work with amazon and vice versa to make sure consumers get the content and the overall media businesses not as disruptive.

I think we are going to see multiple of these negotiations going forward.

But we consumers are consuming content more and more on digital devices, and that's not changing.

If hachette holds firm, who is going to win in the end?

Amazon is a giant.

At the end of the day, amazon has the leverage, just given their 60% share of the e market.

There will have to be some kind of compromise down the road, but i think hachette is not only fighting for itself, but the industry overall because we will have to see other publishing houses follow up with deals on their own and the industry is going to look at this deal as the template for how this relationship is going to go going forward.

It's a critical deal might just for hachette but the industry overall.

Thank you both for joining us today here on "bloomberg west." so what to the authors impacted by amazon's battle with hachette publishing thank?

We have two critics on both side joining us next on "bloomberg west." ? welcome back to "lumber of west." the dispute rages on between amazon and hachette, but the authors are caught in the middle.

Amazon recently authored -- offered the authors all the proceeds from the e-books, so what do others think of the proposal and how is the fight impacting them?

Joining now are two others on both sides of the debate.

Douglas preston is the co-author of the upcoming book "the lost island." and joining us via skype is a self published author of several books on amazon, including the wolf series.

-- the wolf series.

You wrote a letter that went viral and got support from notable authors, welcome gladwell, stephen king, james patterson.

What do you think about amazon's latest move to offer you guys 100% of the profits from e-books?

It seems it's an offer to divide publishers and their authors.

It's not a serious offer.

They are offering a lot of money , we are going to be getting a lot of e-book income but i have a large advance for my book coming out and it wouldn't be fair for me to take that money when that money should be going to buy publisher, -- to my publisher, hachette.

It seems to say that authors are motivated by money, but we are motivated by audience.

And that is what amazon is doing right now, they're taking us away from our audience and making it difficult for customers to order our books.

They're sort of taking away our audience away from us.

But in response to the u road to your readers, amazon had something to say, saying easy for him to say, he is rich and already successful.

He can opt out of the offer but should not stand in the way of authors benefiting from it.

You have a book about to be made into movies.

-- sawing -- starring george clooney.

The people really being crushed by amazon's boycott of the books are the mid-list and debut authors.

I'm successful and they are going to find me but the people are being crushed and having their hopes dashed are the mid-list and debut authors, the ones were struggling trying to find an audience.

It is rather ironic for amazon to make that statement.

You are an author on the other side of the debate.

Where do you stand here?

The only books that aren't available are pre-orders.

Books that are even out yet.

All hachette books are available on amazon, but i am blacklisted from a lot of stores because i published with amazon.

I find it very disingenuous.

Pre-orders are not made available for published authors.

It's hard to take that complaint seriously and it's hard to listen to the call dave boycott.

I agree with douglas that it is these small and debut authors that will be heard here.

But i would like to see hachette counter and say we will take the officer -- take the offer ends at 50/50 and support our authors . for the authors you don't need the money like douglas, i would say hand 100% of that back.

You will be taking some of the money and the small authors who would love to have this deal but don't have the freedom to speak up because the careers will be harmed, i think they would benefit from this.

They have offered this in the macmillan case, just a month or two ago the first time they spoke out.

They offered a 50/50 split, so i believe it is a sincere offer.

They have their authors as a shield and there's no way for amazon to negotiation without harming authors, which is a pr nightmare.

Amazon is saying this is like a nasty divorce with the kids are getting hurt.

Amazon is saying let's get the kids to their and house where they're not going to let us squabble.

The other thing that came out yesterday is that hachette has not even been negotiating with amazon.

They are holding out until they can force prices on e-books and higher.

You think publishers are big part of the problem.

How do you respond?

This is being framed somehow as the authors against amazon.

We are not.

We like amazon.

What we are asking amazon and jeff a's as personally as not to hurt us and use us as leverage in their negotiations with hachette.

They are free to do get out.

We don't know what the dispute is, but please don't hurt us.

We have helped amazon become one of the largest corporations in the world and authors have contributed so much to amazon over the years.

I've personally written blogs and reviews and all kinds of ways that have helped amazon for no compensation at all and i'm grateful for selling -- for settling the dispute.

Can't you settle this without involving and hurting authors?

That's all we are asking.

We are not for hachette either, we just want authors -- want amazon to stop retaliating against authors who want nothing to do with this dispute.

We consider ourselves to be amazon's loyal business partners and i don't think this is the way you treat your business partners.

Thank you both for weighing in.

Still ahead, can the publishing industry survive without amazon question mark we explore the options, including one company called the netflix of books, next.

? welcome back to "bloomberg west." i'm emily chang.

We turned back to our conversation on the amazon and hachette dispute and whether readers and publishers can survive without amazon.

One company is letting you pay a subscription fee for access to hundreds of thousands of looks, but is this model any better for writers must reckon publishers afford to not the on amazon?

To answer these questions, we turned to mark coker, and e-book the sugar serving small presses and indie agents.

Also with us is rocky mom it, founder of culture of profits -- they help company -- companies with their pricing strategies.

Rocky, i will start with you.

What does the publishing world look like without amazon?

The publishing world has really put themselves -- they've gotten themselves into a situation where amazon is now the walmart of retail.

They can dig take price.

What is interesting is that publishers have a chit -- if hachette and other publishers don't come to an agreement with amazon, that damages amazon because amazon is known as the type of place were you can get all types of books.

If one or two of these publishers decide they're going to leave amazon, it would hurt their stock price and i bet amazon would settle quickly.

You are on the other side.

You think authors can live without amazon.


It is tough or amazon to live without authors is amazon controls about 60% of the e-book market, but it's possible to earn a living outside of amazon.

There are multiple retailers selling e-books, apple ibooks, barnes & noble, you mentioned oyster and script and smash words.

There are multiple other channels.

Everything is reminding authors that they need to diversify their distribution and support multiple retailers.

If you look at the numbers on but fails, they are projected to fall in the u.s. to 19.5 ilium dollars this year from 26 billion in 2010 and e-book revenues are expected to jump eight times.

Does hachette really have a choice here?

It's a great point.

It's becoming a real profit center.

Reportedly, what this skirmish is about comes down to one number -- nine dollars and $.99. that is reportedly what amazon wants e-books to be retail that.

Hachette says after you take your cut, that's not very profitable for us and this is what the skirmishes about.

Mark, how would you like this dispute to be resolved?

I would like to see hachette hold the line.

It appears this is about e-book margins.

Amazon wants to earn more than 30% and hachette once you earn 70%. more important, hachette wants to control the price of the book to the consumer.

I'm hoping that hachette holds the line and maintains control over pricing.

Will they?

How will this play out?

By holding out and threatening to leave, it puts hachette in a bad financial position.

And let's face it, publishers are not doing well financially and don't have the financial resources to hold out.

All this is going to do is make it less attractive for authors to work with a major publisher.

The royalty will go down due to lower list price is and it will push people more toward self bushing.

-- self publishing.

Do you see more authors self-publishing instead?

We are seeing a huge boom in self publishing.

Others no longer need publishers to publish and distribute their books and reach readers.

There are strong economic incentives for authors to self publish.

Authors are earning 60% to 80% of the list price as their royalties when they self publish whereas with a publisher, they're earning 12 are sent to 70%. any settlement on hachette's part will undermine their ability to pay authors.

They will have to pay authors even less than they are paying right now and they are not a authors must already.

This all plays to amazon's hand.

As mark says, if you are a low to mid less -- low to mid-list author, you are in charge of marketing the book yourself will stop why get such a lloyd -- such a low royalty rate and invest in your own marketing?

It is a risk.

We've got to leave it here.

Roughy muhamed and mark coker, thank you both for joining us.

We will continue to follow this battle and you do next chapter as it is written.

Germany's 71 win over brazil in the world cup semi finals sent millions of fans flocking to twitter, helping it become the most tweeted about sports event in history.

We will go inside the numbers, next.

? you are watching "numbered west coast quote where we focus on technology and the future of business.

Tech moguls are gathering for the annual allen and company conference, it was traditionally a media gathering, but over the past years, it attracted more and more of tech's against names.

Jon erlichman is on the ground along with them.

What the scene like this year?

Who is there?

It is always an interesting mix.

There was a conference for traditional media mogul's like rupert modoc -- rupert murdoch and hollywood types.

It has clearly transitioned to the world of technology.

Walking around today, we've seen apple ceo tim cook, sheryl sandberg and you are also seeing arguably that next generation of technology leaders, the ceos of companies like shutter stock and next-door and ever note here.

The reality is tech is where it's at and there's a lot of information that is needed and if they are able to grab them, all the better.

In terms of what their expectations are, everyone takes a casual approach.

Ben silverman of pinterest was here last night and the media was interested in talking to them.

He was more interested in talking to the locals and staff members about how they use pinterest as opposed to getting any real hard work done.

Everyone has a different agenda, but it's an interesting mix for sure.

Like that is hard work.

I'm not surprised at all.

A lot of deals get done at that conference.

Have you heard of any deals in the works there?

Not yet.

Certainly with a couple of major deals going through the regulatory process and comcast and time warner cable, that is something people are talking about.

A lot of people are wondering if the content players will feel the need to do their own type of deal.

You will see behind-the-scenes stuff -- last year, the murdoch family get together and figured out how they were going to position their own leadership strategy going forward.

We did speak to barry diller whose a high profile accor.

Listen to what he had to say.

What do you think about area oh -- about aereo?

I think we bought the good fight.

I think if it had been successful at the supreme court level, there would have been a greater need for some kind of consolidation and we will see how it will pay out -- how it will play out over the course of the week.

Security is on high alert this year and not just for the usual suspects, but for drones.

What is this all about?

Technology is about giving people new ways to cover everything.

There is a high security presence here and there was expectation that you would see drones.

They are ready to keep an eye out for them.

Maybe they will keep an eye out for go pro.

Jon erlichman, our senior west coast correspondent on the ground.

Germany's 721 low out when in the world cup semi finals has made history, becoming the most tweeted about sports event ever.

The event got a total of 35.6 million tweets and twitter says traffic peaked at 580 166,000 tree -- tweets per minute when germany scored its fiscal in a span of 18 minutes.

Joining me is our head of data.

It was exciting at first and then it got really sad every time i looked up.

It got really sad unless you're a tournament than rooting against brazil.

35 million tweets during this game.

That's more than anything else we've seen.

The thing we usually talk about his being the biggest event in the world -- this blew it out.

And this was not even the finals.

It was the semi finals.

Where do people get the most wound up?

The goals are the peak.

It definitely rose with each goal.

One, then two, then three, then four, then five.

Then it stopped.

Just like the players, they've probably figured they had won this game will people on twitter new they had won the game.

You see the chart there.

Twitter themselves say the fifth goal was there exact peak.

Certainly in the second half, it was over.

I think the shock of five to zero was enough to get everyone's attention and then shut it down.

My heart just went out to those little brazil fans will stop the announcement on espn said it was over after three goals.

Compare this to other sporting events and the action we have seen on twitter.

Compared to events like the super bowl, this is 50% more than the super bowl.

This is more than two hours.

If you want to compare it to things like miley cyrus or president obama, this had 10 times the amount of tweets and it was sustained over almost three hours.

We are seeing a very extreme set of behavior to match the most extreme world cup game we've seen in the history of the sport.

It's good to see that people's attention matches up with the data.

It was like a natural disaster.

The world had a moment.

These numbers really do matter to twitter.

Give us an idea of how important this is.

It is important because they are fighting against facebook to be the second screen home for people watching on television.

They have a big opportunity or the potential for the opportunity to get deals done with networks if they want to do something smart.

These numbers matter.

It makes a difference and it's not i've million.

They need to show that it's the holiday are seeing on a tv screen.

That's the place a look to have money growing in the future.

Brazil needed tim howard, didn't they?

They could have had three goalies and it would not have been able to stop what happened.

Thank god for the two players who did not have to play because they don't take any responsibility.

We will be watching the rest of the world cup and see if we get the same amount of excitement.

Bloomberg tv's head of data.

Thank you very much.

Facebook, google and yahoo!

Are among the companies ellis data on gender diversity showing men still dominate at many silicon valley companies.

Up next, a deep discussion about women in tech.

? i'm emily chang and this is " bloomberg west" on bloomberg television, streaming on your phone, tablet and

Facebook and google weaselly release date about their employees gender diversity.

Both tech titans hover around 70% male and 30% female.


And linkedin fare slightly better with roughly 60% male and 40% female.

My next guest says the tech sent to her needs more women.

Juliet de baubigny focuses on executive leadership and recruiting.

You recently said silicon valley is a boys club.

It's still a boys club.

Here is the challenge.

If you go back to a study done in 2008, the numbers haven't changed here in 2014 -- women who leave the tech sector in droves after the age 35. why do they leave?

It is inconclusive, but there are a couple of different trends at late -- by mitchell, societal, and environmental.

Daycare is expensive.

So if you are going to get ahead, you that are start working early, start having impact early so you have economic independence to be able to afford to deal with the issue of child care until there is big systemic change.

Women will always struggle with the need to try to do it all.

Then there's the environmental issue.

Are you working in a company that's really going to suck word you as you try to grow your career?

Many of these topics are gender neutral.

They apply to men as well as women.

The numbers from facebook and google, are they not good enough?

They are not and we agree, this is why we are pleased we are having this debate.

Here's something that really strikes me.

We have an incredible mentor program at kleiner perkins.

We took 76 graduates for summer interns and there are still not enough women.

That and actually keeping women in the workforce.

You are involved in recruiting heavily from bottom to top.

Give us some anecdotes where a woman fits or maybe does not fit this profile.

For women, what they'll is want to do is to make sure they can have high impact work where they can make a difference.

What we need to do is continue to have mentoring programs.

It's important we have this debate at all levels, whether you are a ceo or entry-level graduate, you are conscious of the decisions you are going to have to make along the journey so you can actually stay in the workforce.

This is not purely a female issue.

We need men to really support women on this issue.

You have some advice for young women and young men.

I want to walk through some of this -- up for more demanding work come a find people who support you, maybe don't work part-time or be wary of it, and recognize your career is valuable.

Let's talk about this.

These are some of the things i've experienced watching women through their careers.

If i look at the number of women ceos in my career, it's a really small number.

You always want to going to the best people.

I'm a huge believer in meritocracy.

But some of these issues, they actually hinder women in men.

Working part-time, everyone who works in a career is going to have a great sense of responsibility, sub hard time diminishes your role.

Another big issue in the technology sector is taking a long time out of the workforce.

Technology changes so frequently that it so easy to become irrelevant or not have contemporary skills.

My advice is to be aware and if you can, stay doing what you are doing as long as possible.

Even if you don't think it's going to work, give it a chance.

You are a mother and i am a mother.

Let's face it will stop it's hard to try to make his work.

But if you can, you can be as good a parent and i want to stress this is not just a female thing.

You can be as good a parent as career professional.

My husband is traveling this week, so i've had the experience being a single mom.

I was on a conference call and my kid was screaming in the background.

Everyone understood and thought it was cute but it's important to have that support.

The other thing i would say is fine something you love for women and men because you're not going to keep working if you don't like what you do.

I'm a big believer in being passionate about what you do and to have that purpose in life.

Kleiner perkins partner juliet de baubigny.

The pepsi ceo says women can't have it all, saying i don't think women can have all.

We are going to talk more about high-profile women in business, next.

? welcome back to "bloomberg west." i'm emily chang.

The pepsi ceo was making headlines for her take on balancing career with motherhood.

She said i don't think women can have it all -- juliet de baubigny, a partner at kleiner perkins who has thought about women at high places and technology companies.

These kinds of questions always start a conversation and you never know what you're going to get.

What do you make of that question can you have it all?

This is an age-old question and you and i will be discussing it five years from now.

It is a really personal question.

It depends on where you are in your life and it will vary along the career journey in your spectrum of your career profession in your own personal decisions you are willing to make and the trade-offs.

This is gender-neutral.

It just really depends on where you are at that point in your life.

I met a believer in trying to do both.

I do believe in the technology industry, particularly due to mobility, the pace of change, we have an opportunity to try to balance those.

I think it's at the great example to our children, boys and girls, and i have one of each, to make it work will stop one thing you said that resonated with me was don't try to figure it out, just take it one day, one year at a time and do what works for you.

Matt lauer of nbc's made headlines when he asked the gm ceo about this very thing.

Take a listen to that exchange.

You are a mom, two kids.

You said in an interview that your kid say they are going to hold you accountable for one job, and that's being a mom.

Given the pressures of this job at general motors, can you do both well?

I think i can.

I have a great team and we are on the right path, we are taking accountability and i have a wonderful family and supportive husband.

I'm proud of the way my kids are supporting me in this.

He got a lot of flack for asking that question and people said it wasn't fair.

I will say for me, the answer that both of these women had for this question made me think about this issue.

Are we too hard or unfair on women at the top?

I'm so glad we are talking about this.

I admire both of them for their confidence, mary's words reticulated resonated with me.

I do think it's possible to try to do both.

You have to have a really good support system around you.

The comment about our women unfairly criticized, any leader in that position, if they take that form, they are going to open themselves up to criticism.

Hillary clinton gets criticized for her appearance.

Christine lagarde, i will never forget reading the "financial times" article talking about her wardrobe versus the content of her speech.

Marissa mayer name under great pressure when she made a very bold business decision about employees not working remotely.

I think unfortunately, the media highlights these women when they are making business decisions.

She just got a ton of criticism for sleeping through a meeting.

Sheryl sandberg wrote a book about this and got a lot of heat from her way.

You would think somebody women at the top or as many women as there are in the place, how much do they worry about this kind of criticism?

I think less than you might imagine.

For any of these women leaders, i suspect they think about the business decision first and foremost.

It is irritating for when you are then held accountable for your gender rather than the impact of your business decision.

Apple has just announced it will be coming out with its diversity numbers, so we will be looking for those.

Thank you for talking about this.

I think it's an important conversation and talking to you has helped me as i make my own decision.

Thank you.

Juliet de baubigny from kleiner perkins.

It's time now for the bwest byte, where we focus on one number that tells a whole lot.

Jon erlichman, what do you got?

The bite i has for you is 1 -- the number of phones tim cook the ceo of apple has politely suggested be upgraded by our own bloomberg news reporter who ran into tim cook at sun valley.

She just so happens to be a samsung phone user.


cook immediately spotted that, always the salesman, even in sun valley.

I like that you got tim cook telling people to get an iphone and ben silverman talking to people on the ground about pinterest.

They are doing their job.

Who cares about deals?

Everyone's. to keep it loose and have fun, but underlying that quick comment is there's a lot of competition.

The samsung folks are here and these are fierce competitors.

You just highlighted the fact that some cook told bloomberg news that releasing stats on diversity is next up on their list, in part because we see so many other companies in technology making that data more readily available.

We will be interested to see those numbers.

Jon erlichman in sun valley, thank you so much and thank you all for watching this edition of "bloomberg west." ? ..

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